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RAD gets loyal to Wellness+

BY Michael Johnsen

CAMP HILL, Pa. —A possible cold-flu product sales boost and rumors of projected economic recoveries aside, Rite Aid executives were abuzz last month about the prospects of its new Rite Aid loyalty program—Wellness+—that’s expected to roll out chainwide later in 2010.

The program, currently testing in Buffalo, N.Y.; Greensboro, N.C.; Harrisburg, Pa.; and San Diego, is set to expand nationally by mid-year. “While we’ve been in those markets for only about two months now [since October], I’m pleased to report, our new tiered benefit customer rewards program is doing very well in test,” Mary Sammons, Rite Aid chairman and CEO, told analysts during a Dec. 17, conference call. “We expect to aggressively launch Wellness+ nationally next year, and are excited about the potential it offers our business.”

And the potential is pretty good—where applicable, Rite Aid will have the ability to effectively cross-promote its front-end offerings across its pharmacy patients, effectively boosting in-store conversion. Patients with a significant number of prescriptions will be rewarded with increasing levels of front-end discounts, and heavy front-end customers will be able to take advantage of Rite Aid’s health screenings and consultations for free. Patients who patronize Rite Aid for both their prescriptions and their front-end needs will be able to accumulate the most points in the shortest amount of time.

Participants earn one point per dollar spent on the front-end, and 25 points for every prescription. Those points translate into a one-time, 10%-off shopping pass if cashed in early, or free health screenings and greater discounts if accumulated.

The four test markets included three markets where Rite Aid can offer rewards for both front-end and pharmacy purchases, and one market where the chain can only offer rewards on front-end purchases, John Standley, Rite Aid president and COO, noted.

The chain also will be able to capture demographic data, a factor that could help make future promotions more effective. And if the economy cooperates, Rite Aid may be in full swing promoting their new Wellness+ program, as more Americans feel comfortable spending again.

A significantly promotional consumer has negatively impacted Rite Aid’s front-end comparable sales, analysts have noted. An improving economy, continued growth of Rite Aid’s private-label initiative (15.1% penetration as of the past quarter), a more efficient supply chain and improved inventory control, all coupled with the strong marketing of a loyalty program like Wellness+, could help accelerate Rite Aid’s improvement across its front-end.

In the week leading up to the conference call, almost half of all front-end sales in the four test markets were generated from customers using the Wellness+ card. “In the three markets where [prescriptions] are included [as part of] the program, 41% of scripts filled last week were for customers using the Wellness+ card,” Standley added. “Besides building customer loyalty with our existing customers, Wellness+ will provide valuable customer data and help us attract new front-end and pharmacy customers.”

If you were to extrapolate initial participation across the entire Rite Aid base of stores, there would be 12 million participants within those eight weeks, Standley said, “so it’s really gotten off to a very solid start.”

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Walgreens taps veteran to head CCR

BY DSN STAFF

NEW YORK In a high-stakes campaign to fire up its front-end appeal, reaffirm its relationship with America’s consumers and rejuvenate its same-store sales, Walgreens has gone to its bench.

Walgreens has named one of its veteran operations people, Mike Arnoult, to the key post of VP in charge of Customer Centric Retailing. Until last month, the post was held by Chong Bang, who left the company in mid-December to oversee merchandising at Toronto-based Shoppers Drug Mart.

Unlike Bang, Arnoult is more a seasoned operations manager than a merchant. His appointment is a clear sign that Walgreens has moved beyond the conceptual and launch phase of CCR, and is ready to begin the next phase of the massive project: the expansion of a CCR-based store design across Walgreens’ coast-to-coast network of 7,147 drug stores.

Nevertheless, Arnoult inherits a critical challenge at the retail behemoth. CCR encompasses Walgreens’ massive effort to pull together a sprawling marketing and merchandising operation and focus its efforts more sharply on meeting and anticipating customer demands. Within two or three years, it will transform the chain’s front-end presentation and go-to-market strategy coast-to-coast with a leaner, more condensed merchandise mix; a sharper focus on health, wellness and patient education in the aisles; improved departmental adjacencies and signing; and — Walgreens merchants hope — a better overall shopping experience.

