Walgreens Adopts New Drug Pricing Models and Cost-Cutting Measures under CEO Tim Wentworth’s Leadership

January 4, 2024

Walgreens Boots Alliance, under the new leadership of CEO Tim Wentworth, is preparing to adopt new drug pricing models while ensuring its pharmacies are reimbursed for the services they provide. This strategic shift was discussed during an earnings call with analysts, where Wentworth emphasized the importance of delivering more excellent shareholder value and the potential of their retail presence.

Despite slightly surpassing analysts’ earnings expectations, Walgreens’ stock fell by approximately 10% after announcing a significant dividend cut. Wentworth highlighted the company’s readiness to engage with healthcare payers in models that fairly compensate pharmacies, explicitly mentioning the focus on services like aiding patient prescription adherence.

He expressed interest in “cost plus” models, similar to those planned by rival CVS, which involve reimbursement for prescription costs plus a markup. Wentworth sees limited scope for further reductions in traditional retail pharmacy reimbursements and anticipates changes in payment models within the next one to two years.

Additionally, Wentworth stated that while Walgreens remains committed to its primary-care investments, it is unlikely to expand in this area. The company has already closed 27 of the 60 clinics it previously planned to shut down. Concurrently, Walgreens is progressing with its cost-cutting initiatives, aiming to reduce expenses by $1 billion this fiscal year.

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[Source: The Wall Street Journal, January 4th, 2023]

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