Caterpillar pharmacy deal doesn’t make Wal-Mart a PBM
BENTONVILLE, Ark. —When Wal-Mart held its 15th annual analyst and investor conference late last month, pharmacy and health care didn’t rate a mention despite the fact that Wal-Mart is one of the nation’s largest pharmacy chains and has aggressively sought a seat at the table in the national healthcare debate.
The meeting was spread over two days and included presentations from more than a dozen executives, but none specifically addressed the health-and-wellness area, and the subject might not have even come up were it not for a question asked by an analyst that came at the end of the second day as president and chief executive officer Lee Scott was concluding the event. The question dealt with how Wal-Mart intended to build on generic drug pricing initiatives to be a solution for health-and-wellness issues. Clarification also was sought on Wal-Mart’s recent deal with Caterpillar to provide the heavy equipment manufacturer’s employees with prescription drugs (for more, see story, page 48). What followed were some wide-ranging thoughts from the company’s top executives on healthcare issues.
John Agwunobi, president of Wal-Mart professional services division, sought to clarify the arrangement with Caterpillar.
“We have worked directly with them in such a way that we have negotiated prices on our pharmaceuticals that allow Caterpillar to save money—the employer, in such a way that it can now incent its employees to fill their prescriptions at Wal-Mart. That’s basically how it works,” he said.
When questioned about the issue of PBM involvement, Agwunobi noted that Caterpillar uses a PBM, but under Wal-Mart’s deal, the prescription drug pricing was negotiated directly with Caterpillar.
“Caterpillar has a PBM that manages all of the administrative functions associated with this arrangement, but in this arrangement it’s basically about us selling pharmaceuticals at retail prices directly to the employer, rather than going through a third party,” Agwunobi said. “We saved money for Caterpillar in their employee benefits program as a result of their working directly with us, avoiding a middle man.”
In fact, Caterpillar employees pay nothing to have their prescriptions filled at Wal-Mart because the company uses a differential co-pay system, according to Agwunobi.
After Agwunobi, Scott chimed in with some sweeping comments about the need for portable healthcare records, a level playing field when it comes to the subject of providing employee health benefits and working with government to develop solutions that do more than transfer costs. He also mentioned in-store clinics, which he once suggested Wal-Mart might have as many as 2,000 of, before asking Eduardo Castro-Wright, president and chief executive officer of the U.S. store division, to comment on the subject.
“The business model that most companies that operate in that space are using is one that has not proven yet to work,” Castro-Wright said. “Now the one that we have just recently started, which is slightly different because it leverages the brand equity of the local hospital, as well as the expertise of the local hospital to provide the nurse practitioners for the clinic, that is one that we feel that has a lot more potential. Because we both have the trust of the customer in terms of the brand of the hospital, and at the same time you have the professional management of the nurse practitioners, which some private equity firms that have entered this space might not have.”
Aside from the lack of specifics in the area of health and wellness, Wal-Mart did provide details around a widely anticipated store remodeling program and a new format called, “Project Impact.” The company has been working on this new store design for several years, and a key change involves repositioning the pharmacy to the food side of a typical supercenter from its current location near the entrance to the general merchandise side of the store. Other changes include a colorful paint scheme, clean aisles, new interior and exterior signing, new fixtures and new adjacencies. The space dedicated to every department has been reduced somewhat to open up the store with the goal of creating a more inviting and consistent customer experience to drive sales in such key categories as food, apparel, home, electronics, health and pets.
Wal-Mart expects to end its current fiscal year with about 12 percent of its U.S. store base operating under the Project Impact format. However, as the company pares back new store construction and reallocates capital to remodeling efforts, between 500 and 600 stores will be remodeled next year to the new design. When those units are combined with newly constructed Project Impact stores, 32 percent of the retailer’s domestic store base will be converted by the end of the next fiscal year in late January 2010. By 2014 the conversion program will be complete, according to a timetable presented to analysts.
The massive remodeling program comes as Wal-Mart dials back the rate of expansion for its U.S. supercenters and reduces the average new store size. For example, next year’s plans call for between 125 and 140 new supercenters with most of those units in the range of 140,000 square feet with 170,000 square feet. Compare those plans to just a few years ago when supercenter expansion peaked in 2006 with 276 new units, most of which were closer to 200,000 square feet.
Despite the slowdown in new store growth, chief financial officer Tom Schoewe told analysts Wal-Mart was making progress on its objective to drive higher rates of return for shareholders.
“How many companies could stand before you today and say that their balance sheet is stronger today than it was a year ago,” Schoewe asked during his presentation.
Alimentary Health signs licensing agreement with P&G Pet Care
CORK, Ireland Alimentary Health on Wednesday announced that it has signed a worldwide licensing agreement with P&G Pet Care, makers of two of the worlds leading companion animal pet care products, Iams and Eukanuba.
Under the licensing agreement, Alimentary Health’s and P&G’s proprietary pet care probiotics will be used in P&G Pet Care’s nutritional supplement products. The global market for companion animal pet care products was estimated to be over $40 billion in 2007. Alimentary Health will receive an undisclosed royalty on sales of all products containing the pet care probiotics.
In 2001, Alimentary Health partnered with P&G to develop safe and effective probiotic products for gastrointestinal indications. In 2007, P&G Health Care started using Alimentary Health’s natural probiotic strain Bifidobacterium Infantis 35624, in Align in the US. Align is a daily probiotic supplement that helps build and maintain a strong and healthy digestive system.
“Today’s announcement comes as a result of our continued successful collaboration with P&G,” Barry Kiely, chief executive officer of Alimentary Health, said. “We are please that our ongoing efforts have once again resulted in Alimentary Health’s technology making it to the marketplace. This agreement is a result of a successful research and development program between the two companies and it brings us closer to fulfilling our vision of becoming the worldwide leader in the research, discovery and clinical development of probiotics. We are proud of our long standing association with such a leading multi-national company.”
Kmart holds GoldK Day health services, screening day for seniors
HOFFMAN ESTATES, Ill. Kmart, a wholly owned subsidiary of Sears Holding Corp., has announced that its pharmacy division will hold the annual GoldK Day on Nov. 18 for seniors.
“Kmart wants to remind seniors that we care about their health and GoldK Day is a way for our pharmacists to give back to these important customers by not only offering free screenings, but assistance with Medicare health plan selection and information about disease states, which can help seniors make better decisions about their healthcare,” Mark Doerr, vice president of Kmart pharmacy, said.
The activities planned for the event, to be held from 9 a.m. to 1 p.m. at all 1,100 Kmart pharmacy locations, include free blood pressure screenings, free memory screenings, Medicare health plan selection assistance and more.
The initiatives are tied to the efforts of the Alzheimer’s Foundation of America’s National Alzheimer’s Disease Awareness Month, the annual initiative aimed at promoting early detection of memory problems and appropriate intervention.