Walgreens Boots Alliance, Inc. 2017 Annual Report

140 Pages·2017·0.89 MB·English

Walgreens Boots Alliance #WeAreWBA
2021
Annual Report
Board of Directors
As of October 20, 2021
From left to right
Ginger L. Graham Dominic P. Murphy José (Joe) E. Almeida
Former President and Managing Partner and Chairman of the Board and
Chief Executive Officer, Co-Head of UK Investments, Chief Executive Officer,
Amylin Pharmaceuticals CVC Capital Partners Baxter International Inc.
Nancy M. Schlichting Rosalind G. Brewer David J. Brailer, MD
Former Chief Executive Officer, Chief Executive Officer, Chairman, Health Evolution Partners
Henry Ford Health System Walgreens Boots Alliance, Inc.
John A. Lederer
William C. Foote Stefano Pessina Senior Advisor, Sycamore Partners
Lead Independent Director, Executive Chairman,
Walgreens Boots Alliance, Inc. Walgreens Boots Alliance, Inc. Valerie B. Jarrett
Former Chairman and Chief
Former Senior Advisor to
Executive Officer, USG Corporation Janice M. Babiak President Barack Obama
Former Managing Partner,
James A. Skinner Ernst & Young LLP
Former Executive Chairman,
Walgreens Boots Alliance, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,D.C.20549
FORM 10-K
Í ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGE
ACTOF1934
ForthefiscalyearendedAugust31,2021
‘ TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIES
EXCHANGEACTOF1934
FortheTransitionPeriodFrom to
Commissionfilenumber001-36759
WALGREENS BOOTS ALLIANCE, INC.
(Exactnameofregistrantasspecifiedinitscharter)
Delaware 47-1758322
(Stateofincorporation) (I.R.S.Employer
IdentificationNo.)
108WilmotRoad,Deerfield,Illinois 60015
(Addressofprincipalexecutiveoffices) (ZipCode)
Registrant’stelephonenumber,includingareacode:[phone]
SecuritiesregisteredpursuanttoSection12(b)oftheAct:
Titleofeachclass TradingSymbol(s) Nameofeachexchangeonwhichregistered
CommonStock,$0.01parvalue WBA TheNasdaqStockMarketLLC
3.600%WalgreensBootsAlliance,Inc.notesdue2025 WBA25 TheNasdaqStockMarketLLC
2.125%WalgreensBootsAlliance,Inc.notesdue2026 WBA26 TheNasdaqStockMarketLLC
SecuritiesregisteredpursuanttoSection12(g)oftheAct:None
Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecurities
Act. Yes Í No ‘
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)ofthe
Act. Yes ‘ No Í
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)ofthe
SecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredto
filesuchreports)and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days. Yes Í No ‘
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobe
submittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuch
shorterperiodthattheregistrantwasrequiredtosubmitsuchfiles). Yes Í No ‘
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,asmaller
reportingcompanyoranemerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler,”
“smallerreportingcompany,”and“emerginggrowthcompany”inRule12b-2oftheExchangeAct.
Largeacceleratedfiler Í Acceleratedfiler ‘
Non-acceleratedfiler ‘ Smallerreportingcompany ‘
Emerginggrowthcompany ‘
Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiod
forcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchange
Act. ‘
Indicatebycheckmarkwhethertheregistranthasfiledareportonandattestationtoitsmanagement’sassessmentofthe
effectivenessofitsinternalcontroloverfinancialreportingunderSection404(b)oftheSarbanes-OxleyAct(15
U.S.C.7262(b))bytheregisteredpublicaccountingfirmthatpreparedorissueditsauditreport. Í
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchange
Act). Yes ‘ No Í
AsofFebruary28,2021,theaggregatemarketvalueofWalgreensBootsAlliance,Inc.commonstockheldbynon-affiliates
(basedontheclosingtransactionpriceonFriday,February26,2021)wasapproximately$34.3billion.
AsofSeptember30,2021,therewere865,612,358sharesofWalgreensBootsAlliance,Inc.commonstockoutstanding.
