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DrSN holds 10th Annual Industry Issues Summit

BY Antoinette Alexander

NEW YORK Key executives from several leading retailers and suppliers convened Tuesday for Drug Store News’ 10th Annual Industry Issues Summit to discuss the critical issues shaping today’s retail pharmacy industry. The panel discussions were held across from Central Park at the New York Athletic Club.

Kicking off the event was an industry overview by Jay Forbes, who is retiring Dec. 19 after a 45-year career with Lebhar-Friedman, the parent company of Drug Store News. Capping off the afternoon was the 6th Annual Diabetes Roundtable (see related story by Alaric DeArment).

 

“It’s great to take a day away from the everyday give and take of selling and buying and talk about more strategic ways of doing business. What made the event so valuable, was that retailers and vendors made clear how each can help the other build their brands and to deliver value to the customer at the same time,” said John Kenlon, group publisher of Drug Store News.   

Retail participants for the Industry Issues Summit roundtable discussion on the front end included Mike Cirilli, vice president of merchandising for Duane Reade; Dan Funk, vice president of GM/HHB for center store for Supervalu; Joe Grady, vice president of DMM personal care and beauty merchandising for Wal-Mart; Jerry Kuske, executive vice president of merchandising for Katz Group; Bryan Shirtliff, senior vice president of category management for Rite Aid; and David Kuncl, divisional vice president of merchandising, drug store for Sears Holdings/Kmart.

Supplier participants included Joel Carden, executive vice president of Pacific World; Joe Mueller, vice president of sales for health and wellness at Kellogg’s; Mike Voaden, director of sales for Alberto-Culver; and Matt Bireley, director of drug channel for Wrigley.

A second panel discussion, centered on healthcare, included retailers Charlie Burnett, senior vice president for Costco; Chuck Fehlig, vice president of DMM/OTC merchandising for Wal-Mart; Craig Norman, senior vice president of pharmacy for HEB; and Dewayne Rabon, vice president of general merchandising for Winn-Dixie. Supplier panelists included Mike Ebert, vice president, drug for Catalina Marketing; David Howenstine, vice president of shopper category insights for Wyeth Consumer Healthcare; Mike Miller associate brand manager for Pharmavite; and Dianne Pfahl, director of consumer health for Cardinal Health.

Throughout the panel discussions, retailers and suppliers alike stressed the importance of providing consumers with value, innovation and information—especially in light of today’s economic challenges. When asked about the best opportunities facing front-end categories in 2009, Grady of Wal-Mart, for example, was quick to note further opportunities in selling higher end value products as more and more customers are likely move to mass retailers to save money. Echoing that sentiment was Carden of Pacific World, who said that now is the time to place an even greater focus on bringing class to mass.

SKU rationalization was also a topic of discussion. Most panelists agreed that, while retailers and suppliers must tread carefully when reducing SKUs, it can prove beneficial if done properly as consumers may find the shopping experience to be less confusing. Providing shoppers with new products that are innovative, and not just another “me too” item, is also essential. During the discussion on healthcare, providing consumers with additional information and education on products and services was top of mind for many panelists, as was the important role that retail-based clinics will play in the industry going forward.

“We see this [retail-based clinics] as here to stay. That nurse practitioner has so much power and potential,” said Miller of Pharmavite, who noted that he sees opportunities to provide NPs with informational tools to use in store.

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New studies reveal childhood vaccine costs are variable in private sector

BY Antoinette Alexander

ANN ARBOR, Mich. The high cost of some childhood vaccines is putting a significant financial strain on some physicians, according to research from the University of Michigan Health System. However, that burden could equate to an increase in business for retail-based clinics as some physicians may eventually opt to no longer provide all vaccines or may delay the purchase of some vaccines for financial reasons.

A pair of new studies from the University of Michigan Health System found that many physicians appear to be paying too much and receiving too little reimbursement for childhood vaccines.

The survey is of 1,280 U.S. pediatricians and family physicians engaged in direct patient care. Of the pediatricians, 70 percent responded, along with 60 percent of family physicians. They study of costs and reimbursements included data from 76 practices.

