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2018 Retail Forecast: Learning to Adapt

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Industry execs ponder changing business, health care arenas

What will the second year of the Trump administration look like? Is the demise of the Affordable Care Act imminent? Will pharmacists get the greater role in health care they have long sought?

These are among the questions top chain drug industry executives are pondering as they look to 2018.

With spiraling health care costs and the shortage of primary care physicians continuing to be top-of-mind issues, the time is right to press ahead on wider recognition for pharmacy’s value, industry leaders say. The accessibility and affordability of pharmacists — and the growing number of walk-in clinics at drug stores — make pharmacies ideal sources of health care information and services beyond drug dispensing, they note.

And with health care spending growing unsustainably, executives are highlighting pharmacy care as a cost-effective means of keeping people healthy and out of the hospital.

Also driving a more prominent place for the profession is consumers’ pursuit of self-care as opposed to sick care — focusing on prevention as opposed to treatment. Drug store products and services are viewed as well suited to the effort. But pharmacy operators must also continue to cope with the pressure on the business from shrinking third-party prescription ­reimbursements.

Here’s a sampling of what some chain drug and pharmacy industry executives had to say about the outlook for their businesses and for the sector as a whole in the year ahead.

CHANGING MARKETPLACE

“Last year at this time, uncertainty over how the Affordable Care Act would be impacted by the newly elected Trump administration was at the top of the list of external factors to consider in attempting to forecast the retail chain drug industry in 2017. Well, here we are one year later, and the picture is still very murky. All of us in the industry will continue to keep a close eye on what happens to the ACA, as significant changes to it would have a profound effect on health care. As we look to 2018, here are two more very significant potential developments that those of us in the industry will be watching very closely. No. 1, will Amazon enter the pharmacy market? No. 2, will regulators permit the acquisition of Aetna by CVS? If the answer to one or both of these questions is yes, this would change the landscape of our industry.” — Mike Eby, chief financial officer, Discount Drug Mart

Alex Gourlay_Walgreens Boots Alliance

Alex Gourlay, Walgreens Boots Alliance

Legislation on Capitol Hill, mergers and acquisitions activity in the retail and health care industries and the fast-evolving consumer helped to define change in our businesses in 2017, and consumers will continue defining that change in 2018. Most important for our industry will be continuing to listen to our customers and respond to what they want and what they’re looking for from us. Introducing new ideas, programs, services, technology and partnerships will be critical to business success next year — and to meeting the needs of our customers and the communities we serve.” — Alex Gourlay, co-chief operating officer, Walgreens Boots Alliance

“In 2018, we are going to keep a watchful eye on broad industry issues, including consolidation; competitive and reimbursement pressures; regulatory changes; and the growing specialty market, and we will forecast the needs of our customers accordingly. But more broadly as a company, we are keenly focused on supporting community-based care. We believe that community pharmacies are at the center of health care and we will align our support — whether it is from a resource or advocacy perspective — to help make these entities strong and viable health care destinations for patients.” — Robert Mauch, executive vice president and group president of pharmaceutical distribution and strategic globao sourcing AmerisourceBergen

EVOLUTION OF HEALTH CARE

“People don’t always find it easy to achieve their best health in today’s health care system. The current system was built to provide acute care in a fee-for-service world — not to provide coordinated care to the chronically ill, who now make up one-half of the U.S. population and whose treatment accounts for 85% of all health care spending. Nor was it designed to meet the changing demands and expectations of patients, who are increasingly looking for more value, greater convenience and help in making healthier choices every day. The result is a fragmented system that produces high costs and less-than-optimal health outcomes, and one that many patients experience as a maze of confusion. At CVS Health, we see a tremendous opportunity for pharmacy to make health care much more effective by engaging with patients more frequently where they are and coordinating care to make a complex system much easier to navigate.” — Larry Merlo, president and CEO, CVS Health

