CEO John Standley says recent additions boost health care capabilities

CAMP HILL, Pa. — With its recent acquisitions, Rite Aid Corp. is well-positioned to further expand its health care capabilities, according to chairman and chief executive officer John Standley.

The company in June closed the $2 billion acquisition of Envision Pharmaceutical Services, which brought the EnvisionRx pharmacy benefit manager (PBM) as well as specialty pharmacy, mail order, Medicare Part D, technology and other businesses.

“It’s a really exciting opportunity with Envision,” Standley said in an interview. “The PBM space has consolidated rapidly. There are now three big players out there: OptumRx/Catamaran, Caremark and Express Scripts. Then there are others who are more like us in size. I think people still would like to have choice, and Envision provides an opportunity — especially with the Rite Aid brand attached, which will add to its credibility in the marketplace. So there’s a synergy from a branding perspective that will hopefully help Envision open doors over time. Now that it’s part of the Rite Aid family, Envision has a ton of visibility in the market, and that’s a real positive for both.”

Meanwhile, Envision will help open doors for Rite Aid’s pharmacy business in the Medicare Part D arena, Standley said.

“For Rite Aid’s retail business, Envision will hopefully give us access over time to the Medicare Part D business, which has been difficult for us as it relates to preferred networks. I’m hopeful I can encourage the Envision folks to include us as one of the preferred players in their networks,” he explained. “And that probably works its way over to the commercial side as well. The idea there is that it’s access to [covered] lives for our retail business, to the extent that we can get Envision to work with us to do that. It’s still a bit of an arm’s length relationship in terms of negotiating reimbursement rates and those kinds of things. But obviously, given the common ownership, we’re encouraged and incented from an economic standpoint to help Envision be successful in the marketplace.”

Other potential synergies include the opportunity for Rite Aid and Envision to purchase pharmaceuticals together, supporting Envision’s mail order business, as well as enhanced specialty pharmacy capabilities, Standley added.

“Rite Aid has a small specialty pharmacy business, and Envision has a much bigger specialty business. So we’re excited to put those two businesses together and have the opportunity to grow specialty pharmacy,” he said. “That’s a market Rite Aid has had a very difficult time getting into that the Envision acquisition helps open up for us. We still have some areas we need to gain access to in order to grow it as fast as we want. But the addition of Envision is a huge step forward for us on the specialty front.”

Standley also is bullish on what Health Dialog brings to the table for Rite Aid and Envision. The health coaching and analytics firm, acquired in April 2014, provides the in-store care coaches for the Rite Aid Health Alliance collaborative care program, which works with health provider partners — including regional health networks and accountable care organizations (ACOs) — to help people with chronic and polychronic conditions manage their health.

“Health Dialog greatly expands the scope of the capabilities we have, and that asset hits dead-on with our best pharmacy patients,” said Standley. “Those patients absolutely need the types of services that Health Dialog offers. Our opportunity there is to figure out how it best fits in the marketplace, and we’ve been working pretty hard on that since we acquired it.”

Currently, Rite Aid has eight Health Alliance partners: Reliance ACO, Farmington Hills, Mich.; Cornerstone Health Care, High Point, N.C.; Apollo Medical Holdings Inc., Glendale, Calif.; the Greater Buffalo United Accountable Healthcare Network of Buffalo, N.Y.; Penn State Hershey Health System of Hershey, Pa.; Heritage Provider Network, Marina Del Rey, Calif; Physician Direct ACO of Sylvan Lake, Mich.; and Quality Independent Physicians, Louisville, Ky.

“Health Dialog could be a great asset to support Envision over time with its population health management tools. We’re excited to work with Envision to try blending some of those capabilities into their offerings over the next couple of selling seasons to see if we can differentiate some of the products we bring to market,” Standley said. “We can try leveraging our health coaches to drive medication compliance and therapy management and use that as a differentiator going forward.”

RediClinic, also acquired in April 2014, makes Rite Aid more relevant to customer needs, according to Standley. There are now more than 70 RediClinics in several regional markets, with half of the clinics located inside Rite Aid stores and the remainder in H-E-B supermarkets in Texas.

“We spent a lot of time on the clinic business trying to determine if it made sense for us,” he explained. “On the one hand, most of our best pharmacy patients have chronic or polychronic conditions. They fill a lot of prescriptions and already see a lot of doctors. So our sense was they probably wouldn’t be huge users of an acute care clinic. But having clinics clearly makes us more of a health care destination and helps us establish relationships with folks who may not yet be significant pharmacy users but may fill more prescriptions as they move through their lives. So the clinics can make our overall offering in the store much more robust and bring in more foot traffic. And we do generate acute scripts from the clinic that help the pharmacy business. So RediClinic is a pretty good fit for us.”

And with health care costs continuing to rise, the affordable and convenient care model of providers like RediClinic has earned more acceptance among consumers, Standley pointed out.

“As access to physicians gets tougher while health care costs go up and consumers bear more of their own health care costs, a solution like a RediClinic will continue to gain favor from consumers,” he said.

Health care providers and payers are starting to look at pharmacy operators like Rite Aid as more than just a place to fill prescriptions, Standley added.

“I think there’s a growing understanding that pharmacy compliance is a huge part of managing chronically ill patients,” he said. “If you look at things like Star Ratings and how the government and other payers now want to pay for health care services, there’s a view that a lot more can be done by retail pharmacy. Over time, as reimbursements continue to get more difficult and if there’s a successful migration toward outcomes-based payments, I think people will focus more on how to use what’s inside the pharmacy box.”