With vaccines for children enrolled in Medicaid funded by the public sector through the federal Vaccines for Children Program, prices are negotiated annually with vaccine manufacturers by the Centers for Disease Control and Prevention. But the data from the new studies support the belief that costs and reimbursements are widely variable in private practices.

“Until now, nobody knew what anyone was paying,” stated lead author Gary L. Freed, M.D., MPH, chief of the division of general pediatrics and director of the Child Health Evaluation and Research Unit at the U-M Health System’s Mott Children’s Hospital. “This information will change the way in which physicians negotiate prices.” The studies appear in the December issue of the journal Pediatrics.

The studies found that the price-per-dose of one brand of hepatitis B vaccine, for example, ranged from $4.26 to $13.06 at different medical practices. Reimbursements of the MMR (measles, mumps and rubella) vaccine ranged from $16.77 to $59.02. Many physicians in the survey expressed dissatisfaction with the price and reimbursement levels of vaccines.

While few physicians in the survey indicated that they had considered no longer providing all vaccines to privately insured children (11 percent overall; 5 percent of pediatricians and 21 percent of family physicians), about half of them reported that they had delayed the purchase of some vaccines for financial reasons and experienced a decline in profit margins from immunizations.

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Dismal economy stalks November sales as Walgreens closes out a bleak month

BY Jim Frederick

DEERFIELD, Ill. In a sure sign of the downward economic spiral plaguing the nation’s retailers, Walgreen Co. reported a nearly one-percent decline in same-store sales for the month of November.

Overall sales edged up 3.7 percent for the month over the same period last year, to $4.96 billion. But sales in stores open more than a year fell 0.9 percent. Comparable-store front-end and pharmacy sales also slid 0.9 percent, Walgreens announced today.

Black Friday and the following weekend saw stronger consumer traffic than a year ago, according to the company, but fewer items were purchased per transaction. Transactions in comparable stores rose 1.7 percent in November.

Pharmacy sales for the month were up an anemic 2.4 percent on a total-store basis, pulled down both by sagging consumer activity and by the increasing use of lower-priced generic drugs over their brand-name counterparts. Comp-store pharmacy sales, according to Walgreens, “were negatively impacted by 2.3 percentage points due to generic drug introductions in the last 12 months.”

The company also blamed a shift in the calendar for the comp-store decline in pharmacy business, “as pharmacy patients fill more prescriptions during the week than on weekends.

“This year, November had two fewer weekdays compared to November 2007,” Walgreens reported. “Calendar shifts, along with one less holiday shopping week in November this year, negatively impacted total comparable store sales by 2.5 percentage points, front-end sales by 0.8 percentage points, comparable pharmacy sales by 3.4 percentage points and prescriptions filled in comparable stores by 3.3 percentage points.”

The bad news extended to total prescriptions filled, which decreased 3.4 percent on a comp-store basis in November over the same period last year. The shift of Zyrtec from prescription to over-the-counter status was another factor in that decline.

Pharmacy sales accounted for 64.4 percent of total sales for the month, according to the chain.

Walgreens said strong sales of basic necessities, consumables and key beauty items gave some lift to front-end revenues, as did Zyrtec’s switch to OTC status.

“Consumers continued to shop our stores for the essentials throughout the holiday weekend,” explained Walgreens president and chief operating officer Greg Wasson. In a hopeful note, he added, “As we approach the last-minute Christmas rush, shoppers will take even greater advantage of our wide selection of products and convenient locations.”

Walgreens opened 94 stores in November, including 15 relocations, and acquired eight stores. As of Nov. 30, the chain operated 7,123 locations in 49 states, the District of Columbia, Puerto Rico and Guam. That includes 6,630 drug stores—an increase of 491 stores over a year ago—as well as worksite health centers, home care facilities and specialty, institutional and mail service pharmacies.

The company’s Take Care Health Systems subsidiary manages 293 walk-in clinics at Walgreens drug stores. That figure doesn’t include franchisees of Option Care, Inc., a wholly owned Walgreens subsidiary.

On Monday, Walgreens also announced it had completed its purchase of McKesson Corp.’s specialty pharmacy operations, adding to its fast-growing specialty division.

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