Following challenging 2012, Walgreens looks to expand pharmacy role in 2013 and beyond
CHICAGO — "[The year] 2012 was definitely an important year for Walgreens," Greg Wasson, Walgreens president and CEO, told shareholders here, at the Navy Pier, Wednesday afternoon, at the chain’s annual shareholder meeting. "We did make some tough choices to protect and solidify … our position for the long term," he said. "[But] our vision is crystal clear to become the first choice for health and daily living in America."
At this time last year, the primary focus for Walgreens executives at the chain’s annual shareholder meeting was justifying the decision to walk away from Express Scripts pharmacy network. What a difference a year makes.
"We did make some tough choices to product and solidify … our position for the long term," Wasson said. "[But] try to put last year in a little bit of context," Wasson said. Because even with that negative, short term impact, Wasson noted, Walgreens filled 784 million prescriptions last year. The company administered more than 6.5 million immunizations. The company opened more than 400 Wellness Experience stores and made substantial acquisitions like USA Drug, Crescent Pharmacy and BioScrip. And more than 50 million customers enrolled in Walgreens’ Balance Rewards loyalty program — "that far exceeds our expectations of where we would be at this time," Wasson said.
And Walgreens acquired a 45% stake in Alliance Boots in a move that will catapult the Chicagoland retailer onto the global stage.
Looking toward 2013, Wasson acknowledged a number of headwinds that continue to face not only Walgreens, but all of retail. "Certainly we have a continuing tough economic climate," Wasson said. "As a result of that we certainly have tougher competition," he added. "We’re seeing new competition emerge [outside of the drug channel] that we have to recognize and anticipate."
But there is significant opportunity as well. "Regarding Walgreens specifically, many of last year’s headwinds are indeed this year’s tailwinds," Wasson said. "Last year we exited the Express Scripts network; this year we have a multi-year agreement," he said. The company has cycled through a complete overhaul of its private label offerings, he added, away from predominant print advertising to more and more digital media. And, by March, Walgreens will have cycled through a change in the company’s promotional strategy — a strategy that incorporates more of the new media that shoppers are engaging. "[And] last year we were America’s largest pharmacy chain," Wasson said. "This year we are well positioned to be the world’s largest pharmacy and health and wellbeing company."
Wasson identified three focal points for 2013 that will help Walgreens reach its primary healthcare goals for the more than 2,000 shareholders gathered for the company’s annual shareholder meeting. "We are combining leading-edge design with enhanced products and services, increased engagement with team members and customers and an omni-channel approach that blends our brick-and-mortar stores with e-commerce and mobile commerce," Wasson stated. "We are deliberately blurring many retail channels to fit how consumers shop today."
The focal points Walgreens will be bringing to bear in blurring those channels include further expansion of its Well Experience stores — now numbered at more than 400 — advancing the role of community pharmacy and realizing synergies from the Alliance Boots deal. All of that feeds into Walgreens’ big picture plan for its pharmacy operation — enhance the core pharmacy business, expand beyond that core business into new services and evolve the traditional business model to become a partner for doctors, health plans and health systems.
"Our goal … is to step completely out of the drug channel as it exists today and [create] something new and unique," Wasson said.
The most significant move in 2012 was the 45% stake Walgreens took in Alliance Boots, with the option to acquire the remainder 55% stake over the next three years. To characterize this as a retail pharmacy game changer is a bit of an understatement, because it creates an entirely new field of play.
And the Alliance Boots deal is not just the expansion of the U.S. retail pharmacy pedigree into the global arena. When it’s all said and done, Walgreens/Alliance Boots will manifest as the single largest purchaser of pharmaceuticals worldwide with core competencies that extend far beyond traditional retail pharmacy business models. "The one big difference is the integrated wholesaler business that Alliance Boots brings to the table," Wasson said. "Together we’re going into growing markets. Between the U.S. and Europe there are nearly one billion people [approaching retirement age]," Wasson noted. The new company also is well positioned to grow into emerging markets like China, South America and India, Wasson added.
Of course, stateside Walgreens had already been moving in that direction — redefining the revenue streams that feed a national drug store chain. Walgreens in the past year has acquired both Crescent Pharmacy and BioScrip which afforded the Chicago retailer a greater presence in infusion pharmacy and specialty pharmacy, respectively.
Walgreens is also changing the perception of what it means to be a national drug store chain at the street level.
Through fiscal 2012, Walgreens opened more than 400 Well Experience locations as well as several flagship locations that Wasson characterized as "Wellness Experience stores on steroids" The stores feature Wagreens’ new bridge pharmacy design, which puts the pharmacist in front of the counter and closer to the patient. Many of the locations feature a Take Care Health clinic to satisfy acute care and diagnostic needs. "We believe if the pharmacist and nurse practitioners are allowed to practice at the top of their profession, our community pharmacies can provide a higher level of [community] healthcare services," Wasson said. "Our product used to be dispensing pills safely and efficiently. Today and going forward our product is an improved [healthcare] outcome," he added.
