With less than two months to go before open enrollment in the new state health insurance exchanges begins, one of the great dramas in the history of retail pharmacy is about to unfold.

retail pharmacy, health insurance exchanges, Affordable Care Act, ACA, drug chains, community pharmacy, Jeffrey Woldt, CVS Caremark, Walgreens, Alliance Boots, AmerisourceBergen, McKesson, Cardinal Health, Health Mart, Medicine Shoppe, Good Neighbor Pharmacy, Rite Aid, pharmaceutical wholesalers, accountable care organizations, ACOs, health care delivery, in-store clinics

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Inside This Issue - Opinion

Health care reform gives rise to rival Rx models

August 5th, 2013

With less than two months to go before open enrollment in the new state health insurance exchanges begins, one of the great dramas in the history of retail pharmacy is about to unfold.

Implementation of the Affordable Care Act’s (ACA’s) major provisions will create opportunities for health care providers perceptive enough and skillful enough to capitalize on them, and should greatly accelerate the transformation of pharmacy practice.

Drug chains and other community pharmacy operators will be called upon to do more than ever to maintain the health of Americans. In addition to dealing with significantly higher script counts resulting from the gradual extension of insurance coverage to some 30 million people that now lack it, they will see an influx of patients seeking immunizations, routine diagnostic testing and treatment for minor ailments at in-store clinics.

If they are successful in meeting those needs, it will go a long way toward elevating the perception of pharmacy from the place to get prescriptions filled to that of a true neighborhood health care center; if they fall short, the industry could be relegated to the status of a commodity business.

Countless individual stories will be contained within that overarching narrative, as pharmacy operators large and small try to figure out where they fit in the new health care paradigm and how they should structure their business for future growth. Different models are already emerging.

CVS Caremark was the first to reinvent itself, with the 2007 merger that brought the nation’s second-largest drug chain together with one of the top three pharmacy benefits managers. After some initial growing pains the company has started to deliver on its promise of extending the continuum of pharmacy care to improve patient outcomes and lower costs for payers.

More recently, Walgreens moved to expand its reach by forging a partnership with Alliance Boots, the London-based drug wholesale and retail pharmacy company with a presence in some 25 countries. The deal, which was struck last year and is expected to lead to a merger of the two companies in 2015, seeks to leverage the know-how and purchasing power of two of the world’s top five drug store companies, one of which also happens to be the largest pharmaceutical wholesaler in terms of units handled.

Walgreens and Alliance Boots upped the ante in March when they agreed to acquire a stake of up to 16% in AmerisourceBergen, one of the big three drug distributors in the United States.

McKesson and Cardinal Health, the other two major pharmaceutical wholesalers in this country, aren’t standing pat. Each of them maintains a chain of franchised drug stores — Health Mart and Medicine Shoppe, respectively — that is intended to meld the best aspects of chain and independent pharmacy. (AmerisourceBergen has a cooperative network of stores under the Good Neighbor banner.) They’re betting the personalized service that is the stock in trade of independent pharmacies, backed by the scale and range of capabilities they bring to bear, will prove an unbeatable combination.

Rite Aid, the No. 3 drug chain in the United States, is repositioning its stores in response to shifts in the market. The company’s impressive new wellness format is designed to empower health care consumers with expert advice and information as well as products and services. Wellness+, Rite Aid’s customer loyalty program, is also closely tied to pharmacy and health care offerings.

The diversity of approaches reflects the fluidity of the health care landscape. Widespread recognition that the cost curve in the sector was unsustainable and, if left unchecked, would cripple the nation’s finances, led to passage of the ACA in 2010. That, in turn, unleashed a period of experimentation when all of the old rules are being called into question. Accountable care organizations (ACOs) and other models are taking shape that are likely to transfer much of the risk in health care delivery from payers to providers.

Pharmacy operators that can adapt to the new imperatives and accept the challenge of quantifying the value they bring to patients should flourish. Those that are satisfied with the status quo and expect it to continue are in for a bumpy ride.