NEW YORK — Chain drug executives are sounding an upbeat tone as they size up their prospects for 2013.
Though most executives express concern about fiscal developments in Washington, they are confident in the outlook for the retail pharmacy industry. Why? They note that drug chains have positioned themselves well to address two critical market trends: the aging population (especially the baby boomers turning 65) and the rising demand for affordable, convenient health care.
Headlining pharmacy operators’ efforts is the continued expansion of the pharmacist’s role into broader health care services, including immunizations, medication counseling, primary care and disease state management, just to name a few.
Meanwhile, chains are diversifying their revenue streams with enhancements to the front end, such as more consumables and fresh food, redesigned beauty departments, more “good for you” items to promote well-being, expanded photo services, and more store brand and exclusive offerings.
Key things to watch, executives say, include the implementation of health care reform, the impact of new generic drugs, ongoing pressure on pharmacy reimbursements, the growth of digital channels and the progress of economic recovery.
Here’s a sampling what some drug retail executives had to say about the business climate for their companies and the chain drug store industry in 2013.
HEALTH CARE & REFORM
"As health care becomes more consumer-driven, we — as a company and, in particular, our pharmacists — coupled with technology, innovation and expanded clinical training — will play an even greater role in helping our customers live healthier, happier lives. Today’s customers want to be empowered as they make choices for themselves and their families. And as a partner on their health care team, we at Rite Aid must adapt and change, too, to ensure we’re providing customers with the best service and support to help them reach their wellness goals. Our pharmacy team has been hard at work, developing new and exciting ways for our pharmacists to engage with and help our customers achieve their personal health and wellness goals." — John Standley, chairman and CEO, Rite Aid
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"I believe the level of uncertainty is the biggest single thing holding back a more vigorous business climate."
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"As national health care reform moves forward and the U.S. health care system continues evolving to expand care while controlling costs, retail pharmacy is facing an historic ‘push-pull’ — pushed to be more efficient and effective in providing core pharmacy services, and pulled toward new opportunities beyond traditional pharmacy. Walgreens is responding to both the push and the pull. … Our health care strategy in 2013 and beyond is designed to link all patient touch points and channels — stores, online, telephone and home delivery — to achieve three goals: enhance our core pharmacy business; expand beyond our core pharmacy business to provide broader retail health and wellness services; [and] evolve from our traditional pharmacy, health and wellness business to become a valued partner for doctors, health plans and health systems." — Greg Wasson, president and CEO, Walgreens
"With the aging of America’s baby boomers, we see the future as full of opportunities, if we are given a seat at the table. Providing the best in products and services that address our patients’ health and wellness needs is the No. 1 priority of Thrifty White Pharmacy and its 1,200 employee owners. … We believe the industry is changing to a focus on the overall health care spend in order to keep a patient healthy. With the star ratings becoming a factor and the results demonstrated from adherence models and studies, it is apparent that pharmacy is a key partner in controlling costs." — Robert Narveson, president and CEO, and Timothy Weippert, executive vice president of pharmacy, Thrifty White Pharmacy
"A critical component of health care reform is making care more accessible for patients. There are lingering worries that there won’t be enough doctors to care for the 30 million people potentially introduced into the system, so there is a great opportunity for community pharmacists to become part of the solution. An offshoot of that opportunity will help their efforts to diversify and maximize their revenues beyond traditional pharmacy services." — Mike Cantrell, group vice president, Good Neighbor Pharmacy
"Cardinal Health is well-positioned to play a meaningful role in helping retail pharmacies navigate and adapt to this changing world [of health care]. Our focus is squarely on improving the cost effectiveness of care so that health care providers can focus on what matters most — their patients. We will continue to support our customers in differentiating their service offering and believe that the ability to extend clinical expertise to patients is key to the long-term viability of community pharmacy. We also believe that we’ll continue to see a shift toward paying for value rather than volume, and pharmacists have a big role in that. That value comes in the form of more adherent patients and better outcomes management." — Jim Scott, senior vice president of national accounts, pharmaceutical segment, Cardinal Health
THE ECONOMY
"The thing I am most certain about in the economy is uncertainty. Some is out of the hands of our politicians, but much is within their control. I believe the level of uncertainty is the biggest single thing holding back a more vigorous business climate. … While I’m down on government, I’m up on business. We expect a good year in 2013. The local economic climate is pretty good." — George Bartell, chairman and CEO, Bartell Drugs
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"2013 will require pharmacy operators such as Kerr Drug
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"I don’t know if there’s been another time when so much has been hinging on what’s going on on Capitol Hill. With uncertainty over taxes and the deficit and Obamacare, there are many elements that could blow up during 2013. Maybe that’s a little dramatic, but the industry could be affected so greatly that it’s a large concern. (We also have a higher level of concern with restricted networks in 2013.) It’s very hard to plan because it’s very hard to know what to expect. We cross our fingers and hope things work out. I’m the eternal optimist, so we’re still cautiously optimistic on the year and think that in the end things will work out." — Mark Griffin, president and CEO, Lewis Drug
"The economy in northern Ohio seems to have slowed down, after experiencing a strong couple of years. … The health care segment and related retail seem to still be doing OK.
