What’s next for Walgreen? In-store surgery?

by Alexandra Biesada, March 19th, 2008, 5:26 am

Walgreen has become the nation’s largest drugstore chain (in terms of sales) by aggressively building new stores — often cannibalizing existing ones — and greatly expanding its inventory to include apparel, electronics, food, household goods, toys and games, and, oh yes, prescription drugs. So eclectic is the merchandise mix at Walgreen stores that they’ve come to resemble mini-Wal-Mart supercenters more than traditional drugstores. Its strategy of “hiding” its pharmacy departments at the back of the store, insures shoppers have an opportunity to pick up plenty of other stuff along with their prescriptions. Indeed, general merchandise and nonprescription drugs accounted for more than a third of Walgreen’s $53 billion in sales last year.

With more than 6,200 stores and the company on track to reach its goal of more than 7,000 drugstores by 2010, Walgreen has proven itself adept at the art of retailing. But with Walgreen’s and archrival CVS’s chain drugstores blanketing high-traffic retail locations nationwide, the Chicago-based chain launched by pharmacist Charles Walgreen over a century ago is looking for new prescriptions for growth.

Like other drugstore operators, discounters (including Wal-Mart), and supermarket chains, Walgreen has begun opening in-store health clinics — called “Health Corner Clinics” — at some of its stores to boost prescription sales and ingratiate itself with customers. Last year it bought its partner in the venture, Take Care Health Systems, to expand its in-store clinic business.

Now, in a bid to move beyond the confines of its retail locations, Walgreen yesterday announced that it’s formed a new Health and Wellness division to manage healthcare centers and pharmacies at worksites, possibly yours, if your company is big enough. Central to the new division is the planned acquisition of two worksite-health-center operators: I-trax (for about $260 million) and Whole Health Management (price undisclosed). Together the two firms provide worksite health services, including primary, acute, and preventive care, to about 230 employers, including Toyota, Continental Airlines, and Sprint. The acquisitions will also bolster Walgreen’s in-store clinic operation to more than 500 locations, up from about 145 today.

Walgreen pegs the potential market for worksite health centers and pharmacies at more than 7,600 corporate campuses of 1,000 employees or more. That’s a pretty healthy avenue for growth that rivals Walgreen’s already extensive retail presence.