M&A Landscape for Consumer Healthcare

Consumer health refers to the direct connection between a traditional consumer/patient and the healthcare ecosystem that empowers the consumer in their care journey. When the consumer health ecosystem is functioning optimally, a patient is involved with all key stakeholders, which increases patient engagement in all stages of the patient care journey. These stakeholders increasingly include consumer companies.

The patient care journey begins with awareness. From there, discovery, diagnosis and treatment keep the patient involved with one or more providers. Adherence, wellness and prevention complete the patient care journey. Along the way, patients will be involved with a number of key stakeholders — not just with providers but also with life sciences companies, consumer companies, medtech companies and, of course, payers (see Figure 1).

In 2021-22, consumer-focused companies became increasingly interested in diversifying into the approximately $4.3 trillion U.S. healthcare market, particularly in outpatient and other healthcare services. New entrants in the healthcare industry have been largely focused on providing services for which they can leverage their existing infrastructure — for example, clinics/outpatient services leverage established brick-and-mortar locations, and over-the-counter (OTC) remedies and supplement offerings leverage existing shelf space and supply chain infrastructure.

The amount of M&A activity in the consumer health space, measured by number of deals in 2021-22, was highest in healthcare services. This includes clinics and outpatient services, telehealth, at-home services (e.g., home diagnostics), and elder and disabled care.

The area of pharmaceutical products was the next most active, encompassing vitamins, minerals and supplements; OTC remedies; and animal health products. In the area of healthcare devices and supplies, the majority of companies entering this sector have existing manufacturing capabilities to make medical hardware such as diagnostic tools and devices.

Companies entering the healthcare technology space typically have prior healthcare experience and capabilities and use acquisitions to further their presence in healthcare. Healthcare technology includes health platforms or applications (e.g., well-being apps), medical artificial intelligence and online pharmacies.

The human factor clearly plays a role in consumer healthcare. Commercial services companies provide such human capital services as nurses for hire; other companies provide consulting and marketing services to promote business growth. Consumer nondurables provide ongoing opportunities for growth in the area of personal products and food products.

Retailers enter the healthcare space

Of the many high-value consumer health acquisitions in 2022, most were made by retailers looking to enter or expand their presence in the healthcare services space. Many prominent retailers are focusing on gaining expertise in clinics and outpatient services:

Amazon acquired primary care provider One Medical for approximately $4 billion
Walmart is expanding its health clinic footprint and capabilities with a 10-year partnership with UnitedHealth Group to sell Medicare Advantage policies in Georgia and leveraging Optum’s data analytical tools in approximately 15 Walmart health clinics in Florida and Georgia
CVS won the bidding war for Signify, a home health tech player, for about $8 billion, and it has entered into an agreement to acquire Oak Street Health
Best Buy acquired Current Health, a care-at-home tech platform, to supplement earlier aging-in-place acquisitions of GreatCall, Lively and Critical Signals Technologies
Rite Aid has partnered with Homeward, a primary and specialty care startup, to provide on-site services for approximately 700 rural Rite Aid locations
Walgreens has completed a series of acquisitions to gain access across the continuum of medical care: brick-and-mortar primary care players VillageMD (approximately $5 billion) and Summit Health-CityMD (approximately $9 billion), plus home health tech provider CareCentrix (approximately $1 billion) and hospital pharmacy vendor Shield Health Solutions (approximately $2 billion)
Nestlé acquired Bountiful for approximately $6 billion; traditional consumer packaged goods companies have shown an increased focus on healthcare through acquisitions, primarily in the pharmaceutical and biotechnology spaces

M&A trends

M&A values are growing. While M&A activity in the consumer health space peaked in 2021, 2022 saw fewer deals — but the deal values were higher than in the previous three years. 2021 was a record year for consumer health M&A activity, driven by rising consumer interest in self-care, strong capital markets and tailwinds supporting healthcare market growth.

In 2022, consumer health M&A activity declined due to macroeconomic factors including decreased consumer spending and higher interest rates. Despite the lower deal volume, the total dollar value of approximately $30 billion was the highest it’s been since 2018. This is a result of multiple large acquisitions such as Walgreen’s acquisition of VillageMD and Microsoft’s acquisition of Nuance Health. Although M&A activity declined, strong tailwinds remain as consumers continue to take greater ownership of their health and retailers look to expand their footprint in the healthcare market (see Figure 2).

Consumer health M&A deal volume and value in North America (2017-22)*

Consumer-focused companies have engaged in significant M&A activity over the past two years with the goal of capturing market share in the consumer health market. Healthcare services and biopharma/biotech companies have been the primary targets. Healthcare services represents an attractive opportunity for investment as consumer brands look to capitalize on direct-to-consumer model to deliver healthcare options to customers. The biopharma/biotech pharmacy space is attractive to companies aiming to sell supplements and OTC medications (see Figure 3).

Consumer health M&A deals by category in North America (2017-22)*

Holistic health a key focus

A continued focus on primary care and virtual care. Healthcare providers (e.g., CVS Health, Carbon Health, Signify) are increasingly looking for opportunities to develop comprehensive offerings for their customers to support convenience
A digital front door. Healthcare is moving toward more digital, in-home solutions with shifts toward telehealth/virtual appointments, in-home diagnostics and therapies delivered to consumers’ homes in the face of consumers’ pain points with in-person, at-clinic treatment
Increasing access to care. Among consumer-focused healthcare companies, the traditional approach of developing brick-and-mortar locations is anticipated to lose some steam in favor of geographically focused rollouts based on favorable consumer dynamics (e.g., underserved primary care, disease prevalence, payer concentration)
Personalized medicine. Consumers are increasingly opting to become more engaged in maintaining and managing their health, and they are looking for healthcare options that account for their unique health histories, circumstances and preferences
A focus on whole-person healthcare. Increasing prevalence and recognition of mental health issues post-pandemic have caused consumers to look for tools and support in both the physical and mental health spaces
Functional foods and supplements. Products with functional benefits, such as those improving energy, digestion, the ability to manage stress and sleep, are gaining traction as consumers increasingly opt for preventive ways to manage their health
Monitoring technology (e.g., wearables). Products that empower healthcare professionals and consumers to continuously monitor health metrics have become increasingly valuable as they allow for preventive care and delivery of healthcare in the comfort of the consumer’s home