Drug stores walmart
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Drug Stores: Walmart. Eric Biro. Industry Trends. 30 million Americans will gain health coverage by 2018 By 2020, 20% of consumers will directly choose their own health plan By 2020, there is an estimated 45,000 physician shortage

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Drug stores walmart

Drug Stores: Walmart

Eric Biro


Industry trends

Industry Trends

  • 30 million Americans will gain health coverage by 2018

  • By 2020, 20% of consumers will directly choose their own health plan

  • By 2020, there is an estimated 45,000 physician shortage

  • Many drug stores are diversifying their services as margins compress

    • Offering flu shots, quick clinics in-store

  • Time of transformation in the healthcare industry, trickles down into drug store industry

Source: http://www.drugstorenews.com/article/cvs-caremarks-ability-and-agility-key-focus-2014-analyst-day


The industry drug stores

The Industry - drug stores

  • Well-known, established specialty chains

    • Walgreens, CVS, Rite Aid

    • Pharmacy a main draw

    • Sell health & beauty products, over-the-counter drugs, photo-finishing services

    • Operations: merchandising (which items to stock), advertising, inventory management, billing, personnel management

    • High-inventory, moderate receivables

    • Challenge: margins decreasing rapidly

  • In-store pharmacies

    • Retailers that have added pharmacies onto their product offerings

    • Growing source of competition for traditional pharmacies

    • Walmart, Kroger

Source: http://corp.bankofamerica.com/publicpdf/products/industries/sampleprofile.pdf


The industry pharmacy benefit managers pbms

The Industry - Pharmacy Benefit Managers (PBMs)

  • Pharmacy purchases drugs from supplier

  • Insured patient buys drugs from pharmacy

    • Must purchase at a pharmacy that has contract with insurer’s PBM

    • Patient pays part of total upon receipt

  • Pharmacy bills patient’s insurance for remainder of payment

  • PBM negotiates lower reimbursement for insurer to pharmacy

    • Possible through size of PBM and bargaining power that comes with size

  • Insurer pays less to pharmacy because of PBM negotiation

    • PBM takes part of this profit for its services

  • Pharmacies have contracts with several PBMs

    • Walgreens and CVS Caremark


The industry pharmacy benefit managers pbms1

The Industry - Pharmacy Benefit Managers (PBMs)

  • Traditional PBMs

    • 60 major in the U.S.

    • Largest Express Scripts (just purchased one of the other top 3)

    • Intense competition and huge barriers to entry

  • Combination PBM/Drug Stores

    • CVS Caremark


Comparable firms

Comparable Firms

  • Walgreens Co.

    • 2013: $72.2 B in sales, $45.5 B in prescription sales

  • CVS Caremark

    • 2012: $123.0 B in revenue (including PBM revenue)

  • Walmart

    • 2013: $37.0 B in Health & Wellness net sales

  • Express Scripts

    • 2012: $93.9 B in revenue


Walmart background

Walmart background

  • Saving people money to live better through everyday low prices

  • Mass merchandiser of consumer products

  • 3 business segments (U.S., International, Sam’s Club)

    • Supercenters, discount stores (4,005 stores)

  • $466.1 billion in net sales in fiscal 2013 (59%/29%/12%)

  • 11% of U.S. /5% of Sam’s net sales attributable to health & wellness (pharmacy, optical services, over-the-counter drugs)

  • Broad distribution networks (81%/64% of purchases through Walmart owned facilities)

  • 2.2 million employees serving 200 million customers each week

Source: Walmart 2013 10-K


Walmart pharmacy

Walmart pharmacy

  • Expanded into pharmacy in 1977

  • $4 generics program started in 2006

    • Average was $29, used mass distribution tactics to sell at a profit still

    • Reduced America’s drug bill by $1 billion in under 2 years

  • Gingerly stepping into PBM role

    • Offering businesses ability to buy low-price drugs if it buys directly from Walmart’s in-store pharmacies (Caterpillar, 400 others)

    • Has the potential to fundamentally change the way PBMs operate/price

  • Added walk-in clinics in over 400 stores in 2010

Sources: http://www.npr.org/templates/story/story.php?storyId=6119292 http://www.managedcaremag.com/archives/0804/0804.walmart.html

http://online.wsj.com/news/articles/SB124138786561981235


Swot analysis internal factors

SWOT Analysis – Internal Factors

  • Strengths

    • Supply chain

    • Bargaining power

    • Brand name recognition, association with low prices

    • Strong culture for health (save money, live better)

  • Weaknesses

    • Legal issues

    • Negative brand name association (workers, importing)

    • Tendency to aim larger than it should


Swot analysis external factors

SWOT Analysis –External Factors

  • Opportunities

    • PBM model facing margin crunch (generics)

    • Renewed focus on American healthcare from ACA

    • Shady practice of PBMs, can build on better parts of their model

  • Threats

    • Overextension into an unfamiliar market

    • What does failure lead to?


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