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Discount Drug Mart stays on growth path

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MEDINA, Ohio — Discount Drug Mart marked its third consecutive year of improvement in 2014, as sales climbed 6.5% to some $621 million.

Discount Drug Mart_Brunswick Hills storeThe 72-store Ohio drug chain saw front-end dollar volume rise 3.5%, yet the big gain came in pharmacy, where sales jumped 7.2%. Home health care recorded a 4.5% advance, propelled by the acquisition of Hastings Professional Medical Equipment.

Boosting the efficiency of the chain’s prescription counters was its rollout of Pioneer software. “Our pharmacists love it,” says chief financial officer Tom McConnell. “It’s a lot easier to work with than what we had, and it gives us more information and a better ability to track and replenish inventory. So we’re hoping to reduce inventory while increasing turns.”

Also enhancing the pharmacy business is a new “contact center” at company headquarters. The center receives calls made to stores, freeing up pharmacists from having to deal with routine requests. Callers who ask to speak with their pharmacist, however, are connected to the store they called.

As of midwinter the center had been serving about 30 stores, and had taken 90% of their calls. “It has been quite effective in having our pharmacists better able to serve customers face to face,” McConnell says.

The center has also increased pharmacist involvement in medication therapy management and immunizations, which have been two Discount Drug Mart areas of emphasis. Ohio law recently changed to allow pharmacists to give many more kinds of shots (including the shingles vaccine) than they used to.

Demand for the shingles shot, which is recommended for people 60 and older with normal immune systems, has been heavy, notes McConnell. And the chain’s flu shot volume was up close to 30% during the last flu season.

Pharmacies have also benefited from Discount Drug Mart’s three in-store clinics. The company wants to increase that number in partnership with a new clinic operator tied to a major hospital organization. The chain was in talks with two prospective partners over the winter. Ultimately, it would like to have clinics in half of its stores.

An ongoing challenge for the pharmacies is maximum allowable cost pricing for generics. Insurance companies have not adjusted their MAC reimbursement rate on a timely basis despite skyrocketing generic inflation, McConnell says.

Discount Drug Mart pharmacyAnother headwind, narrow networks, has been overcome to some extent. Discount Drug Mart has joined a few such networks after being in almost none, but it is still excluded from some of the bigger ones. Its inroads into networks have lifted its script count, McConnell says.

In the front end, the chain continues to do a reasonable business with video rentals. The offering last year generated some $3 million in sales (down 15% from 2013) and about $1 million in gross margin. The business will probably be maintained for a couple more years.

“It’s obviously a dying product, but it gets customers coming in twice” to pick up and return videos, McConnell says. “And since everybody else is out of the business, we’re there for people who are hanging on to their DVD players.”

Another draw for Discount Drug Mart is the once-a-month senior savings day, and the chain keeps expanding the capabilities of its courtesy card, on which it can now load cash awards and gift cards.

Also driving the retailer’s Pro Points loyalty program are its affiliations with Cleveland and Columbus sports teams. “That program continues to grow, especially with LeBron James back in Cleveland,” McConnell says. “It’s been a pretty hot item.”

Another popular attraction at stores is delis. Discount Drug Mart’s 40 delis have been “a nice surprise,” the CFO says. A few stores even have fully stocked meat departments.

Many of the delis have been added as stores have been remodeled and enlarged. As a 46-year-old chain, Discount Drug Mart tries to expand its older stores whenever possible to conform to its 27,000-square-foot prototype, McConnell notes.

Discount Drug Mart also continues to add stores. It debuted a unit in Montville, Ohio, in October that McConnell says is already doing exceptionally well. It will add at least one outlet this year — in Sharon Township in Summit County — and possibly a second.


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