DOCUMENTSINCORPORATEDBYREFERENCE
PortionsofthedefinitiveproxystatementforourAnnualMeetingofStockholdersplannedtobeheldonJanuary27,2022are
incorporatedbyreferenceintoPartIIIofthisForm10-Kasindicatedherein.
WalgreensBootsAlliance,Inc.
AnnualReportonForm10-K
TableofContents
PartI
Page
Item1. Business 1
Informationaboutourexecutiveofficers 13
Item1A. Riskfactors 14
Item1B. Unresolvedstaffcomments 32
Item2. Properties 32
Item3. Legalproceedings 33
Item4. Minesafetydisclosures 33
PartII
Item5. Marketforregistrant’scommonequity,relatedstockholdermattersandissuerpurchasesof
equitysecurities 34
Item6. Reserved 34
Item7. Management’sdiscussionandanalysisoffinancialconditionandresultsofoperations 35
Item7A. Quantitativeandqualitativedisclosureaboutmarketrisk 63
Item8. Financialstatementsandsupplementarydata 65
Item9. Changesinanddisagreementswithaccountantsonaccountingandfinancialdisclosure 126
Item9A. Controlsandprocedures 126
Item9B. Otherinformation 127
PartIII
Item10. Directors,executiveofficersandcorporategovernance 128
Item11. Executivecompensation 128
Item12. Securityownershipofcertainbeneficialownersandmanagementandrelatedstockholder
matters 128
Item13. Certainrelationshipsandrelatedtransactionsanddirectorindependence 128
Item14. Principalaccountingfeesandservices 129
PartIV
Item15. Exhibitsandfinancialstatementschedules 129
Item16. Form10-Ksummary 143
Signatures 144
ReferencesinthisAnnualReportonForm10-K(this“Form10-K”)tothe“Company,”“we,”“us”or“our”refer
toWalgreensBootsAlliance,Inc.anditssubsidiariesandineachcasedonotincludeunconsolidatedpartially-
ownedentities,exceptasotherwiseindicatedorthecontextotherwiserequires.Ourfiscalyearendson
August31,andreferenceshereinto“fiscal2021”refertoourfiscalyearendedAugust31,2021.
ThisForm10-Kincludesforward-lookingstatementsmadepursuanttothesafeharborprovisionsofthePrivate
SecuritiesLitigationReformActof1995.Seecautionarynoteregardingforward-lookingstatementsin
Management’sdiscussionandanalysisoffinancialconditionandresultsofoperationsinPartII,Item7below.
Alltrademarks,tradenamesandservicemarksusedhereinarethepropertyoftheirrespectiveowners.
PARTI
Item1.Business
Overview
WalgreensBootsAlliance,Inc.,aDelawarecorporation(“WalgreensBootsAlliance”orthe“Company”),isa
globalleaderinretailpharmacy,impactingmillionsofliveseverydaythroughdispensingmedicines,andproviding
accessiblehigh-qualitycare.Withmorethan170yearsoftrustedhealthcareheritageandinnovationincommunity
pharmacy,theCompanyismeetingcustomers’andpatients’needsthroughitsconvenientretaillocations,digital
platformsandhealthandbeautyproducts.TheCompanyisproudofitscontributionstohealthycommunities,a
healthyplanet,aninclusiveworkplaceandasustainablemarketplace.WalgreensBootsAllianceisaparticipantof
theUnitedNationsGlobalCompactandadherestoitsprinciples-basedapproachtoresponsiblebusiness.
WalgreensBootsAllianceisthelargestretailpharmacy,healthanddailylivingdestinationacrosstheUnited
States(“U.S.”)andEuropewithsalesof$132.5billioninthefiscalyearendedAugust31,2021.Walgreens
BootsAlliancehasapresencein9countriesandemploysmorethan315,000people.TheCompanyhas
approximately13,000storeswithintheU.S.,EuropeandLatinAmerica.Inaddition,WalgreensBootsAlliance
isoneoftheworld’slargestpurchasersofprescriptiondrugsandmanyotherhealthandwell-beingproducts.The
Company’ssize,scaleandexpertisewillhelpitexpandthesupplyof,andaddresstherisingcostof,prescription
drugsintheU.S.andworldwide.
