File acquisition lays foundation for solid growth – Pharmacy’s Top Players – Rite Aid

Michael Johnsen

At its annual meeting held in New York earlier this year, Rite Aid targeted growing its pharmacy base as its No. 1 priority. And with the chain’s proven ability to rally its troops around a singular objective, the industry can expect Rite Aid to hit that target and hit it often.

As just one example of Rite Aid’s headquarter staff’s ability to motivate its pharmacy forces, the No. 3 drug chain boasts one of the best generic conversion rates in the industry, where pharmacists actively suggest a generic drug when appropriate. “Generics are really a win-win-win for everybody,” remarked Phil Keough, senior vice president of pharmacy operations for the chain. It’s typically a lower drug cost for the patient, a greater margin for the retailer, and it’s a boost for the employers supplementing health insurance by helping to keep health care costs down, he said. “We have some system enhancements that heighten the awareness for our pharmacy staffs … and they’re actively engaged in discussions with the patients as well as the physicians to drive increased generic utilization,” Keough said.

Growing the pharmacy business is a moving target, however. Accordingly, Rite Aid has pieced together a technologically savvy pharmacy system that is designed to streamline the pharmacist’s work flow. The chain expects to roll out the program, details of which executives were not divulging, nationwide beginning in the fall.

One piece of that technology will be an advancement in the chain’s e-prescribing capabilities. Currently, e-prescribing is up and running in 16 Rite Aid markets through its relationship with ProxyMed. Eventually, Rite Aid plans to have e-prescribing capability in all stores. “E-prescribing will become a standard in the industry in a period of a few years,” Keough predicted. “It’s going to take awhile to gain critical mass, but as the capabilities become easier and less invasive for the physician to incorporate into their regular practice, the retailers who are making a commitment to [e-prescribing technology] will have a competitive advantage.”

The chain has also signed on with SureScripts in its e-prescription platform, and Keough serves on the SureScript retail advisory board. So far, Rhode Island, Massachusetts and Connecticut have been identified as the first three states to go live with SureScripts. Rite Aid has a total of 36 stores in Connecticut.

Another key initiative for Rite Aid is its pharmacy file purchasing program. The chain has doubled the amount budgeted for prescription file buys in fiscal 2004 and even now is ahead of an aggressive acquisition schedule. “We’ve reinvigorated the entire program,” Keough said. “The reason we’ve had such success so far is in the fact that we do treat the file-buy acquisitions as a true merger,” he said, bringing the independent staff on board at Rite Aid and implementing a tailored marketing program to ensure a high patient-retention rate. “We have a variety of marketing efforts that we do in conjunction with the [independent] owner, and have really gotten a lot of mileage out of that,” Keough said.

And in June, Rite Aid kicked off the test marketing of a senior loyalty card, designed to benefit its cash-paying customers, in Louisville, Ky., and Pittsburgh. As part of the program, Rite Aid loyalty card holders earn back 15 percent of their prescription cost in the form of a credit that’s good on any future purchase in the store, including the next refill. In addition, the cash-paying prescription customers get a 10 percent discount on any Rite Aid private label product and can take a 10 percent cut at the register on any branded vitamins or herbs purchased on Tuesdays (excluding GNC-branded items).

In the past few months Rite Aid has announced a series of personnel moves within its pharmacy department as part of its commitment to growing pharmacy dollars. In February Rite Aid tapped Jerry Mark de Bruin, a chain drugstore veteran with 16 years experience in managed care, as the company’s senior vice president of pharmacy services. De Bruin’s experience with managed care will be crucial going forward as 92.7 percent of Rite Aid’s total pharmacy sales comes from managed care customers.

Reporting to de Bruin is recent Rite Aid hire David Vucurevich, who was named vice president of pharmacy purchasing last month. Vucurevich will oversee brand and generic drug purchasing and will manage the chain’s long-term purchasing strategies. Both de Bruin and Vucurevich hailed from Albertson’s.

And last month Rite Aid moved its central division vice president of pharmacy operations, Laura Shaw, into the newly created position of vice president of pharmacy acquisitions. Shaw will be responsible for acquiring additional prescription files, one of the premier strategies Rite Aid plans to employ to build its prescription base. Sammons told shareholders at the chain’s annual meeting earlier this summer that Rite Aid was “77 percent ahead in our file acquisitions than we were at the same time last year” at the end of the chains first quarter, which closed May 31.

“[Shaw’s] newly created position is one of many positive changes Rite Aid is making in our pharmacy area to grow and strengthen our prescription business,” stated Keough in announcing Shaw’s promotion. Keough himself was picked up by Rite Aid from CVS in fall 2002.



2002 * 2001 * 2002 % of of stores ** % of stores

Rx sales Rx sales total sales with pharmacies with pharmacies

$9,986 $9,295 63.2% 3,404 100%

Source: China Store Guide/Drug Store News

* Sales in millions

** As of April 2003

COPYRIGHT 2003 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2003 Gale Group

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