Mass retailers push pharmacy by expanding programs

Drug Store News, April 21, 2008 by Mike Troy

The unique collection of retailers who comprise the mass market segment of the pharmacy industry offered a real mixed bag in 2007. There was Wal-Mart, pressing forward with its industry-altering $4 generic drug program, adding pharmacies and charting a new direction for its in-store clinics while indicating it would also establish a pharmacy benefits management operation. Wal-Mart was also busy asserting itself as a company uniquely qualified to serve as an agent of positive change in national healthcare reform, and of late has offered as evidence of that capability the fact that its $4 generic-drug program has saved its customers more than $1 billion.

Wal-Mart, with annual sales last year of roughly $375 billion, understandably dominates headlines in the mass market, but looking beyond the actions of the world's largest retailer and one of the nation's largest pharmacy chains, there was plenty of activity at the nation's other mass market pharmacy retailers.

That's certainly the case at the nation's No. 2 discount retailer. Target expanded its store base to 1,613 units last year, and as it has expanded or relocated older stores, the percentage of stores with pharmacies continues to grow. The company also operates 210 Super Target stores where the pharmacy department benefits from the increased customer traffic generated by the offering of food. Target ended last year with 1,404 pharmacies and now ranks among the nation's top 12 prescription retailers.

It's been a bit of a different story at Kmart, where the company's March 2005 merger with Sears Holdings has resulted in a declining store count and a focus on improving operations at existing stores. Kmart ended last year with 1,112 pharmacies, and although that number is likely to hold steady this year, the company has been active in upgrading its pharmacies through remodeling efforts, the addition of drive-through pharmacies and other customer conveniences, such as centralized patient records. The company also has been aggressive in promoting its own variation of generic drug savings programs and most recently introduced a $1 OTC program that enables customers to purchase a private-label OTC product for $1 when they have a prescription filled.

Another key player in the mass market, supercenter operator Meijer, has grown at a modest pace in recent years, but has shown itself to be an innovator and maintains a strong focus on pharmacy and health care. The company's efforts to establish in-store clinics hit a bump this year as three of the four operators who leased space in Meijer stores went out of business. As a result, all but one of the 39 clinics in Meijer stores were closed.

Despite the setback, the company recently disclosed that its free antibiotic program launched in October 2006 on the heels of Wal-Mart's introduction of $4 generics has been well-received by customers. The company said it recently filled its one millionth free prescription.

To the south of Meijer's trading area, the Fred's chain of discount stores continues its push into pharmacy by opening a larger percentage of new units with pharmacies. The company last August, hired former Meijer executive vice president of merchandising Bruce Efird to serve as president, and he is leading an effort to improve the basics of execution, such as being in stock, while also pursuing expansion. Fred's expects to open 18 stores this year, and 15 of those units will contain a pharmacy. Currently, about 41 percent of the company's stores contain a pharmacy.

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In the warehouse club segment of the mass market, leading operators Sam's Club and Costco both continued to press forward aggressively with their pharmacy businesses. Sam's Club has been adding pharmacies to new and existing clubs for the past five years, and last year those efforts meant 494 of the company's 591 U.S. clubs contain pharmacies where the parent company's $4 pricing initiative is offered. This year, as Sam's Club observes its 25th year of operation, plans call for the addition of 25 new stores, all of which are expected to contain a pharmacy.

Costco began adding pharmacies to its stores earlier than Sam's Club, so today virtually every one of the retailer's 391 U.S. clubs contains a pharmacy. Costco operates 385 pharmacies in total, and recent changes have seen the company add such features as patient consulting rooms where customers can view a video or have a private conversation.

In addition, Costco made news last year with the introduction of a program for uninsured members, enabling them to receive discounts on hundreds of different products. To qualify, members fill out a registration form confirming they don't have insurance, which entitles them to discounts funded by Costco and pharmaceutical manufacturers.