Across the front-end, Walgreens’ substantial investment in private brands, including DeLish and the value brand Nice!, have led to a 200 basis point increase in private brand penetration year-over-year to 22%. And the chain has enhanced beauty departments that now include an array of niche and prestige brand not found in traditional drug stores, including the introduction of Boots No7.
Beyond the in-store experience, Walgreens is meeting the customer where she wants to shop, which more and more is on her iPhone. Walgreens’ multichannel offerings today include transfer by scan and text refills, QuickPrints for mobile phone photos, a shopping app with in-store navigation tools to make finding product easy and special coupon events through social media outlets like FourSquare. Walgreens in 2012 opened a 50,000 square foot e-commerce distribution facility to support its Walgreens.com and drustore.com businesses.
Walgreens in September launched its loyalty card program Balance Rewards, and in less than three months has already signed more than 50 million card members. The program, designed by Graham Atkinson, SVP and chief marketing and customer experience officer — who came to Walgreens by way of United Airlines, where he was president of Mileage Plus — is designed to makes it easy for members to accumulate and spend points. The back-end of the program creates a big data treasure trove that will both help improve "retail compliance" as well as help dictate future marketing, merchandising and real estate decisions. And it’s a platform that can be expanded to incorporate other partners.
Going forward, Walgreens is developing a business model that can serve as a turnkey model for healthcare cost reduction — an ideal partner solution for payors. For example, earlier this week Walgreens announced the opening of a worksite healthcare center that will be operated out of BMW Manufacturing’s headquarters in Spartanburg, S.C. where patients will have access to services including physical exams, chronic disease management, dental, vision, physical therapy, high blood-pressure management and personalized health coaching. The center also will provide a laboratory for medical testing, digital x-rays, biometric screenings and mobile mammography scans. And an expanded full-service pharmacy will include private consultation rooms, an extensive selection of over-the-counter medications and a drive-through window.
Just read Wasson's views regarding health and wellness that he shared with 2,000 shareholders. I wish he may fulfill his goals as planned.
WEB FEATURE: FDA guidance aims to encourage abuse-deterrent painkillers
SILVER SPRING, Md. — One of the most serious drug abuse problems in the country doesn’t involve heroin, methamphetamine or crack, but abuse of legal prescription drugs, particularly opioid painkillers, a problem that the Food and Drug Administration aims to change with draft guidance released Wednesday.
In August 2010, Purdue Pharma introduced an abuse-deterrent formulation of OxyContin (oxycodone) extended-release tablets, and Endo Pharmaceuticals received FDA approval for its crush-resistant version of Opana ER (oxymorphone) in December 2011. Both drugs, long popular targets for abusers, are designed to become ineffective after crushing, a method used by abusers who then snort or inject them.
To date, however, FDA-approved drug labeling has not included language about abuse deterrence, nor has the agency given anyone the claim of reduced abuse liability. But in the new draft guidance, the agency explains its current thinking about the studies it said companies should conduct to demonstrate that a given formulation of an opioid drug has abuse-deterrent properties, how the agency will evaluate the studies and what labeling claims may be approved. The agency said it would seek public comment on the guidance over the next 60 days.
"The agency believes that new technologies that are effective to reduce abuse are very important for us to incentivize," FDA Center for Drug Evaluation and Research deputy director for regulatory programs Douglas Throckmorton said in a conference call with reporters. "It’s the reason we are putting out this draft guidance today."
The FDA’s announcement comes amid a problem that has seen tremendous growth in the past several years. According to the Centers for Disease Control and Prevention, 2 million people reported abusing prescription painkillers for the first time within the last year, with 71.6% of those obtaining, buying or stealing them from friends or relatives. Misuse and abuse of prescription painkillers led to more than 475,000 emergency room visits in 2009, a figure that nearly doubled over the course of five years, and the drugs were involved in 14,800 overdose deaths in 2008 — more than cocaine and heroin combined.
With abuse comes related violent crime: According to the Drug Enforcement Administration, armed robberies of pharmacies jumped 81% in the five years leading up to 2011. That has prompted efforts like RxPatrol, established by Purdue Pharma as a way to collect and share pharmacy crime data between pharmacies and law-enforcement agencies.
Studies have indicated that adding abuse-deterrent features can reduce abuse of the opioids that have them, but can also steer drug abusers toward other opioids, legal and illegal. According to one 2,566-patient study conducted last year by researchers at Washington University in St. Louis and Nova Southeastern University in Florida, the number of drug abusers who abused OxyContin fell from 35.6% to 12.8% after the introduction of the abuse-deterrent version, while abuse of such opioids as hydrocodone and other oxycodone formulations rose slightly, and abuse of high-potency fentanyl and hydromorphone rose significantly, from 20.1% to 32.3%. Of all opioids used at least once to get high in a 30-day period, OxyContin fell from 47.4% to 30%, but heroin use nearly doubled. The study also found that while 24% found a way to defeat the abuse-deterrent properties of the new version of OxyContin, 66% indicated that they had switched to another opioid, most commonly heroin.
