HOMEECONOMICS

MICHAEL SLEZAK

Supermarkets with pharmacies are entering the home health care business. With catalogs and products displayed near the pharmacy, home health care departments are leveraging the expertise of pharmacists to create a drug store-like environment and a profitable niche.

Their involvement ranges from a catalog at the pharmacy to product displays, and can even vary from store to store within a chain, based on demographics.

Several factors are making home health care products and services particularly attractive to supermarkets. The reason most often mentioned is that prescription drugs are barely profitable, margins having been squeezed by declining third-party plan reimbursements. Home health care products still offer margins ranging from 30% to 50%.

Sales of home health care products by food stores with pharmacies are "a function of the fact that margins [on prescription drugs] have been squeezed so tight," says Dan Ramirez, vice president of the pharmacy division at Wakefern Food Corp., Elizabeth, N.J.

With shrinking margins on prescription drugs, home health care offers "another source of revenue," says Bob Egeland, pharmacy supervisor at Hy-Vee Food Stores, Chariton, Iowa, with 70 pharmacies.

Allen Karpe, director of pharmacy and HBC at Valu Food, Baltimore, says economics led to the supermarket's display of home health care products at one location. Pharmacies, he explains, are able to price home health care products reasonably, and make a profit.

"On prescriptions, the reimbursement is take it or leave it," says Karpe. "It's stuffed in your face. But when you're selling a bedpan, you can be competitive and still make your gross margin."

Demand for home health care products is increasing, due to the aging of the population and efforts to contain costs that favor home care over hospital care.

The U.S. Census Bureau projects that by the year 2000, 35.3 million people will be over age 65. "The population is aging and people are looking for these products," says Egeland. "People are more educated now [about home health care]," about buying these products on their own.

Hospital patients are being released quicker and sicker. Contributing to "a good and growing market for home health care is the whole trend of trying to get patients released from the hospital sooner," says Dana Greenhoe, director of pharmacy sales and marketing for the 50 pharmacies of Kash n' Karry Food Stores, Tampa, Fla.

Home health care areas in supermarkets range from a catalog placed on the pharmacy counter to 24-foot linear sections. Displays typically include arm braces, bedpans, canes, crutches, lift chairs, neck braces, ostomy products, oxygen, wheelchairs and a category of products called aids to daily living.

Hy-Vee's home health care sections usually run between 16 and 24 feet. The mix, says Egeland, ranges from "oxygen to wheelchairs to lift chairs to ostomy products, varying on the expertise of the pharmacists and their comfort level in having these products in their store." Pharmacy managers have autonomy in selecting products, resulting in a varied product mix.

Egeland says lift chairs have been especially popular, but to sell them, "you really have to have one on display. You have to allow people to touch and feel it. You can't make that sale through a catalog. We even special-order different upholsteries."

Wakefern/ShopRite stores carry walkers, bath rails, canes, incontinence pads, neck braces and personal assistance products, says Ramirez. "Most of the stores participating are using a 4-foot section," he explains.

The home health care displays spur impulse buys, notes Ramirez. "A well-placed presentation is a good advertisement and some retailers have carved out an incredible niche. Our 4-foot sections aren't just window dressing. We stock the fastest-moving products in the line there.

"We also provide customers with access to a whole range of home health care products through a catalog. We have mail order service, often overnight or next day pickup," Ramirez adds. He explains that mail-order is particularly useful for selling incontinence products, which are often purchased by the case and which customers may be embarrassed to buy in the store.

"If you take a close look at your database, demographic information and patient information," says Ramirez, many customers can be targeted as home health care users. He adds he feels any store can support a home health care business, too, "because of the foot traffic in a food store."

Home health care products enhance the supermarket pharmacy's one-stop

shopping appeal and reinforce the drug store-within-a-store image. Many ShopRite stores have added the sections because "we want to make sure our pharmacy patients view us as a one-stop shop for their health care needs," explains Ramirez.

Valu Food stocks a large supply of braces at one store location, and has a separate room for fittings. Sales there "are going great," says Karpe, thanks to a nearby sports clinic that refers patients. Some supermarkets limit home health care displays to stores with favorable demographics. In some communities where Valu Food operates, the mix of customers tends more to the "pediatric, rather than geriatric," says Karpe, which has made him hesitant to delve further into the home health care market.

Greenhoe said Kash n' Karry has experimented with home health care products in its stores, but now only offers the products through a catalog displayed at the pharmacy. "All our pharmacies have crutches available through a loaner program," he says. "As far as wheelchairs and bedpans, our pharmacies can order those -- generally on a next-day delivery basis."

Because of the complexity of the category, and high price of many items, supermarkets often depend heavily on a wholesaler or manufacturer as a source of supply.

Wholesalers with separate home health care programs include McKesson Drug Co., San Francisco, and Bergen Brunswig, Orange, Calif. Carex, a division of Rubbermaid, Newark, N.J., a manufacturer, also has one.

Vons Cos., Arcadia, Calif., launched a home health care program in 20 of its southern California Pavilions pharmacies with Abbey Home Healthcare, Costa Mesa, Calif. At 18 of the Pavilions stores, customers can purchase products either from an Abbey catalog at the pharmacy, or via a toll-free 800 number. Two Pavilions have a kiosk with a direct telephone line to Abbey.

Products available to Vons pharmacy customers through Abbey include hospital beds, oxygen and other respiratory supplies, wheelchairs, diabetic supplies, humidifiers and nutritional aids.

Food Circus Supermarkets, Middletown, N.J., has taken a similar approach. Paul Schneider, director of pharmacy, explains that the Toms River, N.J., pharmacy he manages had the space to put in a home health care section, as well as the market. "We have 26,000 senior citizens per week in this store, and we're close to a hospital."

But Schneider was hesitant to invest the needed $5,000 in inventory. "This is a completely different business," he says. "We don't have the expertise or the means to do the billing on these products, and would have to hire expert help."

So Food Circus teamed with an outside company that Schneider felt had the necessary expertise. (See sidebar, right). Aall American Medical Supplies, Lakewood, N.J., supplies products and staffs the department with its own trained employees.

"It's a great deal for both of us and now we're in the home health care business," says Schneider. Karpe and Greenhoe agree that home health care can be risky.

"I haven't gotten as involved in home health care as I would like to," says Karpe. "You have to go out and meet physicians if you expect to succeed in home health care, and that can become time consuming. You have to generate the business over time. And it's very labor-intensive.

"Initially, the section serves as a loss leader," continues Karpe. "Eventually, the margins are good and the pharmacists develop more of a rapport with patients." But to do so, he says, requires the pharmacists' time.

Even under the best of circumstances, home health care products are not fast movers, and they require considerable display space.

Greenhoe says when he had home health care products in his stores, "they weren't high-volume moving products. They don't tend to do as well as HBC or OTC, vitamins and so on. An it's not only time consuming to build the business, but also a labor factor comes into play, though the markups on the products tended to be good."

"On the supermarket side, because shelf space is so valuable, creating a home health care section takes negotiation," acknowledges Ramirez of Wakefern/ ShopRite.

But there are rewards.

"Having home health care [in a supermarket pharmacy] is a positive; it's a draw," says Egeland. "People are getting the products and their prescriptions in the store and pharmacists are getting involved helping them."