Inside This Issue - Opinion
Tests facing regional Rx chains put in perspective
September 30th, 2013
Kerr Drug’s decision to sell its retail and specialty pharmacy businesses is another milestone on the road to consolidation that community pharmacy has been on for more than two decades.
In one sense, the sale of Kerr, a company that demonstrated that a regional chain can be an important innovator in pharmacy care, to Walgreen Co. is a satisfactory conclusion to the company’s history.
Founded in 1951 by Banks Kerr, the organization took its current form in 1996, when Tony Civello and other executives left Thrift Drug to found the “new Kerr.” That designation was intended to distinguish the chain from the one Banks Kerr sold to J.C. Penney (also the owner of Thrift) in 1995. The quick termination of Penney’s tenure was necessitated when the Federal Trade Commission objected to the concentration of drug stores it would have had in North Carolina and South Carolina following its acquisition of Eckerd Corp.
Civello and his colleagues began almost immediately to push boundaries, working to transform the drug store from a place where consumers went to have prescriptions filled into a true neighborhood health care center.
As early as 1998, Kerr introduced its enhanced pharmaceutical care format. Rolled out to select stores, the concept gave customers convenient access to such clinical services as screenings for hypertension, diabetes, cholesterol, osteoporosis and thyroid disease. Programs focused on asthma management, smoking cessation and weight control were also instituted. Since then the company has continued to enlarge its vision of retail pharmacy, adding such services as medication therapy management and immunizations.
Kerr’s concentration on carving out a bigger role for pharmacy in the nation’s health care system makes it an excellent fit for Walgreens, one of whose core principles is to advance pharmacy to the point where such professionals are practicing at the top of their license. As Walgreens president and chief executive officer Greg Wasson noted when the Kerr acquisition was announced, the alignment between the two companies extends to their commitment to transforming the traditional drug store format to deliver a new kind of shopping experience for consumers.
Viewed in another light, the sale of Kerr points to the intense competitive pressure that regional drug chains contend with every day. Not only do they face the likes of Walgreens, CVS/pharmacy and Rite Aid — multibillion-dollar companies with drug stores across the country — regional chains fight for customers with major discounters and food/drug combination store operators.
In North Carolina, where all of Kerr’s 76 retail outlets are located, national retailers command the lion’s share of drug stores sales. In the state’s two biggest markets, Charlotte and Raleigh-Durham, CVS, Walgreens and Rite Aid hold the top three spots, followed by Walmart.
The clout of the big retailers is especially difficult to counter when it comes to the front end, since the scale on which those companies buy merchandise allows them to offer sharper pricing than their smaller competitors. The move toward restricted networks on the part of pharmacy benefits managers and other health care payers further complicates matters.
While the halcyon days for regional drug chains may be over, there are still a number of companies that leverage their roots in the community and knowledge of local customers to stay in the game. Bartell in Washington state; Sioux Falls, S.D.-based Lewis; Kinney in upstate New York and Vermont; and Navarro in south Florida are a few of the companies that fall into the category that come readily to mind.
And regional chains are still a source of new ideas. Thrifty White, which has stores in Minnesota and five other states, has inherited the mantle of regional pharmacy innovator from Kerr.
Thrifty White’s Medication Synchronization and Healthy Pack Rx programs are delivering impressive results in the battle to increase patient compliance with prescription drug regimens, and thus enhance outcomes and eliminate unnecessary health care costs. The retailer recently updated a favorable study about Med Sync originally conducted by Virginia Commonwealth University. The new data shows that people in the program refill their scripts 2.8 times more each year than those who are not, reflecting a substantially higher rate of compliance.
Such initiatives make a real difference in the lives of customers and earn their loyalty. Regional chains that come up with such concepts have the best chance of making a go of it.