Fast, nimble Walgreens aims to own ‘well’
Walgreens, the kaleidoscopic company that wants to “own well,” is shuffling management and realigning operations as it works to knock down its remaining internal silos and create a seamless, broad-based retail health-and- wellness dynamo.
Any snapshot of Walgreens can only present a blurred portrait. At 110 years old, the company is moving so fast on so many fronts that Wall Street analysts and business journalists — not to mention drug, supermarket and mass merchandise competitors on all sides — constantly are trying to draw a complete picture of a shifting and multifaceted retail entity. Whatever picture emerges is likely to be outdated before you can say “8,000 points of care.”
Consider Walgreens’ strategic moves just since the start of this year. In the first four months of 2011, Walgreens has:
Moved to acquire online retailer Drugstore.com for about $409 million. The acquisition will add about 60,000 products to Walgreens’ online offering and “significantly accelerates our online strategy to leverage the best community store network in America,” asserted president and CEO Greg Wasson;
Agreed to sell its managed care division, Walgreens Health Initiatives, to Catalyst Health Solutions for $525 million in cash. Behind the decision to get out of the pharmacy benefit management business, Wasson said, was the need to focus on “delivering … high-quality pharmacy, health and wellness solutions … to become America’s first choice for health and daily living needs.” As part of the deal, Catalyst will provide PBM services for Walgreens’ employee and retiree drug plans, as well as other Walgreens programs, such as the Walgreens Prescription Savings Club. More to the point, Walgreens said it would retain and continue growing its specialty pharmacy and mail-service businesses in support of Walgreens, WHI and Catalyst patients. “Our specialty, infusion and mail pharmacy services are an important extension of our drug stores, retail clinics, worksite health centers and medical facility pharmacies,” Wasson said;
Restructured its health-and-wellness division in line with the retirement in April of health-and-wellness president Hal Rosenbluth, a cofounder of Take Care Health Systems, which Walgreens acquired in 2007. Wasson credited Rosenbluth with a big role in the expansion of “pharmacy, health and wellness services through our Take Care retail clinics and worksite health centers.” Henceforth, the Take Care retail and worksite division under Peter Hotz will report to Mark Wagner, president of a new community management division, while health-and-wellness sales and clinical services, led respectively by chief client officer Joe Terrion and chief medical officer Cheryl Pegus, will become part of the Walgreens pharmacy, health-and-wellness services and solutions division led by division president Kermit Crawford;
Piloted its first loyalty card program as it applies the expertise it acquired with its purchase of New York’s 258-store Duane Reade chain, a loyalty card innovator;
Unveiled, in early April, the first of a planned 18 rapid car-charging stations it said will open at Walgreens drug stores in the Dallas/Fort Worth market. Launched in partnership with NRG Energy, the eVgo Freedom Stations will comprise the nation’s first privately funded large-scale electric vehicle charging network;
Named Loblaw and Duane Reade veteran Joseph Magnacca president of daily living products and solutions, in charge of integrating and raising the profile of many front-end merchandising efforts; and
Launched a new ad campaign in early March to highlight its new Refill by Scan technology, which enables smartphone users to scan prescription label bar codes with their camera phones to order refills — and to obtain text alerts, browse Walgreens’ product selection and process photos.
Walgreens’ underlying goal, Wasson said, is to be the nation’s premier destination for retail health-and-wellness needs across a broad spectrum of American life, including the retail arena, the workplace, the home for patients with serious conditions in need of specialty medications and infusion, and the hospital and clinic setting. Increasingly, the 7,700-store retail and health giant also is staking out cyberspace with new online services and smartphone applications designed to reach customers and patients anywhere they happen to be.
RAD employs Rx initiatives, new format
Rite Aid recently has put into play a number of forward-looking initiatives to help improve operations, particularly across pharmacy. The Pennsylvania-based retailer last month announced its test market of six new Wellness store prototypes, and after successfully testing a 15-minute prescription guarantee in three states, Rite Aid expanded that guarantee to all states except New York.
As part of the company’s segmentation strategy, Rite Aid last month opened six pilot Wellness stores that have been refitted with new decor. “There are significant changes to our merchandising, including the addition of an expanded selection of organic foods, all- natural personal care products and homeopathic medicines,” John Standley, Rite Aid president and CEO, told analysts last month. “These stores have additional resources to help customers obtain their wellness objectives, including expanded clinical pharmacy services [and] wellness ambassadors. The expanded clinical services include pharmacists who are diabetes care specialists, certified immunizers and medication therapy management experts.”
Meanwhile, wellness ambassadors will walk the aisles armed with information regarding over-the-counter medications and supplements. “Many of the wellness ambassadors are pharmacy technicians who have received additional training,” Robert Thompson, EVP pharmacy, told Drug Store News. “Their skill set is already pretty substantial, and they can be part of the bridge between the front-end and the pharmacy. They can help customers on the floor, and if they have a question that needs to be answered, [those pharmacy technicians] can find the right resource and encourage additional conversations with the pharmacist.”
All told, Rite Aid will be remodeling as many as 500 stores in the coming fiscal year, including both Wellness and value formats that will better target each pharmacy to the community it serves.
