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Bashoff named CFO of Care Pharmacies

BY Michael Johnsen

ALEXANDRIA, Va. Care Pharmacies on Tuesday named Saul Bashoff its chief financial officer, and in that capacity will have direct management responsibilities over all accounting functions and will provide financial guidance to the Care board and chief executive officer, Gerry Crocker.

Bashoff comes to Care with extensive experience as a financial advisor—for more than 20 years he worked as a financial consultant with chief executive officers and senior management in the wholesale, retail, manufacturing, high-tech, professional and financial services industries.

Care Pharmacies is a leading independent pharmacy franchisor with 50 shareholders throughout Maryland, Virginia and Washington, D.C. representing more than $200 million in annual sales.

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Longs deal makes CVS king of Calif.

BY Antoinette Alexander

WOONSOCKET, R.I. —CVS Caremark’s planned acquisition of Longs Drug Stores opens the door for CVS Caremark to become the king of California, with 830 stores in the state (excluding store closures). As a whole, CVS/pharmacy, the store division, grows to 6,800 locations in 41 states and the District of Columbia—including Hawaii, where CVS inherits more than half of the pharmacy market—and will fill or manage more than 1.2 billion prescriptions per year.

CVS Caremark plans to buy for $2.9 billion, including debt, Longs Drug Stores’ 521 retail locations in California, Hawaii, Nevada and Arizona, as well as its PBM services.

The transaction, which is subject to review under the Hart-Scott-Rodino Act and has other customary closing conditions, is expected to be completed in the fourth quarter of 2008.

As part of the deal, which is for $71.50 per share in cash, CVS Caremark will bolster its already strong PBM business by acquiring Longs’ Rx America subsidiary, which offers prescription benefit management services to more than 8 million members and prescription drug plan benefits to approximately 450,000 Medicare beneficiaries. Management plans to integrate Rx America with Caremark over time.

Most important, the deal takes CVS to the top of the pack in one of the most important states in the country, and in some of the toughest real estate markets. Those markets also give CVS Caremark important added heft in the eyes of employers and big healthcare payers.

In a conference call with analysts to discuss the deal, Tom Ryan, CVS Caremark chairman, president and chief executive officer, said, “First and foremost, the acquisition accelerates our expansion into central and northern California and Hawaii. These are highly attractive regions of the country where we are not currently represented and they have very difficult real estate markets to penetrate. Second, with the addition of these markets, we will now have filled some very important markets that will be particularly valuable to our PBM clients as we roll out our new Proactive Pharmacy offering. Lastly, Longs’ successful PBM, Rx America, and its stand-alone PDP business will complement our Caremark business.”

More than 490 of the stores CVS Caremark is acquiring are located in the Central and Northern California and Hawaiian markets, where Longs is a leading player. The stores in the Hawaiian market will continue to operate under the Longs name.

While CVS Caremark’s entrance into Hawaii is significant, its expansion into California also is important. The company first entered California with a specialty pharmacy in 1999. It then established a retail pharmacy presence in the state with 19 retail pharmacies in 2004. In 2006, it significantly expanded its footprint in California to 366 locations through the acquisition of Albertsons of the Sav-on pharmacies.

“Longs’ store network in these regions is excellent and is one that would take a decade or more for CVS to replicate through organic growth,” Weinswig said.

About 470 of the stores it is acquiring average roughly 22,000 to 23,000 square-feet in size. The remaining Longs stores are smaller in size and range between 4,000 to 7,000 square feet, and are located namely in or near medical centers and, according to Ryan, represent an opportunity for specialty pharmacy locations.

Meanwhile, Longs’ PBM business, which will complement the Caremark business, generates about $380 million in annual revenues, including the PDP lives, Ryan said.

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Drug stores push for back-to-school shoppers

BY Doug Desjardins

High gas prices and inflation are putting a strain on family budgets, and most analysts are expecting a sub-par back-to-school shopping season. And that’s why pharmacy retailers are putting more emphasis on promotions with sharp price reductions on school supplies and other general merchandise products.

Walgreens has made Hannah Montana the focus of its back-to-school promotion with displays loaded with licensed product from the Disney Channel star. The endcaps are jammed with more than a dozen items including binders, notebooks, message boards and pens. And some products are available exclusively at Walgreens.

“We have Hannah Montana and High School Musical dry erase boards for lockers that are exclusive to us,” said Walgreens spokeswoman Tiffani Bruce.

Walgreens also is offering low prices on basic school supplies and cut prices by 20 percent on back-to-school-themed products from its photo department, including personalized mousepads, posters and photo clings.

CVS has reduced prices on all school supplies and marked sales items with bright yellow WOW signs to call out bargains. The deals include a 20 percent reduction on the price of backpacks and an endcap near checkout stands that stock a mix of marked-down products priced as low as 50 cents. They include mini-notebooks, highlighters and single-use cameras.

CVS Extra Care members are receiving a 2 percent return on every dollar spent on back-to-school products, money that will be made available on Oct. 1 just before the start of the holiday shopping season. And it staged weekly buy-one-get-one-free deals on back-to-school products in August for products ranging from backpacks to specialty pens.

Rite Aid is offering lower prices on its less expensive, private-label line of school supplies like Harvard Square and Office Experts, which include staplers, calculators and push pins. Longs Drug stores are dedicating an entire aisle to back to school products, and the chain sent out back-to-school coupon books to drive consumers into stores. Longs also cut prices by up to 25 percent on basic school supplies like Five Star Binders from Mead.

Back-to-school promotions are more of a challenge this year given the state of the economy. According to a Deloitte study, 71 percent of consumers surveyed said they would spend less on back-to-school shopping this year, with 48 percent planning to reduce spending by more than $100. It also showed that 45 percent of consumers would shop at stores that offer lower prices and put off buying certain products as long as possible.

“These survey results indicate that consumers will likely stick to the basics this fall,” said Stacy Janiak, Deloitte’s U.S. retail leader.

The National Retail Federation has a more optimistic view. It’s predicting an increase in spending, with families with children in kindergarten through 12th grade spending $599.24 compared with $563.49 in 2007.

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