Discount Drug Mart tries clinics

Chain Drug Review, April 28, 2008

MEDINA, Ohio -- This spring will mark a milestone for Discount Drug Mart as the chain, which operates in Ohio, debuts its first m-store clinic.

The clinic, to be operated in partnership with a local hospital, will open in May in the retailer's Olmsted Falls outlet.

The retailer is working with a company to run clinics in various communities that would be under one umbrella but associated with different local hospitals or area doctors' groups, according to chief financial officer Tom McConnell.

The chain has space for clinics at a half-dozen stores, he notes. It created the space either by expanding stores (three units have an additional 3,000 square feet) or realigning layouts. Between 150 and 200 square feet are required for a clinic, says McConnell.

The clinics will be staffed by nurse practitioners, with a doctor on call at all times and support from physicians at the affiliated hospitals.

While slowing its addition of new stores, Discount Drug Mart has accelerated the pace at which it is renovating or enlarging outlets. Expanded units include those in Chesterland, North Olmsted and Olmsted Falls.

One store will be unveiled this fiscal year in Remindersville, near Twinsburg, while renovations are on the drawing board for outlets in Elyria, Lakewood and Medina.

The remodelings have accommodated the retailer's emphasis of home health care, says McConnell, who explains that the chain has added products in the category and stepped up its marketing to gerontologists. Home health care departments at Discount Drug Mart encompass at least two 16-foot runs, with a center aisle showcasing wheelchairs and other durable medical equipment.

The company's home health care offerings were accredited this year by an authorized accreditation firm for the Centers for Medicare and Medicaid Services with a score of 98 out of 100, "so we're set for the next 12 months," McConnell asserts. This was Discount Drug Mart's second year of accreditation.

At the pharmacy Parata robots have performed impressively, with virtually no misfills, he notes. Their speed allows pharmacists to spend more time with patients, and they provide a marginal cost savings, he adds.

And for people taking advantage of flexible spending accounts (FSAs), the retailer has been certified to accept FSA cards.

Discount Drug Mart has answered Wal-Mart's $4 generics with $4.50 generics of its own and a price-matching policy. McConnell believes that the discounter's program has not hurt the drug chain, which has a 67% generic fill rate.

A shining star for the chain is its Immediate Pharmaceutical Services Inc. (IPS) pharmacy benefits manager. "A significant portion of IPS' growth over the past two years has come from its mail-order pharmacy operations," says McConnell. "It has expanded its contract base, serving as the outsourced mail partner for a number of PBMs."

Most of the prescriptions IPS provides are for patients outside Ohio, he notes. "They're not people who would have hit our stores."

At the front end Discount Drug Mart has successfully expanded its wine departments, as much as doubling their linear feet in stores in higher-income neighborhoods, including Brunswick, Chesterland, Independence, North Olmsted and Olmsted Falls. With space for wines as much as doubling, sales have climbed significantly, adds McConnell. The retailer has 400 to 500 feet of wines in a number of outlets.

Bottled water is performing terrifically, notes McConnell, adding that the chain does well with both national brands and private label water. Discount Drug Mart also has an established DVD rental business, which set a record just prior to the big winter snowstorm that hammered Cleveland.

In the photo category the chain is upgrading technology to capture an increased share of the digital processing business.

On the personnel front, Discount Drug Mart hired two women to newly created positions. Anita Fontana is the chain's director of advertising and marketing. She formerly published the ECRM magazine.

Diana Burke is the retailer's director of training, development and recruitment. She will focus on enhancing customer service. She formerly taught at the college level and was a corporate trainer.

"Both of these talented individuals are going to bring us another dimension," states McConnell.

DISCOUNT DRUG MART

* TOP EXECUTIVE Parviz Boodjeh, CEO

* HEADQUARTERS

211 Commerce Dr.

Medina, Ohio 44256

Phone: (330) 725-2340

Fax: (330) 722-2990

Web site: discount-drugmart.com

* INDUSTRY RANK--17 in sales, 22 in stores

* Full-year results (3/31/08)

Sales--$665 million ( 10%) *

Net earnings--N/A

Net margin--N/A

Comparable-store sales-- 1%

* Number of drug stores--67

* Number of states operating--1

* Number of stores opened in 2007--1

* Number of stores planned for 2008--1

* Average sales per store-- $10.1 million *

* Average store size-- 23,000 sq. ft.

* Distribution--Warehouse

* Other businesses--Pharmacy benefits management, mail order

* Includes mail order N/A = Not available.