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Retail Trends

Drug Stores

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Major chains handle approximately half the retail prescription market in this country, according to Research and Markets, but the real power player right now in the retail drug store industry is Express Scripts, a pharmacy benefits manager (PBM). PBMs usually operate in the background, encouraging patients to use lower-priced mail-order houses to fill prescriptions.

At the end of 2011, the contract between Express Scripts and Walgreen expired after the two failed to reach an agreement on how Walgreen would be compensated for filling prescriptions of patients covered by Express Scripts’ insurance and employer clients. As a result, Walgreen has seen consumers in the Express Scripts network transfer their business elsewhere, particularly to CVS and Rite Aid. In the first quarter of 2012, CVS retail revenues grew 9.9 percent and same store sales increased 9.8 percent over prior year levels.

CVS president and CEO Larry Merlo said his team “has done an outstanding job capitalizing on the unprecedented opportunity for share gain afforded to us by the impasse between two of our industry peers” and predicted that “the longer the impasse lasts, the stickier that [newly acquired] customer is going to be. They’re going to have an opportunity to visit a CVS multiple times and begin to establish a relationship with the CVS pharmacists.”

Rite Aid’s sales are improving and operating losses have been narrowing as it benefits from the current environment. In March and April of the current fiscal year, same store sales advanced 3.3 percent as pharmacy receipts grew 3.1 percent and the number of prescriptions filled rose 3.2 percent compared with last year’s figures.

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