TheCompanyprovidescustomerswithconvenient,omni-channelaccessthroughitsportfolioofretailand
businessbrandswhichincludesWalgreens,DuaneReadeandBootsaswellasincreasinglyglobalhealthand
beautyproductbrands,suchasNo7,NICE!,Soap&Glory,FinestNutrition,LizEarle,Botanics,SleekMakeUP
andYourGoodSkin.TheCompany’sglobalbrandsportfolioisenhancedbyitsin-houseproductresearchand
developmentcapabilities.TheCompanyseekstodrivefurtherinnovativewaystoaddressglobalhealthand
wellnesschallenges.Strategicpartnershipswithsomeoftheworld’sleadingcompaniesenabletheCompanyto
extenditshealthcaresolutionsandconvenienceofferingstothecommunitiesitserves.WebelievetheCompany
iswellpositionedtoexpandcustomerofferingsinexistingmarketsandbecomeahealthandwell-beingpartner
ofchoiceinemergingmarkets.Additionally,throughitsstrategicpartnerships,theCompanywillbeableto
dramaticallyenhanceWalgreensBootsAlliance’smarketingeffectivenessandpowertheCompany’sstrategic
initiativearoundmasspersonalization—deliveringtherightoffersandcontenttocustomers.
WalgreensBootsAlliancewasincorporatedinDelawarein2014andisthesuccessorofWalgreenCo.,an
Illinoiscorporation,whichwasformedin1909asasuccessortoabusinessfoundedin1901.Ourprincipal
executiveofficesarelocatedat108WilmotRoad,Deerfield,Illinois60015.Ourcommonstocktradesonthe
NasdaqStockMarketunderthesymbol“WBA.”
StrategicUpdate
InOctober2021,theCompanyannouncedthelaunchofitsnewhealthcarestrategy.TheCompanyplansto
becomealeadingprovideroflocalclinicalcareservicesbyleveragingitsconsumer-centrictechnologyand
pharmacynetworktodelivervalue-basedcare.TheCompanyalsoplanstocontinuetotransformitscore
pharmacyandretailbusiness.TheCompany’sgoalistoprovidebetterconsumerexperiences,improvehealth
outcomesandlowercosts.AtthecenteroftheCompany’shealthcarestrategyisWalgreensHealth,atechnology-
enabledcaremodelpoweredbyanationallyscaled,locallydeliveredhealthcareplatform.Toadvanceits
strategy,theCompanyannouncedmajorityinvestmentsinVillagePracticeManagementCompany,LLC
(“VillageMD”)andCareCentrix,Inc.(“CareCentrix”)whichitbelieveswillstrengthenWalgreensHealth
capabilitiesinprimarycare,post-acutecareandhomecare.
SeeNote21.SubsequenteventstotheConsolidatedFinancialStatementsincludedinPartII.Item8hereinfor
furtherinformation.
1
RecentTransactions
PharmaceuticalWholesaleTransaction
OnJanuary6,2021,theCompanyenteredintoaSharePurchaseAgreementwithAmerisourceBergen
Corporation(“AmerisourceBergen”).PursuanttothetermsandsubjecttotheconditionssetforthintheShare
PurchaseAgreement,AmerisourceBergenagreedtopurchasethemajorityoftheCompany’sAllianceHealthcare
businessaswellasaportionoftheCompany’sretailpharmacyinternationalbusinessesinEurope(“Disposal
Group”)forapproximately$6.5billion,comprisedof$6.275billionincash,subjecttocertainpurchaseprice
adjustments,and2millionsharesofAmerisourceBergencommonstock(the“AllianceHealthcareSale”).
AllianceHealthcare’sinvestmentinChinaandItalyanditsoperationsinGermanywerenotincludedinthe
DisposalGroup,andtheCompany’sretailpharmacyinternationaloperationsinTheNetherlands,Norwayand
LithuaniawereincludedintheDisposalGroup.TheDisposalGroupmetthecriteriatobereportedas
discontinuedoperations.Therefore,therelatedassets,liabilitiesandoperatingresultsoftheDisposalGroupare
reportedasdiscontinuedoperationsforallperiodspresented.
