Chain Drug Review, April 29, 2019

Chain Drug Review April 29 2019 39 My Turn Experimentation is key to keeping drug chains relevant By Steven Robins Its hard to believe that at one time chain drug was so entrenched in business as usual that mail order pharmacies were considered an existential threat to the channel Despite increasing competition the best chains have evolved and have shown a willingness to push the boundaries of both their physical and virtual footprints to remain relevant to consumers Even more interesting is that they are evolving in different ways creating a learning lab for future investments and strategies in the channel As we at the New England Consulting Group look out at the health care landscape we know that not all of todays experiments will work but the continued disciplined test and learn approach of the channel leaders will continue to bear fruit as competition also evolves Competition that could change the landscape When we talk about competition we are not talking about freebates versus reward dollars we are talking about new models new practices and new ish competitors that could change the landscape Here are three plus one bonus that we are watching very closely Amazon PillPack While the PillPack proposition feels like a relatively small threat at first glance the real potential power of this acquisition for Amazon is the pharmacy licenses and know how they got as part of this acquisition While they will look to expand the medication aggregation aspect of PillPack it serves as their best entry point to true pharmacy e commerce Civica Rx This coalition of 17 health systems 750 hospitals is looking to source generic drugs directly as a nonprofit company While the initial scope is in hospital distribution only we see Civica Rx as a potential threat to chain drug as more hospital systems join more drugs are sourced directly and the opportunity to continue to supply patients after they leave the hospital becomes a viable way for hospitals to generate much needed incremental revenue The expansion of med to bed programs A powerful incentive in the Affordable Care Act is the penalty hospitals pay for readmissions in less than 30 days Our estimates from a variety of published sources indicate that the cost to hospitals is over 500 million annually In response to this more and more hospitals are rolling out transition of care programs that typically offer patients up to 30 days of medication at discharge While this should drive down readmissions it also pulls prescription volume out of the retail channel and potentially facilitates enrollment in specialty pharmacy services fulfilled outside of chain drug Haven bonus While Haven the joint venture between JPMorgan Amazon and Berkshire Hathaway has not been publicly defined as of yet their mission may ultimately lead them like Civica Rx to disintermediate established elements of the existing system including retail pharmacy PBMs and drug manufacturers While their scope today will only impact the employees within their benefactors troika the future may hold bigger plans for them The chain drug response While this competition will be formidable we see that many of the initiatives chains are testing and expanding position them well for success today and tomorrow We have captured these initiatives and organized them across three categories expanded access to experts compliance programming and improving off site support Increasing on site access to experts The expansion of retail clinics across leading chains like CVS Pharmacy Walgreens Rite Aid Corp Walmart and Kroger Co continues to be a winning proposition for retailers and consumers According to a report published by Grandview Research the retail clinic category will grow at a 203 compound annual growth rate through 2025 to reach 73 billion In many situations including the cold and flu season annual physicals and some chronic conditions these clinics are quickly becoming the primary point of care This will only increase as telemedicine access also expands in store One good example of this is Publix Super Markets Inc which is expanding its test of in store telehealth kiosks after initial success Beyond access to nurses and virtual doctors chain drug is expanding the presence of live beauty consultants as well CVS is investing in a new store format that will include a larger beauty section and live beauty consultants just as Walgreens has done Combined with a few exclusive captive brands this formula increases the appeal of shopping chain drug for beauty and pushes back against the specialty stores and direct toconsumer players that have stolen share in recent years Finally as many retail pharmacies continue to test and expand pharmacist programs that increase patient education and drive compliance they find that the consumers level of engagement increases as does the satisfaction of many of the pharmacists The results coming out of CVS HealthHUB stores and Walgreens partnership with Humana should be good barometers of the degree to which consumers will embrace a curated point of sale point ofcare experience Compliance adherence persistence programming According to Statista prescription drug spending in the U S was 345 billion in 2018 These sales represent a world where the average rate of nonadherence across multiple disease states is 248 according to a review done by the University of California Riverside Conservatively this means that 15 billion to 25 billion is up for grabs if pharmacies can help improve adherence Adherence is a major potential revenue driver and virtually all of the significant chains are looking at ways to capitalize on it Walmart has the well established 4 generics program and now Kroger is launching the Rx Savings Club in partnership with GoodRx While it carries an annual fee of 36 a year for an individual it promises drug prices ranging from free to 12 for a 90 day supply In addition to discounts multiple retail pharmacies have launched home delivery programs often subsidized by manufacturers who also understand the value of the lost sales due to noncompliance These programs are focused on continuity of medication but also on Steven Robins Something is rotten with e commerce food sales By Kurt Jetta Kurt Jetta Online grocery shopping was once considered a fresh concept But it appears to be quickly spoiling If you look at the latest headlines Walmart and Google have suspended their partnership for sameday delivery Amazon grocery sales appear to have stalled and scores of other companies in the space are struggling Retailers are finding it virtually impossible to achieve scale and profitability And theyre unable to generate sustainable demand due to low repeat levels The future for grocery e commerce looks grim Is a turnaround still possible Potentially but it will take a major shift from competing on price to having consumers view e commerce grocery shopping and delivery as a premium service Countering conventional wisdom Just four or five years ago the e commerce grocery sector held great promise as online retail in other sectors started to really take off With so much unbridled enthusiasm analysts projected rapid growth Back in 2016 an IRI report predicted online food and beverage sales would account for 27 of all consumer packaged goods sales in 2020 and more than double to 55 just two years later But it hasnt hit these projected heights While other nonfood CPG categories such as cosmetics and vitamins are showing significant growth in e commerce sales and repeat purchasing online grocery has stumbled mightily Currently online grocery shopping accounts for just 15 of the 800 billion grocery market A TABS Analytics 2018 survey on food and beverage consumables purchasing trends showed that after two years of heavy declines grocery banners were beginning to make a small comeback in their online business However the longerterm challenge these e tailers face is that only a small minority of shoppers purchase groceries online even just one time While it may be convenient in terms of not having to physically go to the store buying groceries from a website is time consuming and takes work Plus consumers are unable to see and inspect fresh products to ensure theyre getting exactly what they want or easily discover new products they would consider trying The TABS survey revealed that only one in six consumers purchase online groceries regularly compared to 99 who shop in brick and mortar stores While loyalty to online grocery has improved over the years it falls significantly short of the threshold needed to ensure ongoing success of the channel Mounting evidence The lack of anticipated growth and success of online grocery is evident in the latest headlines from the most prominent retailers For example Walmart suspended its alliance with Googlebacked logistics firm Deliv for their planned same day delivery partnership and While Walmart still partners with other delivery firms such as DoorDash and Postmates the viability of these agreements still is in question Amazons year over year growth appears to have stalled according to TABS research as the company wrestled with perishables sales through Amazon Fresh and Prime Pantry services and struggled to capitalize on its acquisition of Whole Foods Market Meanwhile supply issues plague online retailers from Amazon Prime customer complaints on late deliveries to labor groups calling for better warehouse working conditions This evidence is just the tip of the iceberg that could sink the online grocery business in a titanic fashion There are many other signs that show why ecommerce food and beverage could continue to be unprofitable at best and unsustainable at worst The stress on the supply chain particularly the fulfillment piece is a significant challenge In a published report Amazon fulfillment center workers shared that they are expected to pick up 400 items per hour one item every seven seconds to meet the companys production expectations Work any slower take a bathroom break or get injured and employees say they risk being cited for time off task which could justify job termination Other anec Continued on page 40 A fresh concept is rapidly spoiling Continued on page 43