Despite beating analyst expectations on both revenue and earnings in its latest second quarter results, Walgreens Boots Alliance (WBA) narrowed its Adjusted EPS guidance for fiscal year 2024, citing a challenging retail environment. Walgreens CEO Tim Wentworth joins Yahoo Finance Live to shed light on the factors that prompted the decision.

Wentworth emphasizes that the "real dynamic" is the strain faced by consumers under current economic conditions. He highlights that consumers are seeking value, and Walgreens is focused on delivering that with the continued sensitivity around pricing.

Reflecting on the company's pharmacy business, Wentworth admits that it experienced "a challenging time." However, he states that they have since been able to secure adequate staffing and forge relationships with pharmacy schools to bolster hiring efforts: "We like where we are now." Wentworth explains that the company's efforts extend beyond hiring, but rather "work redesign," allowing pharmacists to "operate at the very top of their clinical ability."

Wentworth attributes the negative outlook surrounding Pharmacy Benefit Managers (PBMs) to "consumer, patient dissatisfaction with the way the system works." However, he views this as "an opportunity" to help reshape this outlook. He emphasizes that by concentrating on areas such as value and transparency for consumers, they can aid in transforming this perception, posing the question, "What's the model for the future that's gonna help a PBM help its consumer?"

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Editor's note: This article was written by Angel Smith

Video Transcript

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BRAD SMITH: Walgreens handedly beating earnings and revenue estimates in the second quarter but narrowing its adjusted EPS guidance for 2024, warning of a challenging retail environment. Tim Wentworth, Walgreens Boots Alliance CEO, joins me now alongside Yahoo Finance's Healthcare Reporter, Anjalee Khemlani. Great to have you both here with us.

First and foremost, Tim, I was looking through the earnings report. You mentioned the benefit from higher branded drug inflation and strong execution in pharmacy services. I think a lot of people out there right now are trying to figure out for themselves where inflation still is and isn't present in their patient experience, especially with regard to the healthcare system at large.

TIM WNETWORTH: Yeah, thanks. I-- It's great to be here with both of you. You know, in terms of inflation, it's-- it's not as straightforward, maybe, as folks would think, and as much as drug inflation has actually been pretty reasonable this year. So for patients that are in high-deductible plans, they haven't seen massive increases. New products have come out very expensively, and that's a different-- different challenge than the actual underlying inflation.

And then in the front of our stores, you know, we have-- we have seen, you know, some inflation still but I think the real dynamic is that the totality of where the consumer is today is challenged, particularly our consumer. And so they are shopping for value. They are looking for, you know, best deal. They're willing to bulk purchase their shopping, and so forth, more than ever. And so from our perspective, that means we've got to find ways to deliver value to them because they are very sensitive right now to pricing.

ANJALEE KHEMLANI: Tim, Anjalee here. Really good to see you. And I know that you're really shifting how you're thinking about the way you run these stores. You're giving a lot of really awards and incentives to the local level to the store managers. You want them to take control. Meanwhile, there's pressure on the front of the store, as you mentioned in the earnings call, with not just inflation but in general. Pressure coming from a long time.

And so shifting how you're thinking about managing things, you also mentioned something that I thought was interesting, which is looking over at the UK and the way Boots is now allowed to have the pharmacists prescribe for seven med indications. I thought that was interesting because it's something that we see in the rest of the world doesn't happen here in the US. How does that help, considering you also have a shortage of labor in that area? How are you making-- looking at all of these things combined?

TIM WNETWORTH: Yeah, I mean, it's a big question, obviously. And I-- I-- I appreciate the fact that, you know, the way you laid it out is in such a way-- But let me really go right to the most important question. We actually have today a really good pharmacy staffing, and we have really good relationships with both the pharmacy schools and the communities.

We went through certainly a challenging time, and we had to make some adjustments over the last couple of years as it relates to pharmacists hiring and retention, but we like where we are now. But we're not going to get to where we need to simply by being a place that can hire lots of pharmacists. It is about work redesign. It is about taking the lower-value work off the table.