OnJune1,2021theCompanycompletedtheAllianceHealthcareSale,fortotalconsiderationof$6.9billion,
whichincludescashconsiderationof$6.7billion,subjecttonetcashandworkingcapitaladjustments.The
Companyrecordedagainbeforecurrencytranslationadjustmentsof$1.1billionandanetgainondisposalof
$0.3billion.Thegainonsalewaspresentedaspartofresultsofthediscontinuedoperations.Aftergivingeffect
totheAllianceHealthcareSale,theCompanybeneficiallyownsapproximately28.5%ofAmerisourceBergen’s
outstandingcommonstock,basedonthesharecountpubliclyreportedbyAmerisourceBergeninitsmostrecent
QuarterlyReportonForm10-Q.
InconnectionwiththeAllianceHealthcareSale,theCompanyandAmerisourceBergenalsoagreedto(i)athree-
yearextensionthrough2029oftheU.S.pharmaceuticaldistributionagreementpursuanttowhichbrandedand
genericpharmaceuticalproductsaresourcedfromAmerisourceBergenintheU.S.,(ii)athree-yearextensionof
theagreement,thatprovidesAmerisourceBergentheabilitytoaccessgenericspharmaceuticalproductsthrough
WalgreensBootsAllianceDevelopmentGmbH,theCompany’sglobalsourcingenterprise,(iii)adistribution
agreementpursuanttowhichAmerisourceBergenwillsupplybrandedandgenericpharmaceuticalproductstothe
Company’sBootsUKbusinessfollowingtheclosingoftheAllianceHealthcareSaleand(iv)acommitmentto
pursueaseriesofstrategicinitiativesdesignedtocreateincrementalgrowthandefficienciesinsourcing,logistics
anddistribution.
SeeNote2Discontinuedoperations,totheConsolidatedFinancialStatementsincludedinPartII,Item8below
foradditionalinformation.
VillageMDinvestment
InJuly2020,theCompanyandVillageMDannouncedanexpansionoftheirpartnershipandtheintenttoopen
500to700“VillageMedicalatWalgreens”physician-ledprimarycareclinicsoverafive-yearperiod.This
expandedpartnershipwassupportedbytheCompany’sinvestmentinVillageMDoverthreeyearsof$1.0billion
inequityandconvertibledebt,whichincludedaninitial$250millionequityinvestment.
OnJanuary6,2021,theCompanyandVillageMDannouncedtheaccelerationoftheCompany’sinvestmentin
VillageMD.TheCompanycompletedtheremaining$750millioninvestmentduringthetwelvemonthsended
August31,2021,whichwillsupporttheopeningof600to700clinicsinmorethan30U.S.marketsoverafour-
yearperiod,withtheintenttobuildhundredsmorethereafter.
TheCompanyheldapproximately22%ownershipinterestinVillageMDasofAugust31,2021andaccounted
foritusingtheequitymethodofaccounting.Itwasanticipated,assumingfullconversionofthedebt,thatthe
Companywouldholdapproximately30%ownershipinterestinVillageMDuponconversion.
2
OnOctober14,2021theCompanyannouncedthatithasagreedtomakeanadditional$5.2billioninvestmentin
VillageMDtoadvanceitsstrategicpositioninthedeliveryofvalue-basedprimarycare.Theincremental
investmentincreasestheCompany’sownershipstakeinVillageMDtoapproximately63%fromapproximately
30%onafullydilutedbasis,andincreasesthenumberofco-locatedclinicsfrom600primarycareclinicsto
1,000bytheyear2027.Theinvestmentwillbecomprisedof$4.0billionincash,tobepaidbytheCompanyto
VillageMDattheclosingofthetransaction,andapromissorynoteintheprincipalamountof$1.2billionto
VillageMDattheclosingofthetransaction.TheCompanyexpectstofundthecashportionoftheinvestment
throughacombinationofcashonhandandavailablecreditfacilities
SeeNote21.SubsequenteventstotheConsolidatedFinancialStatementsincludedinPartII.Item8hereinfor
furtherinformation.
iAacquisition
OnDecember29,2020,theCompanyacquiredamajorityequityinterestinInnovationAssociates,Inc.(“iA”)
foracashconsiderationof$451million.iAisaleading-edgeproviderofsoftwareenabledautomationsolutions
forretail,hospital,federalhealthcareandmail-orderpharmacymarkets.TheCompanyaccountedforthis
acquisitionasabusinesscombinationandconsolidatesiAwithintheUnitedStatessegmentinitsfinancial
statements.
