Inside This Issue - Opinion
Pharmacy chains find different ways to stand out
February 17th, 2014
CVS Caremark’s commendable decision to discontinue the sale of tobacco products in its drug stores by October 1 raises some interesting questions about the relationship between retailers and their customers.
Defining itself first and foremost as a health care services company, CVS felt compelled to stop offering products whose detrimental impact on the well-being of the people who use them is supported by an overwhelming amount of empirical evidence.
Consumers who put a premium on health undoubtedly will welcome the decision, which was immediately greeted by a chorus of approval from patient advocacy groups, including the American Pharmacists Association, American Heart Association and American Lung Association. Even President Obama issued a statement applauding the move.
At the same time, a lot of CVS/pharmacy customers are smokers, a fact attested to by the $2 billion a year in sales that the drug chain currently derives from cigarettes and related merchandise. Those shoppers will be frustrated by no longer having the option of buying such products at the 7,600 CVS stores across the country.
Executives say they have a plan for replacing the lost revenue, although they declined to provide details other than to note that the retailer will devote more resources to smoking cessation. A bigger challenge will be dealing with decreased foot traffic, whose negative impact could reverberate throughout the store.
In announcing their decision, CVS Caremark executives called it a paradox for a health care provider to sell cigarettes and related products. Most other pharmacy chains in the United States have thus far adhered to the traditional approach of offering tobacco and living with the contradiction.
Walgreens and Rite Aid, for instance, reacted to CVS’ move by noting that, while they remain committed to helping people who want to quit smoking do so, the sale of legal tobacco products accords with the wishes of a significant group of consumers who have come to rely on their stores for a broad range of merchandise that extends well beyond health care.
The realty is community pharmacies perform a number of important functions, and there is room for differentiation among them. A recent report by the Integer Group and M/A/R/C Research supports that view. The study, which found the vast majority of patients fill their prescriptions at a brick-and-mortar retailer, concludes that the reasons individuals choose one pharmacy over others available to them vary considerably.
It comes as no surprise that CVS and Walgreens were the top two choices among consumers for pharmacy service, with 23% in the survey favoring the former and 19% the latter. Walmart was the only other retailer to exceed 10% when people were asked about their main pharmacy for filling scripts.
Things got more interesting when survey respondents were questioned about their priorities when shopping their preferred pharmacy. Quality is the overriding concern for CVS patrons, for instance, with 68% of them indicating that they want access to the best items. Focus on that criterion drops to 48% among Walmart shoppers. Fifty-eight percent of the discounter’s customers are motivated by cost, an orientation that extends to pharmacy. Rite Aid customers are said to be the most price sensitive, while Walgreens shoppers emphasize convenience.
The evidence indicates that not all consumers — or retail pharmacies — are alike. Nor should they be. Chain pharmacies have frequently been criticized for being too similar in terms of product mix, shopping environment and service. Some observers have even said that, other than the name above the door, it is often difficult to tell which chain a given store is a part of.
That situation has started to change. Such initiatives as Walgreens’ Well Experience store format, which, among other innovations, brings the pharmacist out from behind the prescription counter to encourage interaction with patients, and Rite Aid’s wellness+, a loyalty program that has pharmacy knitted into its fabric, are effective tools to set those chains apart. CVS/pharmacy’s new policy on tobacco sales is another.
Different drug store shoppers have different needs. As the health care system evolves under the aegis of the Affordable Care Act and the front-end business is influenced by the rapid growth of e-commerce, retail pharmacies will have to change and find unique ways to relate directly to customers.