“Our nation is in the midst of a prescription drug abuse epidemic,” Office of National Drug Control Policy director Gil Kerlikowske said. “While there are no silver bullet solutions to this public health and safety challenge, abuse-deterrent formulations of powerful prescription opioids can make a difference in addressing this epidemic. This guidance is a vital component of the administration’s comprehensive effort to reduce prescription drug abuse in America, and we commend the FDA for its commitment to this challenge.”
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Consumerism, budgets, ACA issues to weigh on healthcare industry in 2013
NEW YORK — Ten issues will take center stage as the healthcare industry moves to meet the requirements of the Patient Protection and Affordable Care Act, according to a new report by PricewaterhouseCoopers.
The report found that the pace will likely quicken this year due to technology, consumerism, budgetary pressures and the healthcare reform law converging on the sector, which represents one-fifth of the U.S. economy. To assemble the report, PwC’s Health Research Institute collected input from PwC Health Industries professionals who work with hospitals, physician groups, drug and device companies and employers, in addition to polling 1,000 U.S. consumers.
"Health organizations can hear the thundering footsteps of 30 million newly insured Americans on the horizon," PwC U.S. health industries leader Kelly Barnes said. "By this time next year, the major provisions of the health-reform law will be in effect, and the health industry has a lot of work to do before then. It’s now a foot race to 2014. The evolution of health care that has been in effect over the past several years will become a full-scale transformation in 2013."
The top 10 issues facing the industry, PwC said, are:
States are on the front lines of Affordable Care Act implementation
State officials will have to decide over the next year how to run insurance exchanges, whether to expand Medicaid coverage and what type of insurance market regulation is needed as information technology and the question of how to create a single, seamless entry point to the exchange will present a challenge.
Revolution in health coverage
The report found that nearly one-quarter of surveyed consumers said they were likely to buy health insurance from nontraditional sources, such as a retail store, up from 18% in 2011. Meanwhile, consumers’ rising voice on how they spend their healthcare money and state insurance exchanges are prompting the health industry to compete on attributes similar to the retail industry — namely price, convenience and transparency.
Medical technology industry braces for excise tax impact
A 2.3% excise tax on medical device companies took effect on Jan. 1, which could represent $29.1 billion for the federal government over the next 10 years. The industry is unlikely to be able to pass the tax on to consumers, however.
Caring for dual eligibles
Often considered the most vulnerable patients, dual eligibles are those patients who qualify for both Medicare and Medicaid, making up many of the 16 million people the Affordable Care Act who will add to Medicaid rolls by 2019. Lack of care coordination between the two programs leads to "skyrocketing" costs due to waste, and 70% of state Medicaid spending on these patients goes to long-term care. The result is that states are increasingly turning to managed care companies to better coordinate care and seeking innovative solutions.
Convenience of mobile may come at a cost
While doctors and nurses are bringing their own mobile devices to work, many hospitals don’t yet have a secure enough environment to protect sensitive patient information, and 69% of surveyed consumers said they were concerned about the privacy of medical information if providers can access it on mobile devices, and only 46% of hospitals have a security strategy to regulate the use of mobile devices.
Cost reduction is down, while transformation is up
Hospitals are scrambling to reduce their costs due to reimbursement reseting under the healthcare-reform law and pressure from the federal budget crisis and price-conscious consumers. According to the report, 40% of consumers postponed care in 2012 because of costs.
Customer ratings hit the pocketbooks of healthcare companies
Paying for performance will take on new meaning in 2013 as consumer reviews generate penalties and bonuses for hospitals and insurers. This could mean a bonus payout of more than $3 billion for insurers and a hold back of $850 million for providers this year.
Meeting the new expectations of pharma value
Physicians now have less say in patient decisions than insurers and large providers, while reimbursement has replaced regulatory approval as the final hurdle in the path to drug and device development. Drug and medical device companies will have to prove their worth in health outcomes by demonstrating value and comparative effectiveness.
Employers rethink their healthcare role
Employer-based coverage has been a cornerstone of U.S. healthcare for nearly 70 years, but the two may not be inseparable. With the Supreme Court’s decision to uphold the Affordable Care Act and President Barack Obama’s re-election, employers may be able to explore alternative approaches provided by state and private exchanges.
The building blocks of population health management
Medicare’s accountable care organization and patient-centered medical home initiatives laid a foundation for improving population health, but other collaborations are fueling growth in population health management. More companies this year are likely to form partnerships to build their population health information technology infrastructures and share responsibility for patient outcomes and satisfaction, data collection and analysis, member education and engagement with a focus on at-risk populations.
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