PharmaceuticalWholesalebusinessinGermany
OnNovember1,2020,theCompanyandMcKessonCorporationclosedatransactiontoformacombined
pharmaceuticalwholesalebusinessinGermany,aspartofastrategicalliance.TheCompanyownsa70%
controllingequityinterestinthecombinedbusinesswhichisconsolidatedbytheCompanyandreportedwithin
theInternationalsegmentinitsfinancialstatements.TheCompanyaccountedforthisacquisitionasabusiness
combinationinvolvingnoncashpurchaseconsiderationof$296millionconsistingoftheissuanceofanequity
interestinthecombinedbusiness.SeeNote3Acquisitions,totheConsolidatedFinancialStatementsincludedin
PartII,Item8belowforadditionalinformation.
RelationshipwithAmerisourceBergen
WalgreensispartytovariousagreementsandarrangementswithAmerisourceBergenCorporation
(“AmerisourceBergen”)including(a)apharmaceuticaldistributionagreementunderwhichtheCompanysources
brandedandgenericpharmaceuticalproductsfromAmerisourceBergenintheUnitedStatesand(b)anagreement
underwhichAmerisourceBergenaccessesgenericpharmaceuticalproductsthroughtheCompany’sglobal
sourcingenterprise,WalgreensBootsAllianceDevelopmentGmbH.Theseagreementshavebeenamended
multipletimes,mostrecentlyinJune2021,inconnectionwiththeCompany’ssaleofitsAllianceHealthcare
businesstoAmerisourceBergen(the“AllianceHealthcareSale”).Pursuanttothoseamendments,theU.S.
distributionagreementwasextendedthrough2029andthepartiescommittedtopursueadditionalopportunities
insourcinganddistribution.ThepartiesalsoagreedthatAllianceHealthcareUKwillremainthedistribution
partnerofBootsuntil2031.
TheCompanyalsoholdsasubstantialinvestmentinAmerisourceBergen.AsofAugust31,2021,theCompany
owned58,854,867sharesofAmerisourceBergencommonstock,representingapproximately28.5%ofits
outstandingcommonstockbasedonthesharecountmostrecentlyreportedbyAmerisourceBergen.The
CompanyhasashareholdersagreementwithAmerisourceBergen,whichwasmostrecentlyamendedand
restatedinconnectionwiththeAllianceHealthcareSale(the“A&RShareholdersAgreement”).Pursuanttothe
A&RShareholdersAgreement,theCompanyhasdesignatedonememberofAmerisourceBergen’sboardof
directors.TheCompanyisalsopermitted,subjecttocertainconditions,toacquireuptoanadditional8,398,752
AmerisourceBergensharesintheopenmarket,andthereaftertodesignateanothermemberof
AmerisourceBergen’sboardofdirectors.Theamountofpermittedopenmarketpurchasesissubjecttoincrease
ordecreaseincertaincircumstances.
3
TheCompanyaccountsforitsinvestmentinAmerisourceBergenusingtheequitymethodofaccounting,subject
toatwo-monthreportinglag,withthenetearningsattributabletotheinvestmentclassifiedwithintheoperating
incomeoftheCompany’sUnitedStatessegment.
SeeManagement’sdiscussionandanalysisinPartII,Item7andNote2Discontinuedoperations,Note6Equity
methodinvestmentsandNote19Relatedparties,totheConsolidatedFinancialStatementsincludedinPartII,
Item8,belowforadditionalinformation.
