Health and wellness dominated nonfood topics in 2010
This was the year that everyone in retail was focused on health and wellness.
Health and wellness, including product safety and quality control issues, impacted nonfood categories across the board from fish oil supplements to toys, cosmetics and plastics.
McNeil Consumer Healthcare, a division of Johnson & Johnson, recalled millions of units of 40 over-the-counter brands. The recalls led to huge distribution problems at retail, federal investigations and a class-action lawsuit as McNeil struggled to solve product-quality issues.
Legislation designed to protect public health surfaced.
A new rule under the Consumer Product Safety Improvement Act, which takes effect March 1, 2011, requires tracking labels on many nonfood products. The law requires testing and documentation of all products marketed to children under age 12. Retailers selling a vast array of merchandise that falls under the law are required to maintain from manufacturers “general conformity certificates” to be in compliance of the law.
The Safe Cosmetics Act of 2010 was introduced to Congress. The bill seeks greater oversight over the cosmetics industry and health-based safety standards, among other provisions.
Health care reform legislation continues to dominate the headlines even after its historic passage by the Obama administration earlier this year. While retail pharmacy won some concessions in the package, the food industry remains generally skeptical.
Health and wellness became a separate conference, designed for food retail executives responsible for implementing health and wellness strategies, at the FMI 2010 show in May.
Retailers of all stripes initiated new programs and promotions built around health and wellness this year.
Retail Drug Giants Battle It Out in PBM Arena
ALTHOUGH THE decision by Walgreen Co. to withdraw its participation from the pharmacy benefit management business operated by its main competitor CVS Caremark was short-lived, it illustrated the power a large chain can wield in challenging a main competitor in the marketplace.
Some supermarket chains were quick to take advantage of the dispute to win new CVS Caremark PBM customers rejected by Walgreens.
Walgreens' withdrawal further drew attention to the integrated PBM model, which continues to face scrutiny by federal and state agencies, community pharmacies and consumer groups.
Critics charge a conflict of interest with the 2007 merger of CVS with Caremark. CVS Caremark has been accused of using the PBM to steer its members into CVS pharmacies through the use of private patient information.
Walgreens complained about that. “This is about choice for all of our customers and when we lose one customer that comes into a Walgreens drug store, who receives a letter that they can no longer use their pharmacist who they've known for years and trusted for years, that's one too many,” Greg Wasson, Walgreens president and chief executive officer, told analysts.
Walgreens also pointed to a lack of information on prescription plan transfers and changes, as well as unpredictable reimbursement rates and payment for certain drugs that often didn't reflect the market.
CVS Caremark countered by announcing a termination of Walgreens' participation in its PBM network due to a violation in the terms of its existing agreement. However, the dispute ended within two weeks with Walgreens continuing in the CVS Caremark network under a new multiyear agreement that Walgreens said achieved its business objectives.
Retail Pharmacy Gains From Health Care Reform
EVEN AS THE constitutionality of health care reform is being challenged in the courts, the legislation signed by President Obama in March became historic news, and retail pharmacy endorsed some elements of the final package.
Others in food retailing, however, remained cautious and feared the package would mean increased costs.
Among those provisions in the Patient Protection and Affordable Care Act that favor retail pharmacy are: a series of grant and pilot programs that encompass medication therapy management; a higher payment formula for Medicaid prescriptions; a conditional exemption for retail pharmacies on Medicare accreditation requirements for selling durable medical equipment; and transparency requirements in pharmacy benefit management companies.
However, one element in the health care reform act dealing with flexible savings accounts has industry associations calling for a reversal of the provision.
The provision, which takes effect on Jan. 1, would prohibit the use of FSAs to purchase over-the-counter medications without a prescription.
“The new FSA restrictions will add additional confusion [and] expense, and eliminate a benefit many consumers have come to depend upon,” said Dave McConnell, president and chief executive officer of the Global Market Development Center.
McNeil Recalls Hurt Brand Credibility in OTC Medications
PAINFUL CAN only describe what Johnson & Johnson's McNeil Consumer Healthcare division experienced in 2010 due to distribution disruptions of many of its over-the-counter medications amid a slew of quality-control issues and product recalls involving millions of units of products.
As a consequence, retailers around the country faced significant product shortages, empty spaces on shelves and replenishment issues. The constant recalls hurt Johnson & Johnson's reputation as a trusted branded supplier.
It also brought in the U.S. Food and Drug Administration, which charged McNeil with manufacturing violations, and other federal authorities to investigate the matter.
Among the events related to McNeil's problems was the revelation of a “phantom recall,” conducted two years prior, in which McNeil hired contractors to buy back travel vials of adult Motrin from retailers.
Beginning in January and throughout the year, McNeil issued recalls on 40 brands, including Tylenol, Motrin, Zyrtec and 140 million bottles of children's and infants' products. One source said it was the biggest recall of products in FDA history.
As a result of the recall on children's medications, a class-action lawsuit was filed against McNeil Consumer Healthcare and Johnson & Johnson in the U.S. District Court for the Northern District of Illinois, alleging the manufacturing, promotion and sale of questionable products.
Even last week the drug manufacturer recalled 13 million packages of Rolaids because wood and metal particles were found in the drug, and production of the product was suspended.
The company has said its recalls were not taken because of potential public health risks and that it has made significant steps to improve its manufacturing.
But the consequences of the series of recalls are expected to reverberate for some time.
“It [McNeil recalls] has shifted many consumers over to private-label OTC medications, and we think permanently,” said Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill.
Retailers Vie for Seniors Enrolled in Medicare Part D Plans
WAL-MART STORES, Bentonville, Ark., entered the prescription drug plan business this year in partnership with insurer Humana.
In doing so some observers say the discounter may be implementing a tactic it employed several years ago with the introduction of its $4 generic program that ultimately set a new low-price standard for generic drugs.
Under the Medicare Part D plan, dubbed Humana Walmart-Preferred Rx Plan, beneficiaries pay a $14.80 monthly premium, the lowest monthly premium for a standard stand-alone Part D plan nationwide, according to the Centers for Medicare and Medicaid Services.
Plan members can save on generic prescriptions with as low as $2 copays when they use preferred Wal-Mart pharmacies and no copays on generics when filled through Humana's RightSource home- delivery mail-order service. Co-pays increase when prescriptions are filled at non-preferred pharmacies.
The food industry and independent pharmacies quickly reacted to the new plan.
“This is simply Wal-Mart's latest ‘loss leader,’ intended to bring more people through its doors at the expense of patient care and quality customer service,” said Joseph Harmison, president of the National Community Pharmacists Association.
NCPA sent a letter last week to the Centers for Medicare and Medicaid Services, asking CMS to review the plan on the basis the plan limits pharmacy network access and steers beneficiaries to Wal-Mart pharmacies, discriminates against patients who need specialty medications and those who do not live in close proximity to a Wal-Mart store and is complex in design.
Soon after Wal-Mart announced its plan, Kroger and Safeway rolled out similar plans in partnership with UnitedHealth Group under Pharmacy Saver. That plan allows members to purchase scripts on hundreds of prescription drugs for $2 for 30- and 90-day supplies.