I believe the economy will continue to slow down until the budget situation is determined. That being said, I don’t believe it will have a significant effect on drug stores in the next 12 months." — Tom McConnell, chief financial officer and senior vice president of finance, Discount Drug Mart
PHARMACY PRACTICE
"On the pharmacy side, we are working to take our patient care programs to a new level. We will implement our new WeCARE workflow initiative that will improve our service and script results. This will position us well as we move forward, and as clients and customers demand more from their health care providers. … There are three primary objectives of WeCARE: to implement enhancements to our pharmacy model to improve service, to improve clinical outcomes, and to grow scripts. … Most of our stores had this new workflow in place by the end of this year, with a few stores getting it in the first quarter of 2013. WeCARE was extensively tested for two years, and the results are encouraging." — Mark Cosby, president, CVS/pharmacy
"We remain committed to protecting retail pharmacy’s role in the marketplace and to strengthening retail pharmacy by helping our customers diversify their offerings while protecting their core business — dispensing. For example, we know that specialty medications currently comprise more than 28% of the pharmaceutical spend in the U.S., and the growth rate of specialty medications (nearly 8%) is almost four times the growth rate of traditional medications. We know that not all retailers will want to get into the specialty medication business, but we want to help those retail pharmacies that do."
— John Fiacco, vice president, Medicine Shoppe
"Pharmacists continue to upgrade their professional skills to adopt their new expanded responsibilities (administration of vaccines, medication therapy management and limited prescribing rights) within the health care team. The adoption of pharmacists as a member of the primary health care team has progressed, albeit slowly. … Competition in retail pharmacy continues to grow in different formats, resulting in different competitive pressures for prescription business. … While competition is good to ensure that pharmacy delivers the best possible care to the patient at the most cost-effective price, there is a danger in restricting the patient to limited, select pharmacies. It is evident that the patient-pharmacist relationship is a personal one, developed over time to manage the patient’s needs. Health care discussions and care plans cannot be developed according to the lowest price of the day." — Wynn Powell, CEO, London Drugs
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"As our customers become more technologically advanced, we will need to meet their expectations and to provide them with a means to shop our locations in whatever manner they choose."
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"One area we are especially focused on is disease prevention through vaccines. Pharmacists are the most accessible member of the U.S. health care team. We believe a higher vaccination rate leads to healthier outcomes and less cost to the health care system through fewer hospital admissions and ER visits. This is where ABC is helping."
— A.J. Caffentzis, senior vice president of sales and marketing, AmerisourceBergen Drug Corp.
IN THE STORES
"As always, 2013 will require pharmacy operators such as Kerr Drug to operate as efficiently as possible to control expenses. Expense control is critical in our environment of continued prescription margin erosion and restricted pharmacy networks. Consumers will continue to respond positively where they receive top-notch customer service and attention. In the area of pharmacy, Kerr Drug will step up its focus in getting appropriate products and services to our customers." — Mark Gregory, senior vice president of store operations, Kerr Drug
"2012 saw the Uniprix brand extend its reach enormously. We began implementing our banner strategy, under which all banners will include the Uniprix brand in their name (Uniprix, Uniprix Clinique and Uniprix Santé). In the coming weeks, there will be over 300 affiliated pharmacies with the Uniprix name on their doors. The Uniprix brand definitely has the wind in its sails. After adding eight new affiliated pharmacies in 2011 we added a further 10 in 2012 and are guaranteed at least another 15 in 2013."
— François Castonguay, group president and CEO, Uniprix
"Next year [2013] consumers will see an even broader, more complementary, health product selection in Rexall’s front shop. This new offering combined with our emerging pharmacy practice gives Rexall’s patients and customers an enhanced offering that helps them live happier, healthier lives." — Frank Scorpiniti, CEO, Rexall
"We are focused on further embedding our sales culture both in the pharmacy and at the front end and in improving coordination between the two areas to sell more products and services. We believe that consumers will continue to have more choices available for where to spend their money on products and services." — Juan Ortiz, CEO, Navarro Discount Pharmacy
TECHNOLOGY
"As our customers become more technologically advanced, we will need to meet their expectations and to provide them with a means to shop our locations in whatever manner they choose. These solutions will involve e-mail and phone apps, but we must never lose sight of the importance of driving shoppers into our locations. Our print circular program is being evaluated, and our expectation is that advertising will increase in the electronic media while print will decrease." — Rich Grossman, president and CEO, Sav-Mor
"We recognize that although many consumers want to come into our stores to make their purchases, others prefer to shop through the Internet. As an alternative for these customers, we recently launched a new online store. Although initially focusing on beauty care, the online shop will be expanded over the months and seasons. In addition, our website has been updated so that customers can better navigate the different sections to find the services offered in our stores and our product offerings." — François Coutu, president and CEO, Jean Coutu Group
*To read the full five-page Retail Forecast 2013 report, please see the Jan. 7, 2013, print issue of Chain Drug Review.
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