RETAIL NEWS

Drug chains face year of transition

BY Mark Hamstra

The year ahead will be one of transition for the nation’s largest drug chains, as CVS Health digests its acquisition of Aetna, Walgreens continues to assimilate its 2018 purchase of 1,900-plus Rite Aid locations, and the remaining Rite Aid operation moves forward following its terminated merger attempt with Albertsons.

Burt Flickinger, managing director of New York-based Strategic Resource Group, said that the merger was a “missed opportunity” that could have bolstered Rite Aid’s ability to further invest in such offerings as its loyalty program.

As the chain looks to the future, Rite Aid CEO John Standley said in a recent conference call with analysts that the company would focus on three strategic priorities in the year ahead: Serving as the trusted advisor to its pharmacy customers; providing customers with a convenient and personalized shopping experience; and building a winning value proposition for payers and providers.

To achieve these goals, Rite Aid is implementing several initiatives, including seeking to stabilize reimbursement rate pressures, expanding access to limited and preferred networks, enhancing its pharmacy clinical capabilities to improve outcomes, and leveraging its wellness brand. Rite Aid also is refining its merchandising, expanding its omnichannel capabilities and expanding its PBM EnvisionRxOptions Medicare Part D business.

“We’ve also continued to build new stores and convert additional locations to our innovative wellness store format, which we believe is the best format in the chain drug industry,” Standley said.

CVS Health cites Aetna opportunities
Larry Merlo, president and CEO of CVS Health, said in a call with analysts that he sees significant opportunities in the year ahead from the acquisition of insurance provider Aetna.

“Both CVS and Aetna are passionate about revolutionizing the consumer healthcare experience,” he said. “And while we have been clear that the cost savings are substantial, this transaction is about the significant value creation that will be realized as a result of growth.”

CVS Health said it expects to begin testing a new store format, offering a suite of health services as a result of the Aetna acquisition early in 2019.

During that same call, Eva C. Boratto, who has been named as the CFO of the combined company, said she sees growth in retail pharmacy prescription sales as an ongoing driver of growth in 2019, along with momentum in specialty pharmacy.

Barriers to more rapid growth in 2019 include ongoing pressures on reimbursement and uncertainty in the regulatory environment.

“Some of those [regulatory changes] that Health and Human Services is talking about could be positive or negative,” Boratto said.

Walgreens sees Rx increases
Walgreens also said retail prescription sales have been on the rise, and are expected to grow in the coming year, with the recent acquisitions of the prescription files from Fred’s and of the prescription-drug division of DaVita Rx.

Stefano Pessina, vice chairman and CEO of Walgreens, said he sees the business moving forward in 2019 around three key areas:

  • Developing omnichannel capabilities in pharmacy and retail, which Pessina described as “easily one of the biggest transformations our business has
    ever seen;”
  • Developing a modern, differentiated retail position that leverages the chain’s
    convenient locations; and
  • Transforming pharmacies into healthcare destinations.
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