Opioid Settlement Drags Walgreens To $3.7 Billion Loss

Walgreens Boots Alliance reported a $3.7 billion loss to cover its share of a massive global settlement of claims its pharmacies contributed to the opioid epidemic.

Walgreens Thursday disclosed a $3.7 billion net loss, or $4.31 a share, for its fiscal first quarter 2023, which ended November 30, 2022. That was well off the year-ago period when Walgreens earned a net profit of $3.58 billion, or $4.13 a share.

“First quarter loss per share was $4.31 compared to earnings per share of $4.13 in the year-ago quarter reflecting a $6.5 billion pre-tax charge recognized in connection with the previously announced opioid litigation settlement frameworks and certain other opioid-related matters,” Walgreens said Wednesday in its quarterly earnings report.

CVS, Walgreens and Walmart – the nation’s three largest retail U.S. pharmacy chains — agreed in November to pay more than $13 billion in a massive global settlement to resolve claims they contributed to the opioid epidemic. The U.S. Centers for Disease Control and Prevention estimates the nationwide opioid crisis has led to more than a half million deaths from overdose in the last 20 years. Walmart, CVS and Walgreens combined have more than 23,000 U.S. pharmacies.

Investigations by state and federal attorneys as well as lawyers in private practices representing families of opioid victims have cited the role of distributors and pharmacies in the epidemic. A 2019 investigative report in the Washington Post said Walgreens “handled nearly one in five of the most addictive opioids” at the peak of the crisis surrounding the painkiller and acted as its “own distributor.”

Along with the quarterly loss, Walgreens Thursday reported sales dipped 1.5% to $33.4 billion as the company transitions from a pharmacy chain to what its top executive calls a “consumer-centric healthcare company.”

“We’re making significant progress in driving our U.S. Healthcare segment to scale and profit, including the recent VillageMD acquisition of Summit Health,” Walgreens Chief Executive Officer Rosalind Brewer said in a statement accompanying the earnings report. “Our core retail pharmacy businesses in both the United States and United Kingdom remain resilient in challenging operating environments. Execution across segments reinforces our confidence in achieving full-year guidance, and our strategic actions are creating long-term shareholder value.”

Walgreens raised its full-year sales guidance to $133.5 billion to $137.5 billion reflecting its “Summit Health acquisition, refreshed currency rates, and first quarter sales ahead of expectations,” the company said.

During the quarter, Walgreens invested $3.5 billion in debt and equity to support doctor-staffed clinic operator VillageMD’s acquisition of Summit Health, which closed January 3 of this year. Walgreens-backed VillageMD is buying Summit Health for $8.9 billion to expand doctor-staffed clinics across the country.

The transaction includes investments from Walgreens, which already owns more than 60% of VillageMD, and health insurer Cigna’s health services business Evernorth. Primary care provider Summit Health merged with CityMD in 2019 to create a company with more than 1,400 healthcare providers that offer primary, specialty and urgent care.

In the first quarter, Walgreens said its U.S. healthcare segment that includes VillageMD clinics had first quarter sales of $989 million, “an increase of $938 million compared to the prior year period.”

“On a pro forma basis, this segment’s businesses grew sales at a combined rate of 38.4 percent in the quarter,” Walgreens said. “VillageMD grew 48.7 percent, reflecting existing clinic growth and clinic footprint expansion.”

Meanwhile, Walgreens U.S. retail pharmacy segment had first quarter sales of $27.2 billion, which dropped 3% from the year-ago quarter that “included a significant contribution from COVID-19 vaccinations,” the company said.