“We see the changing landscape of health care as another opportunity to define how we deliver value to our members and our customers. Arguably, last year was one of the most dynamic years in the history of our industry. With declining reimbursements, escalating direct and indirect remuneration (DIR) fees, and the proliferation of access issues surrounding drugs and patients, the headwinds we encountered forced us to review every single aspect of our business. The result was improved cost containment, better patient outcomes, and the ability to differentiate our service and clinical capabilities. Additionally, the new administration’s interest in reshaping the health care infrastructure in this country, in tandem with greater overall market competitiveness, only put further pressure on the entire pharmacy sector to find ways to reduce the unsustainable costs. We believe that in spite of these challenges, Care’s unique operating structure promoting clinical intimacy and superior strategic sourcing partnerships should have us well positioned for continued success in a tightening market.” — Michael Wysong, CEO, Care Pharmacies

Larry Merlo_CVS Health

Larry Merlo, CVS Health

Representing about 18% of GDP, health care as an industry is one the most important parts of our economy. Because of this, we have been continuing to build health care around the triple aim of improved quality, reduced costs and higher satisfaction. Health care is also shifting away from fee-for-service to value-based care. This means that organizations that deliver results will succeed. This is one of the reasons we acquired Medication Management Solutions. It’s a comprehensive, medication management system that provides care to some of the most complex, costly patient groups, and it helps us address the entire continuum of care.— John Figueroa, CEO, Genoa

“In health care overall, we’re seeing a clearer differentiation between consumers and patients. Consumers look primarily for convenience and self-service offerings (think self-service, automated cashiers), while patients want personalized care and timely attention from pharmacists. Given their close relationships with the communities they serve, independent pharmacies are uniquely positioned to provide the time and care patients and consumers need. By keeping a laser-focus on the unique needs of each patient and consumer and innovating their services accordingly, independent pharmacists can continue to thrive.” — Brian Nightengale, president, Good Neighbor Pharmacy

ROLE OF PHARMACY & PHARMACISTS

“The overarching goal is better patient care, which is closely tied to business performance. With more pharmacists transitioning to provider roles, community pharmacists have significant opportunities to delve into other areas beyond dispensing. This includes disease-specific management, chronic care management and point-of-care testing. For example, point-of-care testing, such as a strep test for strep throat, can lead to pharmacists prescribing medications under collaborative practice agreements in selected states.” — Chris Dimos, president of retail solutions, McKesson U.S. Pharmaceutical and Specialty Health

In the pharmacy, immunizations will remain a significant opportunity, both from a business standpoint and in showcasing how our pharmacists can provide valuable services beyond filling prescriptions. For example, our flu immunization campaign got off to a strong start, and we’ve increased non-flu immunizations by more than 20% year to date. We will also look to engage additional patients in our OneTripRefills program, which allows them to fill all of their eligible maintenance medications in one convenient trip to the pharmacy each month. In addition, we plan to leverage the capabilities of RediClinic and Health Dialog to deliver a higher level of care in the communities we serve.” — John Standley, chairman and CEO, Rite Aid

John Standley_Rite Aid

John Standley, Rite Aid

“Community pharmacists are uniquely positioned to offer necessary clinical services. Because they interact closely with patients daily, community pharmacists can identify patient care gaps and respond by integrating services to address the issue. For example, a community pharmacy’s portfolio of clinical services might include immunizations, point-of-care testing, medication therapy management, disease management services or adherence packaging. Community pharmacies that have identified new revenue streams by diversifying their offerings are thriving and will continue to do so. In fact, many successful community pharmacies are expanding their businesses by adding new locations, with the goal of becoming the health care destination in their town.” — Steve Lawrence, senior vice president of retail independent sales, Cardinal Health

“Fruth Pharmacy is positioned for even more success in 2018. Nearly one-third of the Fruth stores house a retail clinic. This is especially important in our rural areas where access to local care is limited or nonexistent. The locations with clinics have seen an increased prescription count and additional foot traffic to support retail sales. These clinics are operated by hospital providers and thereby continue to strengthen the partnership between Fruth Pharmacy and the hospitals in our footprint. A new partnership with CareSource (Ohio Managed Medicaid Provider) will have patients assigned to these Ohio retail clinics for primary care. This should provide additional traffic and prescription volume while removing nonemergency patients from the local hospital emergency rooms.” — Lynne Fruth, chairman and president, Fruth Pharmacy