Industryoverview
Theretailpharmacyindustryacrosstheglobeishighlycompetitiveanddynamicandhasexperienced
consolidationandanevolvingcompetitivelandscapeinrecentyears.Prescriptiondrugsplayasignificantrolein
healthcareandconstituteafirstlineoftreatmentformanymedicalconditions.TheCompanybelievesthelong-
termoutlookforprescriptiondrugutilizationisstrongdue,inpart,toagingpopulations,increasesinlife
expectancy,increasesintheavailabilityofgenericdrugs,thecontinueddevelopmentofinnovativedrugsthat
improvequalityoflifeandcontrolhealthcarecostsandincreasesinthenumberofpersonswithinsurance
coverageforprescriptiondrugs,including,intheU.S.,“babyboomers”increasinglybecomingeligibleforthe
federallyfundedMedicarePartDprescriptionprogram.Pharmaceuticalwholesalersactasavitallinkbetween
drugmanufacturersandpharmaciesandhealthcareprovidersinsupplyingpharmaceuticalstopatients.
Theretailpharmacyindustryacrosstheglobereliessignificantlyonprivateandgovernmentalthird-partypayers.
Manyprivateorganizationsthroughoutthehealthcareindustry,includingpharmacybenefitmanagement
(“PBM”)companiesandhealthinsurancecompanies,haveconsolidatedinrecentyearstocreatelarger
healthcareenterpriseswithgreaterbargainingpower.Third-partypayers,includingtheMedicarePartDplans
andthestate-sponsoredMedicaidandrelatedmanagedcareMedicaidagenciesintheU.S.,canchangeeligibility
requirementsorreducecertainreimbursementrates.Inaddition,inmanyEuropeancountries,thegovernment
providesorsubsidizeshealthcaretoconsumersandregulatespharmaceuticalprices,patienteligibilityand
reimbursementlevelstocontrolcostsforthegovernment-sponsoredhealthcaresystem.Changesinlawor
regulationalsocanimpactreimbursementratesandterms.Forexample,thePatientProtectionandAffordable
CareAct(the“ACA”)wasenactedtohelpcontrolfederalhealthcarespending,includingforprescriptiondrugs,
intheU.S.ThesechangesgenerallyareexpectedtoreduceMedicaidreimbursementsintheU.S.StateMedicaid
programsarealsoexpectedtocontinuetoseekreductionsinreimbursements.Whenthird-partypayersor
governmentalauthoritiestakeactionsthatrestricteligibilityorreducepricesorreimbursementrates,salesand
marginsintheretailpharmacyindustrycouldbereduced,whichwouldadverselyaffectindustryprofitability.In
somecases,thesepossibleadverseeffectsmaybepartiallyorentirelyoffsetbycontrollinginventorycostsand
otherexpenses,dispensingmorehighermargingenerics,findingnewrevenuestreamsthroughpharmacyservices
orotherofferingsand/ordispensingagreatervolumeofprescriptions.
Theseindustrydynamicsandchallengesarecontinuousandhaveintensifiedinrecentyears.Sincethe
completionofthestrategiccombinationofWalgreensandAllianceBootsinDecember2014,theCompanyhas
hadacontinuousfocusonoperationalefficienciesandcostreduction.
Genericprescriptiondrugshavecontinuedtohelploweroverallcostsforcustomersandthird-partypayers.The
Companyexpectstheutilizationofgenericpharmaceuticalstocontinuetoincrease.Ingeneral,intheU.S.,
genericversionsofdrugsgeneratelowersalesdollarsperprescription,buthighergrossprofitdollars,as
comparedwithpatent-protectedbrandnamedrugs.Theimpactonretailpharmacygrossprofitdollarscanbe
significantinthefirstseveralmonthsafteragenericversionofadrugisfirstallowedtocompetewiththe
brandedversion,whichisgenerallyreferredtoasa“genericconversion”.Inanygivenyear,thenumberofmajor
brandnamedrugsthatundergoaconversionfrombrandedtogenericstatuscanvaryandthetimingofgeneric
conversionscanbedifficulttopredict,whichcanhaveasignificantimpactonretailpharmacysalesandgross
profitdollars.Ingeneral,intheU.S.,thespecialtyprescriptionbusinessisalsogrowingandgenerateshigher
salesdollarsperprescription,butlowergrossmargin,ascomparedtogenericprescriptiondrugs.
