Technology meets Retail Pharma: Emerging Partnerships

If your attention has been absorbed by the political events in the U.K. and the USA in the past week, you might have missed an announcement last week about a new strategic partnership between Microsoft and Wallgreens BootsAlliance. Published as an exclusive on CNBC, it is of interest to those of us that have a fascination with both tech and pharma companies and their products. The excerpt below provides some background information about the deal:

You can watch the full video on CNBC here.

Further details of the partnership are given on the WalgreensBootsAlliance website here. The goals are indicated as the following:

  1. Connecting WBA stores and health information systems to people wherever they are through their digital devices.
  2. Enabling more personalized health care experiences from preventative self-care to chronic disease management.
  3. Building a seamless ecosystem of participating organisations to better connect consumers, providers (Walgreens and Boots pharmacists), pharmaceutical manufacturers and payers.

In order to attain the above objectives, the following operational strategies will be implemented by WBA in collaboration with Microsoft:

  1. Migration of the majority of WBA’s IT infrastructure onto Microsoft Azure; including new transformational platforms in retail, pharmacy and business services, new capability in data and analytics, as well as certain legacy applications and systems.
  2. Rolling out Microsoft 365 to more than 380,000 employees and stores globally
  3. A multiyear research and development (R&D) investment, including use of Microsoft AI systems
  4. Establishment of joint innovation centres in key markets.
  5. Piloting of up to 12 store-in-store “digital health corners” aimed at the merchandising and sale of select health care-related hardware and devices

One may well ask what advantages this offers to either company. For WBA, this is an opportunity to transform its healthcare offering and “future-proof” it by taking advantage of the expertise of a dedicated leader in technology. On the other hand, Microsoft stands to gain from the adoption of its Azure cloud platform, the improvement to its AI technology based on insights from data science; and expansion in the use of Microsoft 365.

Of course what is interesting is that this is described as a “strategic partnership.” At the time of writing, according to ycharts, Microsoft had a market capitalisation of nearly US$827billion, compared to US$68billion for WBA.

Microsoft market Capitalisation
Microsoft Market Capitalisation 18 January 2019
WBA Market Capitalisation
WBA Market Capitalisation 18 January 2019

In other words, when you look at the combined value of the two companies, you can see that Microsoft could easily “swallow” WBA.

Screenshot 2019-01-19 at 23.25.22

That this has not happened is testimony to the focus of Microsoft on its core business: technology and services, rather than a foray into ownership of a health organisation.

The same cannot be said of Amazon, which bought the online pharmacy PillPack in July last year. In this deal, Amazon seems to have focused on the logistical synergies to be achieved in distribution, which fit well into Amazon’s core business model.

While WBA has excellent distribution capabilities, this is not an area of interest or expertise shared with Microsoft, hence this might explain the different outcome in this case. We’ll watch this space as we await new initiatives as a result of the partnership.

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