Retail giants Walgreens, Costco, and Walmart are stepping into the virtual healthcare arena, emphasizing retailers’ advantages in delivering omnichannel patient care. Walgreens recently unveiled its virtual healthcare solution, joining a growing market segment. While demand for virtual care has evolved post-pandemic, retailers leverage their physical presence to offer integrated virtual and in-person healthcare experiences. Their expansion isn’t poised to replace complex care but rather complement it, signaling potential collaborations with traditional healthcare providers and payers. Competition intensifies, but consumers stand to benefit from greater choice and convenience in virtual healthcare services.
In a strategic move following in the footsteps of industry giants Costco and Walmart, Walgreens, a prominent pharmacy chain in the United States, has announced its foray into the virtual care arena. This decision highlights the distinct advantages that retailers possess in the realm of virtual healthcare, even in the face of shifting patient demand dynamics.
The recent revelation occurred at the HLTH conference in Las Vegas, where Walgreens introduced its forthcoming virtual healthcare solution, set to launch later this month. This innovative platform aims to deliver on-demand care for common healthcare needs through video and chat-based services, along with prescription services.
This development follows closely on the heels of Costco and Walmart unveiling their own virtual care offerings, ushering in heightened competition within an already crowded digital health marketplace. Moreover, consumer preferences have evolved since the peak of the COVID-19 pandemic, further intensifying the competitive landscape.
Recent findings by market research firm Trilliant Health demonstrate that while telehealth visit volume remains higher than pre-pandemic levels, it has decreased significantly from 76.6 million visits in the second quarter of 2020 to 41.5 million visits in the fourth quarter of 2022—a decline of 45.8 percent. This decline reflects the growing number of telehealth providers vying for a limited share of virtual care consumers or a finite demand pool, signaling an era of heightened competition.
Despite this evolving landscape, non-traditional players such as technology firms, retailers, and pharmacy chains are actively pursuing opportunities in the virtual care sector. Experts suggest that retailers, in particular, hold a competitive edge in this evolving landscape compared to other stakeholders.
As demand for virtual care slows down, telehealth usage is anticipated to find its niche in specific applications and consumer segments. Walgreens’ Virtual Healthcare solution, for instance, is tailored to address common health conditions like respiratory illness, allergies, urinary tract infections, and acne. Users can seamlessly connect with healthcare professionals via chat or video through their personal devices, followed by access to prescribed medications at Walgreens stores or through the prescription delivery service.
While these chat-enabled virtual visits typically cost $33 out-of-pocket, video visits are priced between $36 and $75, with insurance currently not accepted for Walgreens Virtual Healthcare consultations.
In a similar vein, Costco offers its members access to virtual primary care at $29, comprehensive health check-ups paired with a standard laboratory panel and a virtual provider follow-up at $72, virtual mental health therapy at $79, and a 10 percent discount on other services, including in-person appointments, through a partnership with Sesame, a platform connecting healthcare consumers with providers across various specialties.
Walmart has also joined the virtual care bandwagon, announcing plans to introduce a no-copay virtual primary care service for employees and their families, covering preventive care, chronic condition management, and mental health support through digital tools.
While there are shared features, non-traditional healthcare entrants employ varying approaches in their virtual care offerings concerning service scope, business models, and ownership structures. CVS and Walmart’s virtual care initiatives are among the most mature, spanning a wide array of services, including care for common conditions, primary care, behavioral healthcare, and some chronic condition management. In contrast, Walgreens and Amazon Clinic concentrate on treating common conditions and providing access to medication refills.
The distinction in business models becomes evident with CVS and Walmart targeting virtual care as a health plan and employer benefit, while others opt for cash-pay models. Moreover, Costco and Amazon collaborate with third-party companies like Sesame, Wheel, and SteadyMD, while CVS and Walgreens appear to operate their virtual care offerings independently.
Despite these variations, all virtual care providers face a common challenge—encouraging adoption. Some industry experts believe that retailers may have an advantage in this regard.
As the virtual care landscape evolves beyond its initial phase of virtual visits with minimal in-person integration, an omnichannel approach that seamlessly combines virtual and in-person care becomes essential for healthcare consumers. Retailers can leverage their extensive physical presence in communities to offer such integrated care experiences.
Retailers bring a unique physical scale and community presence, which are invaluable for delivering an omnichannel healthcare experience. For instance, a consumer may prefer to visit their primary care provider in person at a local clinic but choose virtual visits for specific conditions or medication management. Retailers have recently bolstered their virtual capabilities, enabling consumers to access a range of services seamlessly.
The absence of a physical presence may pose challenges for virtual-only healthcare providers, making it difficult to compete with retail pharmacies that offer an integrated experience, from diagnosis to medication dispensing.
Retail pharmacies like Walgreens have a history of delivering a positive consumer experience through their pharmacy apps, and this expertise is expected to carry over into their new virtual care offerings. This holistic approach, which integrates diagnosis, medication prescribing, dispensing, pricing, and treatment delivery within a single visit, reduces delays in care access, as all services are conveniently provided under one roof.
Retailers’ seamless integration from virtual care visits to tele-prescribed medication aligns well with their business model, offering a level of convenience that traditional providers find challenging to match.
While retailers’ expansion into healthcare is promising, they are not positioned to replace traditional primary and complex care delivery. Most retail clinics primarily handle low-acuity conditions and are ill-equipped to manage complex or specialty-level care. This limitation necessitates collaboration with traditional healthcare providers to ensure comprehensive patient care.
Moreover, many retailers do not accept insurance for virtual care services or limit their services to commercial payers, leaving a substantial portion of the population, including low-income and underinsured individuals, without access to these services.
However, there is potential for healthcare providers and payers to learn from retailers and collaborate to enhance patient access and experience. Retailers can work with integrated care delivery networks to seamlessly transition lower acuity virtual care to in-person care at physical facilities and specialized care clinics for specific populations.
Furthermore, there are numerous collaborative opportunities between retailers and payers as the healthcare landscape shifts toward value-based care. By working together to succeed in risk-based models, payers can reduce the cost of care, while retailers can build strong consumer relationships that lead to shared savings and an improved primary care delivery experience.
While collaboration is possible in some areas, retailers’ expanding virtual care offerings are likely to intensify competition, particularly in lower-acuity specialty care. Walgreens, for instance, has already signaled its intent to acquire multispecialty medical group Summit Health-CityMD, indicating a move toward comprehensive care.
Ultimately, retailers’ growing presence in the virtual care space could significantly redefine the total addressable market for telehealth. As more retailers enter the market and telehealth becomes increasingly commoditized, the commercially insured market’s total addressable market for telehealth services may approach zero. This competition could ultimately benefit healthcare consumers by offering a wider range of options at more competitive prices, leading to improved healthcare access and satisfaction.