4
TheCompanyexpectsthatmarketdemand,governmentregulation,third-partyreimbursementpolicies,
governmentcontractingrequirementsandotherpressureswillcontinuetocausetheindustriesinwhichthe
Companycompetestoevolve.Pharmacistsareonthefrontlinesofthehealthcaredeliverysystem,andthe
Companybelievesrisinghealthcarecostsandthelimitedaccesstoprimarycarephysicianspresentopportunities
forpharmacistsandretailpharmaciestoplayanevengreaterroleindrivingpositiveoutcomesforpatientsand
payersthroughexpandedserviceofferings.
Segments
TheCompany’soperationsareconductedthroughtworeportablesegments:
• UnitedStates;and
• International
Forfiscal2021,oursegmentsaleswere:UnitedStates,$112.0billionandInternational$20.5billion.Additional
informationrelatingtooursegmentsisincludedinManagement’sdiscussionandanalysisoffinancialcondition
andresultsofoperationsinPartII,Item7belowandinNote17SegmentreportingandNote18Sales,tothe
ConsolidatedFinancialStatementsincludedinPartII,Item8belowforadditionalinformation.
UnitedStates
TheUnitedStatessegmentincludestheCompany’sWalgreensbusiness,whichincludestheoperationsofretail
drugstores,healthandwellnessservices,andmailandcentralspecialtypharmacyservices,anditsequitymethod
investmentinAmerisourceBergen.
Salesforthesegmentareprincipallyderivedfromthesaleofprescriptiondrugsandawideassortmentofretail
products,includinghealthandwellness,beauty,personalcareandconsumablesandgeneralmerchandise.The
UnitedStatessegment(excludingequitymethodinvestments)haspharmacy-ledhealthandbeautyretail
offeringsin50states,theDistrictofColumbia,PuertoRicoandtheU.S.VirginIslands,eachfocusedonhelping
peoplefeelhappyandhealthy.TheCompanyoperated8,965retailstoresinthesegmentasofAugust31,2021.
TheprincipalretailpharmacybrandsinthesegmentareWalgreensandDuaneReade.TheCompanyisamarket
leaderintheU.S.and,asofAugust31,2021,approximately78%ofthepopulationoftheU.S.livedwithinfive
milesofaWalgreensorDuaneReaderetailpharmacy.
TheCompanyisfocusedoncreatinganeighborhoodhealthdestinationandamoremodernpharmacyalignedto
awiderrangeofhealthcareservices.Significantinvestmentsinfiscal2021haveacceleratedtheCompany’s
customer-centricapproach,withspecificfocusontransformingomni-channelcapabilitiesandofferingsacross
retailandhealthcare.TheCompany’sserviceshelpimprovehealthoutcomesforpatientsandmanagecostsfor
payers,includingemployers,managedcareorganizations,healthsystems,PBMcompaniesandthepublicsector.
TheCompanyutilizesitsretailnetworkasachanneltoprovidehealthandwellnessservicestoitscustomersand
patients,asillustratedbytheCompany’sabilitytoplayasignificantroleinprovidingvaccinations.Additionally,
throughourkeycollaborations,weaimtodevelopnewhealthcaredeliverymodelsandtoimprovethespeed,
efficiencyandsafetyoftheprescriptionfulfillmentprocess.Wehavetakenfurtherstepstodevelopour
neighborhoodhealthdestinations,workingwithourhealthcarestrategicpartnerssuchasVillageMDtoprovide
anintegratedprimarycareandpharmacymodelthataimstodrivebetterhealthoutcomes,reducecostsand
provideadifferentiatedpatientexperiencetothecommunitiesweserve.
TheCompanyalsoprovidesspecialtypharmacyandmailservicesandoffersotherhealthandwellnessservices
throughouttheU.S.,mostofwhichareoperatedbyourstrategichealthcarepartners.TheCompanyhasmore
than85,000healthcareserviceproviders,includingpharmacists,pharmacytechnicians,nursepractitionersand
otherhealthrelatedprofessionals.