If you think about Boots, for example, and what we talked about there, you know, that's pharmacists operating at the very top of their clinical ability, being able to diagnose and then as well actually dispense and treat a patient that has a UTI or has a number of these other conditions.

And so from our standpoint, whether it's our micro-fulfillment centers, whether it's same-day delivery or same-hour delivery in 80% of the time, and other things to move as much work off of the pharmacists desk as possible, making them able to take on these other more high-order more value for the system opportunities, that's going to be the way that we're able to essentially grow our underlying clinical side of our business while at the same time building trust with patients.

BRAD SMITH: Tim, are you still looking for a buyer for Boots?

So we've never said that we're looking-- I mean, a couple of years ago, there was a process that Boots was in. Where we are now is that we are looking at every asset we have in our portfolio. Everyone. And inside of some of those assets, we're looking at some of the sub-assets even. But we are looking at every one of those to determine what is the best place for it given our future.

And that place may be in our book of business. It may be in our book of business with a partner. It may be that we find a better home for it that's not inside of our company. We haven't-- We haven't discussed Boots specifically, but I can tell you that Boots is certainly on the whiteboard as one of the assets that we need to have a complete understanding of how do we get the most value in the future for that fabulous fabulously performing asset.

ANJALEE KHEMLANI: Tim, you also have some experience with PBMs going back to your old stomping grounds. So talk to me about how you're playing with them now, considering nationwide there's a squeeze on them. There's a lot of pressure on how PBMs operate, and pharmacies historically, especially smaller pharmacies, have been complaining for years that the playing field is not fair, and they-- we've seen closures for the past several years. How does that really affect what you're doing?

TIM WNETWORTH: You know, the way I think about it, maybe it's a bit contrarian, is that whole environment, and more importantly, maybe the underlying drivers of that, which is consumer patient dissatisfaction with the way the system works to some extent payer dissatisfaction with the way that the system works. From my perspective, I view that as an opportunity to sit down with the PBMs and actually help them find a way to create additional value for the marketplace, additional transparency, additional clarity for-- for-- for the consumers.

And so we're having conversations with the PBMs that are very constructive as it relates to not just traditional rate but rather what's the form of the future. And I know folks have talked about cost plus as one way of describing that. But what's the model for the future that's going to help a PBM help its consumers feel that the benefits that they have are valuable, that they're getting what they deserve, that they're working with a good company, that their employer provides good benefits?

And I think those are all things that we can actually be quite helpful. So when I see the PBMs kind of under the microscope, I don't celebrate. I say, how can we help? How can we actually take the current model and make it better? And we are willing, and able, and actually love to work in an environment where we are paid for the services we provide very transparently.

That's the way vaccines work today, and it works very, very well. But to do that in the drugs and in the specialty market, where again, I think by building trust, we can get a whole lot of other patient outcomes that are going to be good for the system.

BRAD SMITH: You know, Tim, we were talking to our viewers about-- about health is wealth. Of course, we tossed that around a lot. But for those who are trying to figure out the right spend profile into their healthcare savings accounts or-- spending accounts rather, or some of the other spend accounts that is tied to where Walgreens can capitalize, where have you seen that mix shift a little bit recently, and what are the anticipations there?

TIM WNETWORTH: You know, you get some annual stuff where the first part of every year folks have a reset of their-- of a lot of their out-of-pocket deductible things, and so they suddenly go looking to hopefully find the money in those accounts to-- to bridge them through to when their insurance coverage will start once they've reached those hurdles inside their plans. This year has been no different in that respect.

The flip side is, you know, also, you know, our own-- because patients are value shopping. Even if they're sick, they'd rather not overpay for a particular over-the-counter cough, cold, and flu remedy, for example. And so what we see is the number of owned brand things that come off our shelves that are paid for by HSA's accounts are continuing to increase as patients use those-- those dollars to keep themselves healthy and-- and-- or make themselves well.

And so, you know-- And I do-- I'm a big believer that health is wealth. I think the most important thing is for folks that have those accounts to have to spend as little as possible today because then they can compound the growth of those accounts and hold the money for as they age for-- for the really catastrophic things where they may need it.