WAGERING ON PHARMACY

DAN ALAIMO

LAS VEGAS — Supermarket retailers are weighing in on special issues designed to protect their share of the prescription drug market. In some cases, like health clinics, retailers may be facing a crapshoot.

With the Food Marketing Institute's pharmacy public affairs program ramping up, executives came here earlier this month for the Arlington, Va.-based group's annual Supermarket Pharmacy Conference. As last year, it was co-located with the FMI Show. Most were bullish on prospects for pharmacy's future in food stores, but there was no shortage of controversies.

Among the hot conversations swirling around the event:

Whether offering free or discounted generics — or neither — or supporting entrepreneurial or health system-based clinics — or neither — most pharmacy executives at the conference agreed that supermarkets have great potential for becoming a central location for wellness in any community.

“Food and pharmacy can be a solution center for the sick,” said Chris Dimos, president, Supervalu Pharmacies, Franklin Park, Ill., during one of the FMI Show sessions. “We have patients who have ailments, and we can provide solutions for those patients to get better. But the larger opportunity we have is making sure that we become the destination center for the healthy.”

At last year's conference, FMI made public its plans to expand its presence in pharmacy regulation and legislation. A few months later, Cathy Polley, with 25 years' experience with Washington pharmacy organizations, was hired as vice president, pharmacy services, to lead the association's new pharmacy public affairs program.

While regulatory issues remain her focus, Polley said FMI also will work with members to enhance supermarket pharmacy's participation in wellness efforts. “FMI is looking to work with our retailer and wholesaler members to create offerings that help us blend health, wellness and nutritional offerings with the pharmacy services within our stores,” she told SN.

Although there is some overlap with existing pharmacy organizations, pharmacy executives have high expectations for the initiative.

“The important thing that they can do is represent supermarket pharmacy, which is becoming increasingly different from the other channels that are out there,” said Donald Clark, vice president, pharmacy operations, K-VA-T Food Stores, Abingdon, Va. “There is no organization better suited and better able to represent supermarket pharmacy than FMI.”

Often enough, the grocery perspective on pharmacy is different than chain drug, said Greg Jones, director of pharmacy, Harmon City, West Valley City, Utah. “It is important that our voice be heard. A lot of times, that voice is the same as the chains, but not always.”

While many issues overlap with other pharmacy organizations, “our practice setting is pretty unique in terms of patient care and the innovation that our members provide,” said John Beckner, director, pharmacy and health services, Ukrop's Super Markets, Richmond, Va.

FMI can make a powerful contribution to the single voice that pharmacy should use, said John Fegan, senior vice president, pharmacy, Ahold USA, Quincy, Mass. “The key is that we're all in agreement on the issues that are confronting us, and the approach to those issues.”

Representation on regulatory and legislative issues is primary, but the emphasis on wellness, integrating food and medicine, at the FMI Show and Pharmacy Conference indicated another area of potential, said Michele Snider, senior director of pharmacy, Save Mart Supermarkets, Modesto, Calif. “It's prime time for supermarket pharmacy to step forward and be the leader when it comes to wellness,” she said.

“Supermarkets are well positioned for today's environment of consumers being more concerned with taking care of their own health and wellness needs,” Polley said.

One future direction for the pharmacy department at FMI is setting up share groups, said Randy Heiser, vice president, pharmacy, Giant Eagle, Pittsburgh. “That's one of the things that can benefit all the retailers that participate.”

“I want us to be up to date on the latest issues,” said Dan Milovich, vice president of pharmacy operations, Bashas', Chandler, Ariz. “What do I need to worry about for the future?”

Few topics in pharmacy bring more heated discussion than the discounted or free generics programs inspired by Wal-Mart Stores' successful effort. Whether for or against them, many executives told SN they are now forced by competition to at least consider such a plan.

“With $3.50 gasoline, everybody is a customer for a $4 generic,” said K-VA-T's Clark. K-VA-T launched its program in February, offering a 30-day supply for $4, a 60-day supply for $7.75, and a 90-day supply for $11.50.

“It has had an impact on our business. We have seen an increase in our script volume, and our customers really like it,” Clark said.

“We absolutely regard the $4 program as permanent. It's not going away,” said Giant Eagle's Heiser. In November 2007, after one year with the program, Giant Eagle increased the number of drugs offered from 300 to 400.

“We look at it as more of a competitive move based on what Wal-Mart was doing. We were not going to let Wal-Mart come into our markets and take a big chunk of Giant Eagle's pharmacy business away from us,” he said.

“The way we compete is by providing service and a value for the prescriptions,” said Ahold's Fegan, who acknowledged the company is looking at generics programs. “As the economy has changed, it is going to become a significant program for much of the population, so I think these programs are here to stay.”

“While our decision is to focus on things other than price in pharmacy, we haven't decided 100% what we're doing” in regard to generics, said Harmon's Jones.

Save Mart tried a free antibiotics program, but it didn't continue to increase customer counts, Snider said. Now it relies on a loyalty program. “If it's an expected part of retail pharmacy to do $4 prescriptions, then a lot of pharmacies will go out of business,” she said.

When clinic operators closed in Wal-Mart stores, and drug chains downscaled clinic expansion plans, it may have sounded like the beat of a distant drum to supermarkets. However, during the Pharmacy Conference, SN learned that well-regarded clinic operator MedBasics, Irving, Texas, had lost its financing at least in part because of the economic climate.

“They did run into some economic problems and it was not tied to the performance of the clinics,” said Minyard's Peters. As a result, the retailer now has six empty spaces, four that closed this month, and two that never opened.

Giant Eagle has set aside space for clinics in remodels, but is using it now for other merchandise, Heiser said. “We're still looking for the right type of partnership with a clinic.” The retailer is weighing a big-name health plan or hospital vs. another kind of provider.

Taking an industry perspective, Heiser thinks more clinics will open this year. “It's going to be a slow go, and people are going to be a lot more prudent on selecting locations, and selecting the providers to be their partners,” he said.

“I think they have their place,” said Ukrop's Beckner. “They have the potential to be successful in an environment where there is true collaboration between the people operating the clinics, the nurse practitioners and the pharmacists. The ones that are going to be really successful are the ones where companies are able to partner with the local health care system, or a local physician group, where they're not alienating the medical community.”

“The successful clinic model has to have some sort of health resource attached to a hospital or doctors,” said Mike Juergensmeyer, group vice president, fuel and pharmacy, Schnuck Markets, St. Louis. It needs someone who has a way to drive some business into those clinics. “They also need the cash flow in order to make the clinics viable as they go through the ramp-up stage to become a mature operation.