“As health care in Canada advances, so does pharmacy’s role. The evolution of pharmacy practice in Canada continues to present new opportunities for pharmacy services. Pharmasave pharmacists, in communities all across the country, work collaboratively with other health care providers and patients to ensure the safe and appropriate use of medications and to achieve desired health goals. Pharmacists have many opportunities to provide exceptional patient care, such as medication consultations, injection services, travel health, minor ailment prescribing and a full range of patient care programs. Pharmasave pharmacists are leaders in providing medication therapy management programs, such as medication reviews to patients of all ages, resulting in improved health outcomes.” — Carmen Churcott, CEO, Pharmasave Drugs National

THE FRONT END

“We are fortunate that more people every day turn to natural products for their health and beauty needs. Pharmaca is committed to providing our customers products they have come to know and trust, as well as ones that are on the cutting edge of ingredient research. We will invest more in new products and research in 2018 than any previous year in our history, and will aggressively research new health and beauty products that serve the needs of our customer demographic. Indie beauty brands, natural and organic supplements, and eco-friendly and sustainable lifestyle essentials are just a few of the areas we have been focusing on in order to keep our product assortment fresh and relevant.” — Richard Willis, CEO, Pharmaca Integrative Pharmacy

TECHNOLOGY, E-COMMERCE & SERVICES

“A big part of health management is being available digitally, which is why an important 2018 initiative is to drive digital and mobile engagement programs through social and digital assets. This includes utilizing the technology our customers use on a daily basis and forming partnerships with manufacturers and pharmacy benefit managers to improve the patient experience, accept more insurance plans and participate in more preferred networks.” — Mark Panzer, senior vice president of pharmacy, health and wellness, Albertsons Cos.

Mark Panzer_Albertsons Cos.

Mark Panzer, Albertsons Cos.

“With more people looking to shop online, we’ve seen growth in our e-comm business, specifically around the launch of Endless Aisle. In more than 1,300 urban, suburban and rural Shoppers locations across Canada, in-store Beauty Experts can now offer “extended aisles” of prestige products, serving and shipping thousands of previously unavailable items using in-store technology and the company’s beautyBOUTIQUE.ca e-commerce site. Through the new service customers can access more than 10,000 prestige items from coveted brands like Chanel, Dior, Urban Decay, Origins and Darphin. Transactions are ordered and shipped for delivery to the customer’s home in as few as two days.” — Jeff Leger, president, Shoppers Drug Mart

With patients increasingly using mobile devices, digital and social media channels are essential. A unified digital experience should include a modern, mobile-optimized website with rich content, prescription refill capability, local news and appointment scheduling. Prescription refill apps and text refill reminders are a win-win, offering convenience for patients, and low-cost ways for pharmacies to engage 24/7. Add to that a strong digital advertising program, search optimization and customized e-newsletter, and pharmacies are well on their way to meeting their patients when and where they make health care decisions and ­purchases.” — Todd Treon, vice president of Medicine Shoppe International and e-commerce, solutions and services at Cardinal Health

“From a record number of flu shots administered for the third year and the opening of our first telepharmacies, to exciting pharmacy-related enhancements to Hy-Vee’s mobile app, each year we strive to enhance the pharmacy patient experience both in-store and virtually, through new services and easier methods of communication. In 2018, Hy-Vee will remain focused on our patients and customers, with the ultimate goal of meeting them in their health care continuum. We are utilizing our strongest asset — our engaged pharmacists, dietitians, pharmacy technicians, clinic providers and chefs — to make lives easier, healthier and happier.” — Kristin Williams, senior vice president and chief health officer, Hy-Vee

*To read the full 7-page Retail Forecast report, please see the Jan. 1, 2018, print edition of Chain Drug Review.


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