Rite Aid had been under a cloud of uncertainty for 23 months since agreeing to merge with Walgreens Boots Alliance in October 2015.
After meeting with resistance from government regulators and going through several stops and starts, the deal was scrapped and superseded by an agreement calling for WBA to acquire 2,186 Rite Aid stores and related assets. A slightly modified version of that deal, involving 1,932 locations at a purchase price of $4.4 billion in cash, won FTC approval last month.
With the asset sale in place, Rite Aid finally has, in the words of chairman and chief executive officer John Standley, a clear path forward.
Standley moved quickly to put an end to another cause for concern that emerged earlier in the month, when Ken Martindale, president and CEO of stores at Rite Aid, stepped down to become CEO at GNC Holdings Inc. The departure of a key member of the management team that restored Rite Aid’s fortunes raised new questions.
The appointment of Kermit Crawford last week to succeed Martindale answered them.
Crawford — who during a 31-year career at Walgreens rose through the ranks to become executive vice president and president of pharmacy, health and wellness before retiring at the end of 2014 — strengthens Rite Aid’s capabilities in its core health care business, which in addition to 2,600 eponymous retail pharmacies includes EnvisionRx, a pharmacy benefits manager; RediClinic, a walk-in clinic operator; and Health Dialog, a population health management services provider.
Crawford is slated to start at Rite Aid on Oct. 5. His expertise should be invaluable at a time when prescription drug reimbursements continue to be squeezed and retail pharmacies are asked to take on a bigger health care role.
In some respects, the skill set Crawford possesses differs from that of his predecessor. Martindale made his greatest contributions to Rite Aid, which he joined in 2008, in the areas of marketing, merchandising and logistics. He was instrumental in the development of the Wellness Store format as well as the enhancement of Rite Aid’s loyalty program. (Going forward, some of those responsibilities will be handled by Bryan Everett, who was recently promoted from executive vice president of store operations to the newly created position of chief operating officer of Rite Aid stores.)
In addition to proven ability in their respective disciplines, Crawford and Martindale both have strong interpersonal and leadership skills.
Looking back at his career when he retired from Walgreens, Crawford talked about an approach that will serve him well in his new role. “We’re constantly asking, ‘How do our pharmacists play a greater role in the delivery of health care, and how do we leverage all of our assets as an integrated health care model?’ ” he said. “We always try to look beyond traditional channels and put the needs of the patient first and foremost.”
Extended to include the front-end customer, that philosophy will help Rite Aid adapt its business model to altered circumstances.
In a recent conference call with analysts, Standley said Rite Aid will focus on six areas: strengthening the management team; redefining and enhancing the customer and patient experience; engaging with third-party payers to create a sustainable business model; evaluating purchasing options for prescription drugs (as part of the asset sale to WBA, Rite Aid has the option to buy generics for a period of 10 years through Walgreens Boots Alliance Development GmbH); streamlining operations; and driving growth at EnvisionRx.
Crawford clearly has what it takes to help Rite Aid achieve those goals and is someone Standley can rely on as the company begins the next chapter in its history.