Rite Aid Q4 revenues up 2.2% to $6.6 billion
CAMP HILL, Pa. — In the wake of acquiring Houston-based RediClinic, Rite Aid on Thursday reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales. For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.
For the fourth quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues. For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.
"Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA," stated Rite Aid chairman and CEO John Standley. "These accomplishments reflect the significant progress we’re making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well," he said. "Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company."
Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales. Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots. Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.
In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215. The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.
Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales. Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 0.3% over the prior year period. Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.
For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.
Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.
The company’s outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies. The company’s outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.
Capital expenditures are expected to be approximately $525 million. This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.
Rite Aid acquires RediClinic
CAMP HILL, Pa. — Rite Aid on Thursday announced it has acquired Houston-based RediClinic, one of the nation’s leading operators of retail clinics. RediClinic currently operates 30 clinics in the greater Houston, Austin and San Antonio areas. Through the acquisition, RediClinic will operate as a wholly owned subsidiary of Rite Aid.
Details of the transaction were not disclosed.
“RediClinic is a pioneer and a leader in the retail clinic industry, having provided high-quality, convenient and affordable health care to nearly one and a half million people since opening its first clinic in 2005,” stated Rite Aid chairman and CEO John Standley. “Retail clinics play a critical role in today’s health care delivery system and will play an important role in Rite Aid’s overall health and wellness strategy. We are committed to working with RediClinic to expand its current footprint in Texas and, in the near future, begin to bring its expertise in delivering convenient healthcare and wellness programs to Rite Aid customers in select Rite Aid markets.”
RediClinics are staffed by board certified nurse practitioners and physician assistants, who are trained and licensed to treat common conditions and provide preventive services, in collaboration with local physicians who are affiliated with a leading healthcare system in each market. Patients can be treated for more than 30 common medical conditions and RediClinic’s clinicians are able to write prescriptions for these conditions when appropriate.
Additionally, RediClinics provide a broad range of preventive services, including screenings, medical tests, immunizations and basic physical exams; and the company’s Weigh Forward weight/lifestyle management program is offered at RediClinics and licensed to other providers.
“Through our new relationship with Rite Aid, RediClinic is well positioned for continued growth in Texas and other states,” noted RediClinic CEO Web Golinkin. “Rite Aid enables us to leverage our many years of experience in retail healthcare to the benefit of patients throughout the U.S., and we look forward to working with the Rite Aid team to deliver on our shared mission of helping people live and stay well.”
Coalition stresses more time for state implementation of AMP-based FULs
ARLINGTON, Va. — Emphasizing implementation challenges that could impact patient access to pharmacy services, a coalition is urging Secretary of Health and Human Services Secretary Kathleen Sebelius to allow a one-year transition period for states to fully implement the Medicaid average manufacturer’s price-based federal upper limits for prescription medications.
The American Pharmacists Association, Food Marketing Institute, Generic Pharmaceutical Association, Healthcare Distribution Management Association, National Association of Chain Drug Stores, National Alliance of State Pharmacy Associations and the National Community Pharmacists Association signed the letter.
“Given CMS’ expectation that states adjust both the drug reimbursement and dispensing fees for Medicaid reimbursement by July 2014, we are concerned that many states are not ready to make such a quick transition,” the groups stated in the letter. “Therefore we are requesting that CMS allow states a transition period for implementation of the FULs and corresponding dispensing fee changes to be one year from the time the states have everything they need for implementation from CMS.”
In November 2013, the Centers for Medicare & Medicaid Services announced final publication of the National Average Drug Acquisition Costs and indicated that the final AMP-based FULs would be published in July 2014. CMS also stated that the final AMP rule would be released in May 2014. However, there are concerns that the final rule release date may be delayed. But CMS has maintained that the July 2014 publication of the final AMP-based FULs is a hard deadline and CMS expects immediate state implementation of those new FULs.
“While CMS may be ready to implement changes to the ingredient side of the formula immediately in July 2014, states face additional obstacles that hinder their ability to be so expedient. Most states require legislative or regulatory changes, have short legislative sessions this year that do not allow for Medicaid reimbursement changes, will have to do a cost-of-dispensing-fee study prior to implementing a dispensing fee change, and/or will have to file a State Plan Amendment to implement such a change,” the letter stated.
The groups that signed the letter have long-held that AMP is an inaccurate benchmark for pharmacy reimbursement, and there is no correlation between the weighted AMP and pharmacy acquisition costs.
In the letter, the organizations also cited a September 2013 letter by the National Association of Medicaid Directors to CMS requesting that CMS provide states with a transition period of up to one year for implementation of AMP-based FULs in order to protect access to pharmacy services for Medicaid beneficiaries.
“While we remain hopeful that CMS will utilize the rulemaking process to implement Medicaid pharmacy provisions in a manner that will ensure that pharmacies are not reimbursed below cost, we are still concerned with the flawed AMP-based methodology and CMS’ timeline for implementing the new AMP-based FULs,” the groups concluded in the letter.