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Duane Reade announces strong second quarter

BY Antoinette Alexander

NEW YORK Duane Reade announced on Tuesday that during the second quarter it experienced record front-end same-store sales thanks to strong sales of convenience, health and wellness, and beauty products.

“This growth is especially gratifying as the increase follows record front-end comp-store growth of 7.3 percent for the comparable quarter a year-ago,” stated Rick Dreiling, chairman, president and chief executive officer of Duane Reade.

Front-end same-store sales rose 9.4 percent, while pharmacy same-store sales increased 6.1 percent. Total same-store sales increased 7.9 percent. Total net sales rose 8.3 percent to $431.9 million from $398.8 million in the year-ago period.

Net loss for the quarter narrowed to $20.1 million compared with a loss in the year-ago period of $21.1 million. The current year’s second quarter results included $4.2 million of other expenses, including $1.8 million in costs related to the previously disclosed and completed accounting investigation, $1.4 million in connection with the company’s former chief executive officer, and $0.7 million of closed store costs.

Gross margin for the quarter rose to 21.1 percent from 20.3 percent last year and reflected a continuation of the improved trend of front-end margins partially offset by reduced pharmacy margins resulting from increased penetration of lower Medicare Part D sales combined with reductions in Medicaid reimbursement rates that went into effect in July 2006.

Total debt at quarter end was $560.6 million, reflecting a decrease of $11.8 million from the balance at the end of fiscal 2006.

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Transitioning to era of patient-centric care

BY Jim Frederick

Community pharmacy stands at a crossroads. Buffeted by rapid technological change, a new era of patient-centered care, the decentralization of clinical care and disease management, and the diminishing returns of an increasingly commodity-oriented prescription dispensing business, the industry must adapt to the new era in what could be a painful and wrenching transition.

Pharmacy operators and the pharmacists they employ have a choice. They can either work to assert their larger role as fully engaged members of an increasingly integrated patient care delivery network, or risk becoming marginalized by staying tied to their traditional role as time-pressed dispensers of medicines.

Therein lies both risk and reward. Drug dispensing and basic patient counseling will likely remain a crucial and indispensable element of community pharmacy practice for decades to come. But the industry’s future is closely tied to a fundamental transformation of both the business and profession of pharmacy and the wider—and deeply troubled—U.S. health care system as a whole.

For pharmacy operators, the coming shift to a new, integrated model of health care, driven by information technology and electronic patient records, will provide a platform for the delivery of a broader and more effective range of pharmacy-care services. The transformation opens up major opportunities to secure pharmacy’s place in the future of health care.

In this section of the annual report on pharmacy, we look at three of those opportunities: the electronic health/information technology revolution, the search for a successful model for Medication Therapy Management, and the growing campaign to improve patient drug therapy compliance.

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Consumer demand will drive burgeoning retail clinic industry

BY Antoinette Alexander

NEW YORK —Since emerging on the scene in 2000, in-store health clinics have strived to fill a void in today’s health care system—which, on more than one occasion, has been classified as broken by industry observers—by treating common ailments and vaccinations in a convenient, affordable setting, but will that remain the case going forward? Some industry observers believe that it is the consumer who will dictate the future of the convenient care industry.

There is no doubt that today’s health care system is in need of an overhaul as patients battle rising health care costs (which are expected to be $1 for every $5 spent in this country by 2015, according to the Convenient Care Association), long waits to see their primary care provider and an overflowing emergency room where people often wait hours to receive care. Then there are the 47 million patients who are uninsured and another possible 30 million who are underinsured.

Looking to provide patients with convenient, quality and affordable health care, food, drug and mass merchants are increasingly working with clinic operators to implement retail-based clinics. By the end of July 2007, the number of facilities had grown to more than 500. CCA expects that 700 clinics will be in operation by year-end 2007.

Not only are retailers working in partnership with clinic operators, but CVS and Walgreens went as far as to acquire MinuteClinic and Take Care Health Systems, respectively. Obviously, that is a strong testament to the value retailers see in such clinics.

The concept, while still in flux as retailers figure out how best to generate profitable revenues, is attractive to patients as the clinics are open extended hours and weekends, with most visits taking about 15 minutes and requiring no appointment.

They are typically staffed with certified nurse practitioners who provide diagnosis and treatment of common family illnesses, administer vaccinations, perform diagnostic screenings and conduct physical exams. The menu of services generally ranges in price from about $30 to $100, and many major health plans cover the services.

