John Driscoll : Thanks for the question. I think just on the — first on the geographic reach question, we have a relatively small, early-stage set of practices in Florida. So we’ve got a low exposure there. I think on the risk adjustment and rate changes, we’re obviously looking at that carefully. It would be premature to talk about that given the fact that the final rule isn’t out, and we don’t know when the final rule happens, how that will — how health plans on the MA side might adjust their benefit designs. But based on the way we are positioned and the variety of levers we have, we are cautiously optimistic that we’re in really good shape to manage the changes that we expect may come down the pike. But I think we need to really look at what comes out on April 4. But with regard to Florida, it’s a de minimis exposure.
Operator: Your next question comes from the line of Lisa Gill from JPMorgan.
Lisa Gill : James, I wanted to just start with how should I think about margins in the U.S. Retail business on a go-forward basis? So if I look at the margin this quarter, I know there’s like puts and takes and you talked about growth rates and what’s happening with COVID, et cetera. But how do we think about a sustainable margin, one, in that business? And two, do you have a longer-term goal of what you’d like the margin to look like? And then just secondly, John, I wanted to follow up to your comments on VillageMD as you think about capitated relationships, I think that James earlier talked about 177,000 fully at-risk MA lives. And I understand we’ll wait for the floors and see what the potential is there. But can you maybe just talk about vintages or what you’re seeing right now around the profitability of some of those MA lives as we move into the back half of this year and going forward?
Are there any key things that we should be looking at or thinking about for moving those members to profitability?
James Kehoe : Okay. So let me take a shot at the first one on the margins. And I think some of this will go back to actually the JPMorgan Conference, where we laid out, what are the drivers between the first half and the second half? And I think you’ll recall, Lisa, that we did call out pharmacy in the U.S., the pharmacy reimbursement and cost of goods sold, both of those were expected to be a much lower headwind in the second half of the year versus the first half. So I would not judge the first half margins as representative for the full year. There will be a significant delta between first and second half. You asked about longer term, how do we see the margins? I think on Retail, you’ve seen our performance, I would say, over the last eight quarters.
It’s a business that has grown comp sales and margins at the same time, consistently over a long-term period. We actually think we’re still at the bottom of this, if you like, because we still haven’t unlocked the power of the Walgreens brand to own-label offering and we have goals out there to be in the low 20s in terms of penetration, and we’re currently sitting at 16. And that will continue to underpin margin growth longer term. The second part of this is we’ve done some nice work on strategic margin management, both on promotional effectiveness and selectively adjusting price tiers within the stores and that is expected to continue to be a lever going forward. So we see positive gross margin gains longer term on the front of store business, which is already well improved over the last eight quarters.