5
Thesegmentprovidescustomerswithconvenient,omni-channelaccesstoconsumergoodsandservices,
includingownbrandedgeneralmerchandise,suchasNICE!,FinestNutrition,No7,andSoap&Glory,aswellas
pharmacyandhealthandwellnessservicesincommunitiesacrosstheU.S.IntegratedwiththeCompany’s
e-commerceplatform,theWalgreensmobileapplicationallowscustomerstorefillprescriptionsthroughscan
technology,receivenotificationswhenarefillisdueandchoosetheirdeliveryoption,whichincludesin-store
pickup,drive-throughordeliverytotheirhome.
Infiscal2021,welaunchedmyWalgreens,replacingtheformerBalancedRewardscustomerloyaltyprogram,to
provideanewinterfaceforcustomerstoaccesstheenhancedandgrowingWalgreensdigitaloffering.Thenew
programsimplifieshowcustomersaccumulateanduserewards.PointshavebeenreplacedbyWalgreensCash,
reflectingtheactualvalueoftherewardandallowingthecashbenefittobeappliedasthecustomerchooses,not
justtofuturetransactionsatWalgreensbuteveninsupportoftheirfavoritecharityorcommunitycause.The
numberofmyWalgreensmemberscontinuetogrowandasofAugust31,2021,totaledapproximately85million.
TheWalgreensFindCareplatformalsoincludestelehealthserviceproviders,connectingpatientsandcustomers
withoptionstoaccessconvenientandaffordablecarefromtheirmobiledevices.Additionally,theCompanyhas
expandedtheretailfunctionalityofitsmobileapplication,suchasextendingdrive-throughservicetoinclude
retailproducts,curbsidecollectionforonlineordersandsamedayofferingsincludingpickuporderswithin30
minutes.TheCompanyalsoofferson-demanddeliverytoitscustomersthroughitscollaborationswithDoorDash
andPostmates.Thesegmentisalsoimplementingnewapproachestopromotions,productselectionandother
areastodelivergreatervaluetoitscustomersinitsstores,includinganenhancedbeautyoffering.
Thecomponentsofthesegment’ssalesarePharmacy(thesaleofprescriptiondrugsandprovisionofpharmacy-
relatedservices)andRetail(thesaleofhealthcareandretailproductsincludingnon-prescriptiondrugs,health
andwellness,beautyandpersonalcare,andconsumablesandgeneralmerchandise).Thesegment’ssalesare
subjecttotheinfluenceofseasonality,particularlythecough,coldandfluseasonsandwinterholiday.This
seasonalityalsocanaffectthesegment’sproportionofsalesbetweenRetailandPharmacyduringcertainperiods.
Thecomponentsofthesegment’sfiscalyearsaleswereasfollows:
Fiscal2021 Fiscal2020 Fiscal2019
Pharmacy 76% 75% 74%
Retail 24% 25% 26%
Total 100% 100% 100%
TheCompanyfilled827.5millionprescriptions(includingvaccinations)inthesegmentinfiscal2021.Adjusted
to30-dayequivalents,prescriptionsfilledwere1.2billioninfiscal2021.TheCompanyfillsprescriptionsunder
Medicare,Medicaidandotherpubliclyfinancedorsponsoredhealthbenefitandprescriptiondrugplansand
programs,includingthefederal340Bdrugpricingprogram.Saleswherereimbursementisreceivedfrom
managedcareorganizations,governmentalagencies,PBMcompaniesandprivateinsurancewereapproximately
97%ofthesegment’sfiscal2021Pharmacysales.
TheCompanyfillsprescriptionsformanystateMedicaidpublicassistanceprograms.Salesfromallsuch
Medicaidplanswereapproximately4%ofthesegment’sfiscal2021sales.SalesfromMedicarePartDplans
wereapproximately20%ofthesegment’sfiscal2021sales.
Infiscal2021,theCompanyalsointroducedthenewmyWalgreensCreditCardprogram,featuringtwoindustry-
firstretailhealthandwellnesscreditcards.ThemyWalgreensMastercardandthemyWalgreensCreditCardare
thefirsteveroftheirkindtorewardmorepersonalizedwellbeingchoicesandofferindustry-leadingrewardsat
Walgreenslocations,Walgreens.com,DuaneReadestores,viatheWalgreensmobileapp,andwherever
Mastercardisaccepted.
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