Bang took CCR all the way from conception to realization, streamlining assortments, cutting hundreds of redundant SKUs, and applying new rationale to categories, adjacencies and promotional strategy at the front end. He also oversaw the test and launch of a new Walgreens store prototype, based on CCR principles and a better read of consumer needs.

Arnoult will now take the CCR rollout from a 400-store pilot in Texas to nationwide completion. Given the chain’s aggressive plans for 2010 — nearly 3,000 stores scheduled for a CCR redesign by the end of the year — he’ll need to bring all his proven management skills to bear to coordinate local-market remodeling activities with Walgreens’ operations and merchandising teams.

“We’re evaluating the findings from the Texas stores and doing some tweaking,” company spokesperson Tiffani Washington told Drug Store News in December. “We’ll continue the rollout [of the CCR-based store overhaul program] starting in January.”

Arnoult brings to his task a strong resume in store, district and regional management. His 20-year career at Walgreens includes stints as store manager, district manager and store operations VP, followed by a year as head of online merchandising. He’s a 1990 graduate of Marquette University with a B.A. in communications.

“His ability to build relationships and collaborate across the organization will be invaluable,” Walgreens asserted.

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Bartell to cease filling Medicaid prescriptions at 15 locations

BY DSN STAFF

NEW YORK The Medicaid storm is still intense in Washington as Bartell Drugs has announced that — as of Feb. 1 — it will no longer fill Medicaid prescriptions at 15 of its 57 stores. Limiting access to pharmacies with its payment cuts could spell an increase in other healthcare costs — costs that represent the majority of health expenditures.

As stated in the article, the decision stems from a court decision in Massachusetts in September 2009 that reduced the industry pricing standard.

Bartell stated that — unlike most other insurance providers, including other states — the Washington State Department of Social and Health Services has made no effort to offset this significant reduction, resulting in sizeable reductions in payments to pharmacies.

The intent, according to Bartell, is to return to the established level of compensation prior to the Sept. 26, 2009, court action. As it currently stands, Bartell simply can’t afford to fill the Medicaid prescriptions.

While Bartell currently is the only pharmacy retailer to take such action, it certainly isn’t alone in the battle.

In March 2009, Walgreens threatened to stop serving Medicaid patients in 44 of its stores in the state. The company at that time stated that it operates 111 pharmacies throughout the state, but the 44 pharmacies in question represented more than 60% of its total Medicaid business in the state. However, in May 2009, Walgreens stated that it would continue to serve Medicaid patients when the state agreed to make smaller cuts than it had planned.

But will the court decision in Massachusetts now prompt other pharmacies to follow in Bartell’s footsteps? Perhaps, but if you ask Doug Porter, the state’s director of Medicaid, he will likely say no. In a recent Seattle Times article, Porter was quoted as saying that Medicaid recipients should not worry about other companies following suit and he is “convinced pharmacies can weather this change.” As reported by the Seattle Times, several pharmacies and industry trade groups filed suit in U.S. District Court in Seattle trying to force the state to return its reimbursement rates to those it was paying before the Massachusetts settlement. A hearing is scheduled for Jan. 15.

Last year, the pharmacy groups filed another lawsuit, after an earlier attempt by the state to cut its reimbursement rates. That suit was withdrawn when the state agreed to make smaller cuts than it had planned.

“We are deeply concerned about the health of our patients. Pharmacists are on the front lines of our healthcare system protecting patients by ensuring safe and appropriate medication use. Commercial healthcare payers and Medicaid programs in some states have already adjusted pharmacy reimbursement necessary to maintain patient access to the essential care provided by pharmacies. If Washington Medicaid does not do the same, it can result in reduced access to medicine for our neediest and most vulnerable patients ultimately leading to expensive emergency room visits and hospitalizations,” stated Jeff Rochon, Pharm.D., CEO, Washington State Pharmacy Association, in an NACDS press statement issued in September.

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