Loyalty program adds the ‘plus’ to consumers’ wellness
Rite Aid’s wellness+, one of the few loyalty cards that proffers an actual healthcare component as one of the benefits of use, continues to be one of Rite Aid’s key marketing initiatives moving forward. The retailer boasted 16 million wellness+ members as of July 26, only 12 weeks into the program, which suggests the company is well on its way to realizing projections of 20 million members by year’s end, according to several analyst reports.
No other loyalty card program provides actual healthcare screenings as one of the benefits of using the card. “[Rite Aid’s] wellness+ is really a key support mechanism for our wellness empowerment brand-positioning,” said John Learish, Rite Aid SVP marketing. “We’ve got some pretty interesting and appealing service benefits that are attached to the program.”
For example, a wellness+ member has around-the-clock access to a pharmacist either through an 800 number or through real-time chat by logging on to the wellness+ dashboard online. And when a customer reaches 500 points, Rite Aid offers a free healthcare screening, measuring blood glucose and total cholesterol. “It’s really a combination of the health benefits…with the savings benefits, that really differentiates this program,” Learish said.
The healthcare component associated with the program is one of those intangibles that helps distinguish Rite Aid’s loyalty card from others on the market, especially as consumers today can rattle their keychains with a host of retailers’ loyalty cards. But none of those programs tie pharmacy into the front-end, and vice versa, quite like Rite Aid does. Only three months into the program, more than one-third of front-end sales (37%) and prescriptions filled (36%) are being made by wellness+ cardholders, according to Rite Aid’s June 23 analyst call.
Rite Aid also is generating quite a bit of marketing data through the card, enabling the retailer to better target market-specific customer groups. “We’re getting some very interesting views into the data,” Learish noted. “We’ve got a lot of transactions coming through now, enough to make the data really meaningful. Across every single metric—average basket size, average units/basket, scripts/basket, margin—the wellness+ customer on all of those metrics dramatically exceeds the non-wellness+ customer.”
Going forward, as that data stream continues to become more robust, Rite Aid will be better able to target front-end-only customers and convert them into crossover customers—customers who both fill their prescriptions at Rite Aid and shop the front-end. For example, a cardholder identified as a front-end-only shopper now can be target-marketed around the benefits of transferring his or her prescriptions to Rite Aid—a $25 gift card and a much faster way to accumulate wellness+ points.
And the potential to capture and grow the number of prescription patients is significant. According to the chain’s annual meeting presentation, 71% of Rite Aid’s total shopper base currently shop the front-end only; and 24% shop both the front-end and fill prescriptions at the Rite Aid pharmacy. However, looking only at the prescription patients serviced by Rite Aid, 85% of those customers also shop the front-end.
So, enticing more patients to transfer their prescriptions to Rite Aid not only should boost pharmacy sales, but front-end sales as well. Pilot stores that tested the wellness+ offering before its national launch in April boasted a $37.09 average basket size, compared with an average basket size of $35.01 in those stores that did not yet offer wellness+ during the program’s pilot phase.
Sorry, FTC: ‘Pay-for-delay’ isn’t going away
WHAT IT MEANS AND WHY IT’S IMPORTANT This week’s decision by the U.S. Second Circuit Court of Appeals could make political efforts to ban generic-branded patent settlements a lot more difficult.
(THE NEWS: Appeals court upholds decision to OK ‘pay-for-delay’ deals. For the full story, click here)
The Federal Trade Commission in particular, not to mention some members of Congress like Sen. Herb Kohl, D-Wis., has fought hard against so-called “pay-for-delay” settlements between branded and generic drug companies, contending that they delay patients’ access to generic drugs and cost consumers billions of dollars every year.
The concerns of opponents are understandable. Because generic and branded drug makers are supposed to be competitors, what seem on the surface like sweetheart deals must look positively Faustian to many people. But the judges in the appeals court affirmed that whatever their appearance, patent settlements don’t violate antitrust laws.
