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Does Walgreens need Express Scripts? Maybe not

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT — Walgreens certainly has the clout to pull off a Mexican standoff with Express Scripts. Some might think all of the tough talk last week is just the kind of posturing one puts on for negotiations and that this will all blow over, similar to last year’s standoff between Walgreens and CVS Caremark. So why is it different this time?

(THE NEWS: Walgreens to walk away from Express Scripts in 2012. For the full story, click here.)

Walgreens sold its own pharmacy benefit management business because the pharmacy operator believed that its Walgreens pharmacy, Take Care Health operations, specialty pharmacy, home infusion services and other programs can be bundled as a comprehensive healthcare-services package directly to the largest employers. And they’re right.

So Walgreens may really not need Express Scripts as much as Express Scripts may need them, after all.

Another difference between now and last year: Express Scripts doesn’t have to prove its business model is economically viable, or that it’s pharmacy network doesn’t artificially steer patients to one pharmacy over another. Because as a pure-play PBM, Express Scripts equally sticks it to all pharmacies.

Separately, the National Community Pharmacists Association is using these discontinued negotiations as an opportunity to highlight just how much community pharmacy is caught between a rock and a hard place in its support of legislation that would give independents the same kind of negotiating heft that Walgreens has. A company the size of Walgreens can afford to face off with a PBM like Express Scripts — in other words, if Walgreens and Express Scripts did part ways, Walgreens will still be filling prescriptions. But what happens when a community pharmacy operation reaches its 127th hour in dealing with PBMs? They either stop filling prescriptions or learn how to adjudicate those prescriptions with just the one arm they have left.

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Coinstar appoints new chief customer officer

BY Allison Cerra

BELLEVUE, Wash. — Maria Stipp has stepped into a new role at Coinstar, the company announced Monday.

Stipp, who will serve as Coinstar’s chief customer officer, joins the company from Activision’s owned properties global business unit, where she served as EVP and general manager.

At Coinstar, Stipp will report to company CEO Paul Davis. Coinstar’s interim chief customer officer, Tim Hale, will continue in a sales management role at Coinstar.

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Rite Aid discovers innovation can do wonders

BY Alaric DeArment

WHAT IT MEANS AND WHY IT’S IMPORTANT — In June 1997, the cover of Wired magazine showed Apple’s logo with a crown of thorns and the foreboding word “Pray.” Amid the nascent tech boom, the company’s stock hit a low of about $12 per share that summer. The future, it seemed, was IBM-compatible.

(THE NEWS: Rite Aid shows off innovation with Wellness store. For the full story, click here.)

Nobody is laughing today: Apple’s stock now trades at more than $300 per share, and its products regularly leave competitors in the dust and spawn myriad imitators. Apple’s renaissance began with the letter “i” — iPod, iPhone and iPad, but above all, innovation.

In recent years, Rite Aid, the country’s third-largest retail pharmacy chain with about 4,700 stores, has found itself in a situation similar to that of Apple in the 1990s. Its stock trades at around $1 per share — compared with around $30 to $40 for Walgreens and CVS, which each have more than 7,000 stores — and it plans to close 60 stores this year.

But Rite Aid’s new Wellness store format could revitalize it the way the iPod did for Apple. As Rite Aid COO Ken Martindale told Drug Store News during an exclusive tour of a new Wellness store near Harrisburg, Pa., the format is the Rite Aid of the future. “This is positioning us for future opportunities down the road,” Martindale said.

The men’s grooming section — developed in conjunction with Procter & Gamble — the family care section and the modern, airy look of the stores are just some of the features that give a glimpse of what the chain has in mind.

Currently, there are eight Wellness stores in southern New Jersey, Pennsylvania and California, with another one planned for the Harrisburg area, so it’s a little early to make a conclusive judgment about the format’s success, but according to some initial data, sales at the stores are tracking at 100 to 200 basis points above the core Rite Aid stores. The company plans to renovate around 500 more stores over the course of the year using components of the Wellness, Rite Aid/Save-a-Lot and Value formats.

In addition to the new formats, the company’s Wellness+ loyalty card program continues to grow, with close to 40 million members, boosting same-store sales and helping the company narrow its losses. Members accounted for 67% of front-end sales during the quarter and 62% of total scripts and have shown larger basket rings than nonmembers, especially gold and silver members. In addition, gold and silver members shop on both sides of the store, and 50% of members visit Rite Aid every week.

“Innovation” has become a popular word lately. Such commentators as Fareed Zakaria promise it will save America’s economy and guarantee the country’s competitiveness in the long term. As Apple has demonstrated since Wired prematurely diagnosed it as terminally ill, innovation can do wonders for companies as well. And it appears that Rite Aid has learned that lesson well.

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