Inside This Issue - Opinion
Drug chains’ agenda for 2014 already crowded
January 6th, 2014
While a number of unforeseen events will undoubtedly play a role in shaping the chain drug industry during the course of the new year, several developments that had their origin in 2013 or before will continue to exert a strong influence on the trade class’ evolution.
Implementation of the Affordable Care Act, which was passed in 2010 but whose major provisions are only now going into effect, will have a powerful impact on community pharmacy, the larger health care system and the nation’s economy.
Thus far the rollout of the program has been plagued by problems. The deadlines for many mandates, including the one calling for large employers to provide coverage for workers, have been extended. Technical glitches affecting healthcare.gov, the federal government website designed to serve as a portal to the new health insurance exchanges in 36 states, have frustrated would-be users.
At the start of the year, the number of people who had signed up for coverage through healthcare.gov stood at 1.1 million, well below the 7 million-plus that Health and Human Services Secretary Kathleen Sebelius had earlier said the government wanted to have in place by the end of March. Achieving that level is critical because the economic underpinnings of the ACA depend on the participation of young, healthy people as well as older individuals who are more likely to make extensive use of health care services.
Retail pharmacies have a lot at stake. If health care reform is successful, within a few years they will have some 30 million more customers with prescription drug coverage than they did before the advent of the ACA. In addition, pharmacies and the in-store clinics that an increasing number of them operate will be in a position to provide diagnostic tests and other routine health services to help offset the growing shortage of primary care physicians.
Another trend with industrywide implications is the globalization of pharmacy. Walgreens and Alliance Boots are building their partnership into what is expected to be a full merger in 2015, CVS Caremark has established its first overseas outpost in Brazil, and McKesson is in the process of acquiring the German pharmaceutical distributor Celesio. The extension of those companies’ international reach could have significant implications for the way pharmaceutical products are bought and sold.
A transition in the executive ranks is under way at the chain drug industry’s two dominant players. In October Alex Gourlay, who had been chief executive of Alliance Boots’ health and beauty division, became Walgreens’ president of customer experience, and at the start of this month Helena Foulkes, a longtime CVS Caremark executive with extensive experience in the retail and pharmacy benefits management sides of the business, assumed the presidency of CVS/pharmacy. Both of them have a proven track record that shows they are capable of making a real difference. The decisions they make in their new roles will go a long way toward determining if the industry leaders pull further away from the pack.
One company that is determined not to let that happen is Rite Aid, which under the leadership of chairman and chief executive officer John Standley, president and chief operating officer Ken Martindale, and senior executive vice president and chief financial officer Frank Vitrano has staged a remarkable comeback in recent years. The innovations they’ve fostered — the wellness+ loyalty program and the wellness store format chief among them — have altered the perception of the drug chain from a has-been to a force to be reckoned with. The challenge for Rite Aid is to find ways to maintain and build on the momentum that it now enjoys.
Other trends worth watching are the state of the economy, which by some key measures is picking up steam, even as high unemployment and income inequality persist; regional drug chains’ struggle to remain competitive as they confront the likes of CVS Caremark, Walgreens and other mega retailers; and the inroads that continue to be made by online retailers in an environment where consumers expect to be able to shop whenever and however they desire.
The proverbial expression “may you live in interesting times” is clearly applicable to today’s chain drug sector.