And the facts seem to support that decision. According to a report released in January by RBC Capital Markets, generic drug companies prevailed in 76% of cases that included settlements, but only in 48% of cases that went to trial. Meanwhile, according to a report released the same month by securities and investment banking firm Jefferies & Co., on average, patent settlements result in generic launch three years before patent expiration. Legally, a generic drug company must launch its version of a drug before or at the time of patent expiration.
While patent settlements often involve some type of monetary transaction, in many cases, the “pay” is in the form of a promise by the branded drug company not to launch an authorized generic, which is the branded drug sold under its generic name at a lower price. Under the Hatch-Waxman Act, the first generic drug maker to launch a knockoff of a branded drug is entitled to six months in which to compete directly with the branded version, but the authorized generic allows the branded drug maker to undercut the generic drug maker by marketing a supposedly “generic” version of its own.
Authorized generics have seen a bit of a pickup as well, and more activity on that front can be expected. On Tuesday, Greenstone, the generics arm of Pfizer, announced that it would create a new business called the Authorized Generics Alliance in order to market authorized generics under the Greenstone label.
Medicaid plans to end onerous AMP rules
WHAT IT MEANS AND WHY IT’S IMPORTANT It’s about time.
(THE NEWS: NACDS, NCPA in joint statement praise CMS’ move to withdraw provisions of AMP rule currently blocked by injunction. For the full story, click here)
The White House, or more specifically the Centers for Medicare and Medicaid Services’ division of Health and Human Services, announced in recent days that it plans at last to scrap its controversial and burdensome pricing policies for generic drugs bought by retail pharmacies to dispense to Medicaid patients. If CMS’ newly proposed rule goes through, it will mean the end of the current, much-disputed provisions that define the average manufacturer price of Medicaid me-too medicines.
The proposed rule, to quote the National Association of Chain Drug Stores, calls for “the withdrawal of existing provisions that define AMP, that determine the calculation of federal upper limits [FULs], and that define ‘multiple source drug.’”
As currently defined, Medicaid’s payment model for reimbursing pharmacists to dispense generics is based on a flawed formula for determining what retail pharmacies pay for those medicines, as determined by a set of controversial market metrics.
The current AMP policy almost is a guarantee that retail pharmacies would lose money on nearly every Medicaid generic prescription they dispense. It’s only a temporary court injunction that has thus far kept that new formula from being imposed.
Thus, CMS’ turnabout marks a real victory for the chain and independent pharmacy lobby, which has bitterly contested the AMP reimbursement formula since it was made policy by the Bush administration more than three years ago. But the plan to withdraw the current AMP model doesn’t end the long battle by pharmacy for a fair payment policy for dispensing generic drugs to Medicaid beneficiaries.
What the pharmacy industry –– and the U.S. healthcare system itself, for that matter –– need is a permanent solution to the Medicaid reimbursement mess. And that solution can only be achieved by congressional action and enactment of a new law governing Medicaid.
The 2010 health-reform law goes part way toward that solution, by holding the line on pharmacy cuts and setting the FULs on Medicaid prescription payments at no less than 175% of cost. It also includes what NACDS president and CEO Steve Anderson calls “a much-improved definition and calculation method for AMP” that will “better approximate pharmacies’ costs for purchasing generic drugs.”
Anderson said the injunction lawsuit filed in 2007 by NACDS and its independent pharmacy counterpart, the National Community Pharmacists Association, has saved pharmacy more than $5.3 billion in cuts since a federal court blocked the imposition of the new AMP formula in January 2008. It also may have prevented the closing of more than 11,000 community pharmacies that otherwise would have been forced to dispense Medicaid scripts at a loss or stop serving lower-income patients.
“When we filed the lawsuit in 2007, we knew that patient care was at stake,” Anderson asserted.
The bottom line is that the White House and Congress need to establish a federal payment system that rewards –– rather than penalizes –– pharmacies for dispensing lower-cost generics that provide the same safety and efficacy profiles as higher-cost pioneer medicines. Such a permanent fix would be a win both for the pharmacy industry and the American taxpayer, by saving tens or even hundreds of billions of dollars over the long term in federal health costs.