Supermarket pharmacies take bigger bite of prescription pie

Drug Store News, Sept 13, 2000 by James Frederick

PHOENIX -- The supermarket industry now accounts for 16 percent of the nation's retail pharmacy outlets and 13 percent of total prescriptions dispensed, the Food Marketing Institute has reported, as food store chains add new prescription departments and target healthcare consumers more aggressively.

In its recently released 2000 Report of the Supermarket Pharmacy Survey, FMI reported strong gains on the pharmacy side of the food store business, with the number of in-store pharmacies rising from 6,612 in 1995 to 8,193 in 1999. Citing data from IMS Health, the report also showed that median prescription sales per store in the nation's supermarkets have risen almost 80 percent in the last five years, to $38,321 in 1999 from $21,500 in 1995. Average number of prescriptions dispensed rose from 130 a day to 150 a day over the same time period, FMI reported.

"Supermarket pharmacies dispensed 357 million prescriptions in 1999, a 62 percent increase from 1995 and the highest level of growth in the retail pharmacy marketplace," noted FMI in its report. "As a percentage of total prescriptions dispensed, supermarket pharmacies have slowly increased their market share ... from 10 percent to 13 percent between 1995 and 1999."

However, the report added, average script count declined slightly among supermarkets last year, to 150 from 154 in 1998. In addition, FMI noted, "Market share of retail sales [has remained] flat at 11 percent since 1996."

By contrast, noted FMI, chain drug stores saw a 36 percent increase in total prescriptions dispensed over that five-year period, with mail-order pharmacy growing 55 percent, mass merchandisers up 25 percent, and independent pharmacies rising 4 percent. Citing IMS, the industry organization reported that independents were "the only type of store to decrease in market share," with share of units prescriptions dispensed falling from 33 percent in 1995 to 27 percent in 1999, and market share of retail pharmacy sales dropping to 24 percent from 30 percent.

Chain drug stores, by comparison, saw a two-point increase in share of total units dispensed, to 44 percent, and mass merchandisers have held steady at 11 percent since the mid-1990s, according to FMI.

Also on the rise among supermarket pharmacies is the average cost of a prescription. FMI found that the median retail prescription price rose 12.5 percent last year over the previous year, to $37.86.

"Prescription prices have soared in recent years," said the report. "Although third party providers encourage the use of generics to decrease prescription costs, the average prescription price has been affected by a 10 percent to 20 percent price increase among top-selling prescription brands."

Nevertheless, reported the group, the volume of generics dispensed at supermarket pharmacy counters has remained flat at 42 percent of total prescriptions for the past five years, mirroring overall industry trends. "On the other hand," the report added, "the percentage of prescription sales from generic drugs in the supermarket has fallen to 17 percent in 1999--a five-year low. This decline can be attributed to the introduction of newer higher-priced drugs that have no generic alternative."

On a positive note, the report found that gross margins in food store pharmacies, "after 10 years of continuous decline," appear to have stabilized at 20 percent, thanks in large part to an industry wide flattening out of third-party prescription plan growth. "The general decline over the past decade was triggered by the increased prevalence of third party sales and the declining margins associated with those sales," FMI noted. "As third party margins halted their downward trend last year [third party now represents 77 percent of sales], the overall department margins also remained flat."

Pharmacy care initiatives

Meanwhile, FMI's latest survey found steadily growing support among supermarkets for pharmacy care initiatives and disease management programs. Those programs, noted the report, are now offered in at least one pharmacy at 49 percent of the food store chains in 1999, compared with 40 percent in 1998.

Indeed, the survey found that 100 percent of the food retailers who responded now offer some kind of diabetes management program in one or more of their pharmacies, compared with 87 percent the prior year.