By Sharon Terlep 

Walgreens Boots Alliance Inc. is getting out of the walk-in clinic business as it cuts costs and looks to bring in outside providers to deliver medical services in stores.

The Deerfield, Ill., drugstore chain said Monday it will close the roughly 160 in-store health clinics the company runs itself, while keeping 220 clinics that are run by local health systems. It didn't provide an estimate for the financial impact.

Walgreens and rival CVS Health Corp. both want become treatment centers for chronically ill patients as a way to offset slowing revenue from prescription drugs and competition from online retailers.

They are taking different approaches. Walgreens has increasingly sought partnerships with other companies and health systems, while CVS is making the shift through acquisitions or by building its own new business.

Walgreens's roughly 400 walk-in clinics and CVS's 1,000 Minute Clinic locations have long either proven unprofitable or barely broken even for both companies. The goal for both is to shift away from treating minor or acute issues and to provide services for more people with chronic conditions such as diabetes, heart disease and hypertension.

The chains say their vast networks, the ease of access and the data they collect on pharmacy customers will enable them to help people with chronic disease and comply with their treatment plans. The Centers for Disease Control and Prevention estimates that chronic conditions account for roughly 90% of the nation's $3.3 trillion in annual health-care spending, much of it for in-hospital care.

The news came as Walgreens, which also owns the Boots chain outside the U.S., posted a 55% drop in quarterly profit, hurt by restructuring charges. The company reported a profit of $677 million, or 75 cents a share, for the fourth quarter, ended Aug. 31, compared with $1.51 billion, or $1.55 a share, a year earlier.

Revenue grew 1.5% to $33.95 billion. U.S. retail pharmacy sales were up 2% to about $26 billion.

The company said retail sales are taking a hit as the chain takes steps to pare back sales of tobacco products. Comparable retail revenue fell 1.2% in the most recent quarter, due entirely to lower tobacco sales, the company said.

Walgreens this spring raised the minimum tobacco-buying age to 21 amid criticism from federal regulators that the company was among the worst offenders of selling cigarettes to minors. Earlier this month, Walgreens stopped selling electronic cigarettes, citing regulatory uncertainty and investigations into potential health effects. CVS stopped selling tobacco products in 2014.

For fiscal 2020, Walgreens said it expects roughly flat adjusted earnings growth at constant currency rates, with a range of plus or minus 3%.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

(END) Dow Jones Newswires

October 28, 2019 11:47 ET (15:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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