Acquisition Bolsters A&P Presence in Rx

Chain Drug Review, August 18, 2008

MONTVALE, N.J. -- A&P's purchase of Pathmark Stores Inc. last December helped make the chain a stronger provider of community pharmacy services across the northeastern United States.

Prior to the merger A&P had limited expansion options for its pharmacy because many of its stores that lacked pharmacy departments were in areas with a dense concentration of established pharmacies.

"Pathmark has a very large pharmacy business, so we are pretty excited," A&P president and chief executive officer Eric Claus said when the merger was announced.

In fact, integrating the two companies' pharmacy operations into a single unit was one of the first tasks A&P undertook after the merger was finalized.

Executives note that by adding Pathmark's nearly 130 pharmacies to the more than 200 it already operated, A&P has been able to create a network with increased buying power.

In fact, they say, soon after the merger was completed A&P negotiated a joint supply contract for its pharmacies.

The addition of Pathmark to A&P's operation did not come cheaply and was not done quickly. The $1.3 billion A&P paid for Pathmark was the culmination of nine months of negotiations and was preceded by A&P's sale of its entire stake in the Canadian supermarket chain Metro Inc. to help finance the Pathmark purchase.

The addition of Pathmark and the subsequent closing of stores outside its core markets left A&P with 450 stores and slightly more than 250 pharmacies in eight states.

Bringing Pathmark into the fold has also helped A&P strengthen its position in many of the Northeast's most densely populated markets.

For instance, A&P is now the top-ranked supermarket operator in the New York City area and has increased its presence in greater Philadelphia and Baltimore.

The company offers its pharmacy customers several options for filling their prescriptions.

Besides the traditional in-store option A&P provides patients with the choice of using ordering refills by telephone, filling prescriptions online or getting maintenance drugs for such conditions as high blood pressure and diabetes through the mail.

Like many other chains, Pathmark has implemented a $4 generic prescription program.

"At Pathmark we know that your family's prescriptions are a necessity, and that many families do not have adequate prescription coverage," the company's web site says. "That's why our pharmacy is committed to making health care affordable across New York, New Jersey, Pennsylvania and Delaware, and now offers over 300 generic medications at commonly prescribed dosages for a $4 co-pay."

The $4 prescriptions are being offered as part of Pathmark's Advantage Card program.

Executives explain that Pathmark's Advantage Club is not insurance coverage. Rather, they stress, the program helps those who qualify for it to manage their prescription drug costs.

Cardholders also receive priority scheduling for flu shots and immunizations; free bone density, diabetes and cholesterol screenings; free blood pressure testing; and free store tours that focus on nutritional counseling and food education.

Vaccinations, screenings and testing services are regular parts of A&P's pharmacy operation. Last month, for instance, the company offered one-day shingles vaccination programs at four stores in New Jersey.

A&P

* HEADQUARTERS

2 Paragon Dr.

Montvale, N.J. 07645

Key pharmacy executive: Carol DiNicolantonio, Senior Director of Pharmacy

Phone: (201) 573-9700

Fax: (201) 930-4079

Web site: aptea.com

* TRADE CLASS--Supermarket

* PHARMACY RANK--21 in sales, 26 in pharmacies

* Full-year results (12/1//07)

Pharmacy sales--$1.0 billion *

Overall sales--$4.2 billion

* Number of stores--450

* Number of pharmacies--253

* Number of states operating--8

* CDR estimate.