business news in context, analysis with attitude

Got the following email from MNB reader Michael Blackburn:

Regarding CVS and Walgreens (not even going to bring in the bankrupt Rite Aid into this discussion as they have been failing for the past two decades), when exactly were they poised to take over the U.S. healthcare system?  Historically, drug stores sold scripts with a few front-end items out of convenience….CVS and Walgreens then expanded the front-end and through store growth expanded their national footprints up until about 10 years ago; this was the “convenience” phase.  When online started eating their front-end lunch, they realized that they needed to pivot. CVS had already acquired Caremark and then Aetna. Walgreens took another tack, acquiring a big piece of AmerisourceBergen and then the AllianceBoots euro wholesale/retail business (they’ve since divested most of the euro wholesale and a large chunk of the Amerisourcebergen shares).

With ACA  we have the U.S. transition to value based care. CVS and Walgreens (and Amazon, Walmart and UnitedHealth) see an opportunity to create that new care model and started their shift into primary care…we are just in the early innings here. There are challenges (including getting consumers to adapt) and no one I saying they have successfully launched the new model, but I certainly wouldn’t say they have failed yet. However, for a number of reasons, Walgreens seems to be having the hardest time getting its footing, in part due to poor management (see recent turnover of its CEO and CFO) … Be a skeptic as you wish, but this game is far from over.

Two quick responses:

They said they wanted to take over US healthcare.

And I certainly never said it was over.  I'm just unimpressed.

From another reader:

I'm sure you remember when the chain drug store chains all abandoned the inline shopping center locations to go freestanding so they could have pharmacy drive-thrus. The pharmacy was key and many Rx clients had a closer relationship and held more trust in the pharmacist with their prescription consumption than with their doctors. Back then you could talk to your pharmacist. Busy stores had more than one pharmacist on duty at each shift. Today the pharmacists are so over worked they have little time for customer service. Rarely are more than one pharmacist on duty at a time replaced by hard working clerks who have to be overseen by the pharmacist. It now takes a long time to turn around scripts particularly if the pharmacist is trying to fit in flu and covid shots.

I went to a CVS to get a script recently that I needed filled that day for a procedure I had that morning. They said they were out but come back early the following day. The next day they had no record of my request and said come back the next day. I went across the street to Walmart and got it filled on the spot for less. CVS and Walgreens need to focus on what their core business is. A decade ago many of the supermarket chains put in walk-in clinics with the hope that it would drive Rx sales. Most of the clinics closed within the first year of operating for lack of business and many of the supermarkets have since been getting out of the Rx business. If CVS and Walgreens don't get their core business right they may well follow Rite Aid down the restructuring path.

And from another reader:

To use an old fashion phrase, chain drug stores should "stick to the knitting". Sell things that give them a unique product assortment.  Does a Drug Store really need a 12 foot section of pet care? Do you buy your coffee, cereal or trash bags at a chain drug store?  As greeting card sales decline, has the section been cut back in size or eliminated? How many weekly man-hours are used to plaster a store with weekly TPR's?  Maybe those hours could be used to eliminate out of stocks in the cough cold/analgesic section.

During my 35 years in consumer sales, I was always amazed how many skus had very low turns per year in a typical chain drug store. Do you think chains make more on the buy (slotting fees) than on the sell? Most chain drug stores could cut their assortment in half, cut the store size in half and concentrate on the Rx department and related healthcare items.

The retail world has changed but chain drug still thinks it is 1980!!!!

MNB reader Mike Freese wrote:

As an old fart I am lucky I only take two prescription drugs. God knows, my doctor would have me on many more!

You mentioned here in passing that Amazon has been working to get into the health care business.

After Amazon informed me they could now fill my prescriptions I did look into it.

Geez, they were not at all competitive. I mean, not even close to GoodRx.

And you could do a great public service by pointing your followers to GoodRx for their prescription needs. I have both Medicare and Medicare Advantage insurance. In the 7 years since I moved to Medicare, not once, NOT ONCE, has my Medicare Advantage insurance been able to have me pay for my prescriptions at a lower price than GoodRx.