Walgreens Prepares for High-Tech Future with Microsoft Partnership

Xconomy Seattle — 

Microsoft is making a “wal-to-wal” bet that retailers can harness the Seattle-area tech giant’s products and services to upgrade the brick-and-mortar experience for consumers and patients.

About six months after it struck a partnership with Walmart (NYSE: WMT), Microsoft on Tuesday announced a seven-year agreement with Walgreens (NASDAQ: WBA), the specific financial terms of which were not disclosed.

Microsoft (NASDAQ: MSFT) and Walgreens said in a news release that one of their goals in working together is “making healthcare more convenient to people” through technology. This year, Walgreens plans to upgrade up to 12 of its stores with “digital health corners,” which will display healthcare-related devices and gadgets. Presumably, some or all of them would be underpinned by Microsoft technology.

Walgreens is the nation’s second largest pharmacy chain, according to the research firm IQVIA (NYSE: IQV). The only company that operates more locations and employs more pharmacists is Rhode Island-based CVS Health (NYSE: CVS), which has been making its own software-focused push in recent months. CVS has partnered with tech companies to offer patients telehealth services and chatbots to help get them in front of clinicians—either over a videoconference feed or in-person at a CVS clinic.

Additionally, CVS said in June that it was working to expand its prescription-drug delivery service. That same month, Amazon (NASDAQ: AMZN) announced a deal to acquire Boston-area online pharmacy startup PillPack. The purchase price was nearly $1 billion, according to a TechCrunch report citing sources with knowledge of the deal.

Some industry observers view the Microsoft-Walgreens tie-up as a hedge against the possibility that Amazon will move deeper into prescription drug sales. With its huge footprint in e-commerce—a reality underscored by Amazon’s Prime service now tallying 100 million-plus subscribers—Amazon appears likely to encourage consumers to refill prescriptions through the mail, rather than picking them up at a nearby pharmacy.

Meanwhile, Microsoft’s partnership with Walgreens seems to signal both companies have confidence in the long-term future of brick-and-mortar retail. Under the terms of the deal, Walgreens has agreed to transition its IT infrastructure to Microsoft’s Azure cloud computing platform. That will enable the pharmacy chain to incorporate more of Microsoft’s artificial intelligence technologies into the outpatient healthcare services Walgreens provides patients.

The two companies say they also plan to develop new technologies to help patients manage chronic conditions.

In the future, Microsoft and Walgreens may establish “innovation centers” in large metropolitan areas, according to Tuesday’s release. They also mentioned the possibility of adding more partners—pharma companies, insurers, and networks of hospitals and clinics, for example—to create what they call a “seamless ecosystem” within the healthcare industry.