Rite Aid’s 15-minute prescription guarantee should serve as a key trial driver. Last month, a Consumer Reports survey revealed that 21% of pharmacy customers were dissatisfied by a perceived slow speed of service, and 15% complained their prescriptions weren’t ready when promised. The ability to stand out as a pharmacy that consistently dispenses prescriptions within 15 minutes could be a game changer, especially as speed of service becomes more paramount. The Consumer Reports survey found that 49% of respondents cited speed of service as an important consideration in choosing a drug store, compared with 24% in their 2002 survey.
“The vast majority of prescriptions at Rite Aid are filled within 15 minutes anyway,” Thompson said. “Our NexGen dispensing system is the backbone to filling prescriptions and is built around a rigorous quality assurance process. There are many checks and balances built into the system to ensure that quality and safety is foremost in dispensing the prescription.” Thompson noted that the guarantee does not include counseling, compounding or where information is needed from the prescription provider or insurer. “[The 15-minute guarantee] is about recognizing and respecting consumers’ desire for prompt service,” Thompson added.
Rite Aid’s segmentation initiatives, including its new Wellness store pilots, and the 15-minute guarantee both serve to draw customers into the store, but Rite Aid’s successful loyalty program is a significant factor in keeping them coming back. “Wellness+ members accounted for 67% of front-end sales and 58% of our script count during the quarter,” Standley said. Standley reported 36 million Wellness+ members as of mid-March, up from 29 million reported in mid-December.
CVS aims for growth behind new leader
With a new leader at the helm, a robust management team in place and an unwavering focus on driving medication adherence and reducing healthcare costs, CVS Caremark remains squarely on the growth path and continues to play an increasingly important role in U.S. health care with its far-reaching store network and arsenal of products and services.
There’s no doubt that 2011 and beyond will be significant for the nearly $100 billion powerhouse as it embarks on a new chapter under the guidance of Larry Merlo, who now holds the title of CEO as of March 1, in addition to president. Tom Ryan retired as CEO after spending 36 years with the company and will remain non-executive chairman until his retirement at the company’s annual meeting of shareholders in May.
The decision to select Merlo as the new CEO came as little surprise as he has played a key role in the evolution of the company and has an impressive track record of integrating major acquisitions. Under Merlo’s leadership, CVS completed some of the most successful acquisitions in the history of retail pharmacy, including Longs Drug, Osco/Sav-on, Eckerd and Revco, and delivered significant organic growth in major markets across the country.
Merlo has indicated that under his watch, three things will define CVS Caremark’s future success:
Flawless execution of its strategy, which is lowering healthcare costs while improving the health of its consumers and leveraging its integrated pharmacy services model;
Stressing more cross-functional thinking and action across the company, producing even higher levels of customer service; and
Enhancing value for all of its shareholders in such ways as improving dividend payouts and share repurchases.
“We are building on a strong foundation. CVS Caremark is the leader in providing integrated pharmacy health care. No one else has our combination of the largest chain of retail stores, a leading [pharmacy benefit manager], the fastest-growing retail health clinics and a strong track record of healthcare innovation,” Merlo stated.
CVS Caremark continues to stress its commitment to its PBM business as, according to Merlo, year 2011 is the year the company will break trends on top-line growth in the PBM, and 2012 is expected to be the year it breaks trends on profit growth.
“There are many reasons for optimism about our PBM’s long-term prospects, starting with its performance in 2012. First and foremost, 2012 is expected to be the strongest year in generic [drug] launch history. … Second, the streamlining benefits will begin to outweigh our investment costs. Third, we will see a ramp in accretion from the Aetna contract. Fourth, we anticipate continued growth in both specialty and the Medicare Part D businesses. And fifth, our focus on client service and satisfaction, along with our innovative products and services, will provide continued momentum in renewal and new sales success,” Merlo told analysts during a recent quarterly conference call.
Furthermore, CVS Caremark’s acquisition of the Medicare Part D business of Universal American will not only more than double the size of CVS Caremark’s Medicare Part D program, but the move also comes just as the first baby boomers turn 65 years old.
MinuteClinic, which by 2015 is estimated to operate about 1,060 clinics in 100 markets, also will take on added significance going forward as 32 million uninsured gain coverage beginning in 2014, amid an ongoing primary care physician shortage.
Among the most recent developments is MinuteClinic’s clinical affiliation with Advocate Health Care and Advocate Physician Partners to enhance healthcare services provided to patients in communities throughout Chicagoland and central Illinois — marking the largest clinical collaboration between a regional health system and MinuteClinic based on the number of in-store clinic locations.
However, that’s not to say that the front of the store is not of great importance, as evidenced by the continued focus on and success of its ExtraCare loyalty program, which has been expanded with the new ExtraCare Beauty Club, the rollout of a new store brand called Just the Basics, the completion of more than 200 urban remodels in the past year and the implementation of the expanded consumables planogram in about 4,000 stores.
Charged with integrating all the company’s capabilities in branding, communications and healthcare-reform strategy to forge even stronger partnerships and further improve pharmacy care delivery is ExtraCare loyalty program architect Helena Foulkes, who was recently named EVP and chief healthcare strategy and marketing officer.