Growth focuses on coasts

Source: Drug Store News
State No. of clinics Operator
Washington 6 MinuteClinic
Oregon 0 NA
California 15 QuickHealth, Sutter Express Care, Lindora Health Clinic
Nevada 4 MinuteClinic
Idaho 0 NA
Montana 0 NA
Wyoming 0 NA
Utah 7 Medical Marts
Arizona 11 MediMin, MinuteClinic
New Mexico 0 NA
Colorado 15 SmartCare
North Dakota 0 NA
South Dakota 0 NA
Nebraska 5 Alegent Quick Care
Kansas 7 Minute Clinic, TakeCare
Oklahoma 2 RediClinic
Texas 31 MedBasics, MinuteClinic, RediClinic, My Healthy Access
Minnesota 48 HealthPartners, MinuteClinic, NOW Express Care, Target Clinic, Mayo Albert Lea Medical Center
Iowa 5 Mercy QuickCare, Trinity Medxpress
Missouri 24 InstaClinics, MinuteClinic, TakeCare, NOW Express Care
Arkansas 2 RediClinic
Louisiana 5 Checkups USA
Wisconsin 28 Aurora Quick Care, Take Care, Gunderson Lutheran Express Care
Michigan 26 Affordable Basic Care, MinuteClinic, Early Solutions Clinic
Illinois 29 InstaClinics, MinuteClinic, TakeCare, Corner Care Clinic
Indiana 30 Affordable Basic Care, MinuteClinic, MedPoint Express, The Little Clinic, Corner Care Clinic
Kentucky 5 The Little Clinic
Tennessee 18 MinuteClinic, Wellspot
Mississippi 6 Checkups USA
Alabama 11 Checkups USA, Wellspot
Florida 44 Checkups USA, MinuteClinic, Solantic, The Little Clinic
Georgia 50 MinuteClinic, RediClinic, The Little Clinic
South Carolina 6 Wellspot, Corner Care
North Carolina 18 MinuteClinic, Corner Care Clinic
Virginia 9 RediClinic
West Virginia 0 NA
Ohio 20 MinuteClinic, The Little Clinic, Premier HealthNet Express Care, Corner Care Clinic
Maryland 13 MinuteClinic, My Health Access
Pennsylvania 15 Geisinger CareWorks, Take Care, Corner Care Clinic
New Jersey 15 Atlanticare Healthrite, ExpressCare, MinuteClinic, Corner Care Clinic
New York 13 DR Walk-In Medical Clinics, MinuteClinic, Corner Care Clinic
Connecticut 10 MinuteClinic, Corner Care Clinic
Rhode Island 0 NA
Massachusetts 0 NA
New Hampshire 0 NA
Maine 0 NA
Vermont 0 NA
Hawaii 0 NA
Alaska 0 NA
Delaware 0 NA

But will the future of health care demand more?

“This is being driven by the consumers,” said Tine Hansen-Turton, executive director of the CCA, which was founded in October 2006 to support the exploding industry.

Judging by some recent research, consumers not only welcome the convenient care that such clinics provide, but also believe that they should provide a broader array of services.

“I think consumers are savvy in what [the clinics] are or not or what they could be,” Hansen-Turton added.

According to the study released earlier this year by Market Strategies, 30 percent of respondents believe that retail clinics should compete with primary care physicians by offering a broader variety of more complex care and diagnostic services.

The study, which is MSI’s first wave of retail clinic research, featured 1,500 online surveys conducted with people age 21 and older between Feb. 7 and 19. Of those who completed the surveys, 900 had not yet used a retail clinic and 600 had recently visited a clinic.

“I see continued growth, but the one thing that will remain steady is convenience, but offerings will be dependent on the individual operators,” said Hal Rosenbluth, co-founder and chairman of Take Care, who also serves as senior strategy consultant of health care for Walgreens and president of the CCA. “It will depend on the marketplace.”

There already is evidence that the convenient care industry sees a need to branch out beyond acute care. One such example is Lindora Health Clinic, which provides non-emergency health care services and weight-management programs.

Lindora currently operates 35 clinics specializing in the non-surgical treatment of obesity. Last fall, it partnered with Rite Aid to open in Costa Mesa, Calif., the first retail-based clinic. The Lindora Health Clinic focuses on weight loss and wellness services in the Southern California area. It plans on having 10 retail-based locations by the end of the year.

There’s also Early Solutions Clinics, which currently operates about a half dozen clinics within Meijer stores. In addition to focusing on acute care, the company has developed a health promotion disease prevention program, which includes treatment for diabetes, asthma, weight loss and screenings for depression.

Meanwhile, several clinic operators are offering, namely in select markets, travel medicines.

“There are talks about chronic-disease management and health-education services but it is important to look at the limitations,” Hansen-Turton said. “The important aspect is that it needs to be integrated within the medical home.”

Hansen-Turton also believes that the convenient care industry could see more provider demand for additional service offerings going forward, given the shortage of health care providers and the current strain on the health care system.

“If it expands, it will be in partnership with the local medical community,” she said.

She added, “The focus is to have a sustainable model and one that fits in with continuum care…but it is a community that grows quickly but also grows with what the [patient] needs are.”

Rosenbluth noted, “The most important thing is that quality care is provided at all times and the standards that operators have put forward [are followed].”

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