How Flu Shots Became Big Sales Booster For Walgreen, CVS

Less than four years after Walgreen (WAG) and rival drugstores like CVS/Caremark Corp.  (CVS) began a lobbying blitz with state regulators to allow pharmacists to administer seasonal influenza shots, pharmacies are beginning to see benefits of the strategy in their bottom lines.

Earlier this week, Walgreen reported January sales rose more than 6 percent to $6.15 billion thanks in part to a 25 percent increase to 6.9 million the number of flu shots stores have administered since January of 2012. Meanwhile, CVS’ fourth-quarter 2012 earnings released earlier this week also benefited from increased flu vaccinations during the epidemic.

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Much of the growth can be attributed to the ability of pharmacists to administer flu shots. That was generally not possible until fall of 2009 when several states issued special waivers to allow pharmacists – rather than just doctors and other health professionals – to administer seasonal and H1N1 vaccines amid fears of a pandemic.
Walgreen and CVS took advantage of the crisis to convince a growing number of state regulators that pharmacists should be allowed to have the expanded role as a way to save lives and potentially money by getting more Americans flu shots from an army of pharmacists.

“Immunizations are one of the key pillars of our strategy to transform and advance community pharmacy,” said Kermit Crawford, Walgreen’s president of pharmacy, health and wellness said in a statement to Forbes. “Our goal is to continue to shape and re-engineer the future of health care delivery in the U.S.”

The sales increase for Walgreen was the first year over year growth in monthly sales in almost a year and largest uptick in sales since August of 2011. Walgreen has been dogged in the wake of its contract dispute with pharmacy benefit firm Express Scripts (ESRX) which has caused a flood of customers to switch to rival pharmacies that were in Express Scripts networks. The dispute was resolved in recent months, but not all customers have returned to Walgreen.

But even the Express Scripts imbroglio cannot stop the boost from customers coming in for flu shots.

Through Jan. 31, flu shots administered at Walgreen pharmacies and clinics season-to-date were nearly 6.9 million compared to 5.5 million in last year’s flu season. And though Walgreen does not break out how many shots were administered in its Take Care clinics as opposed to its pharmacies, it’s clear more shots were administered by pharmacists given the pharmacy chain has more than 8,000 drugstores compared to 370 clinics.

CVS, too, has seen major growth in its flu shot business. Through Feb. 5, CVS had given 4.8 million flu shots, more than double the 2.3 million flu shots given all last season, the company said.

The drugstores see the vaccination parade into their pharmacies as more efficient and potentially less costly than a trip to the doctor’s office, which can typically cost a health plan or employer $100 or more for an office visit.

Now, pharmacies are pushing in states to allow their pharmacists to administer even more vaccines. At Walgreen, the pharmacy chain now administers up to 17 vaccines recommended by the Centers for Disease Control in more than three dozen states that “enable the full scope for pharmacist-administered immunizations,” a Walgreen spokesman said.

“We hope to eventually have the ability to administer all CDC-recommended immunizations in all 50 states, and for pharmacists to be recognized as providers in order to be reimbursed for immunizations and other primary preventive healthcare services,” Crawford said. “By offering a full range of immunizations in states that allow, we’re able to provide even greater convenience and access to vaccines and other preventive health services at our community pharmacies.”

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Walgreen Ready To 'Blur Retail Channels' In Stores Across U.S.

If you enter a Walgreen (WAG) and it looks more like an upscale sushi bar or a grocery store than a pharmacy, that’s okay with chief executive Gregory Wasson.

It’s actually by design and part of the “Well Experience” concept that will be rolled out in more Walgreen stores this year as the company pushes further beyond the traditional look of a drugstore with a pharmacy counter in back to a variety of looks that also emphasize fresh food, beauty supplies and an array of private label products.

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“You’re beginning to see the blurring of the retail channels in America,” Wasson told more than 2,000 shareholders Wednesday afternoon at the company’s annual meeting on Chicago’s Navy Pier. “Frankly, that is what we are doing with our ‘Well Experience’ concept. We are deliberately blurring those channels.”

The push comes as Walgreen recovers from the loss of customers to CVS/Caremark (CVS) from last year’s Express Scripts (ESRX) contract dispute and expands globally through its Alliance Boots partnership.

Walgreen opened about 400 “Well Experience” stores, mostly in the past year, though not even close to the breakneck pace of a few years ago when the company opened new stores every 17 hours. Wasson said the company is “still opening stores . . . maybe just in a different way.”

For example, Walgreen just last month opened its 8,000^th store in Hollywood, Calif., at Sunset and Vine, complete with flash bulbs and testimonials from celebrities like Mark McGrath and Kurt Russell. The new stores also appear in iconic buildings such as a location in Chicago’s Bucktown/Wicker Park neighborhood where a three-floor drugstore opened in the historic Noel State Bank building where even the basement was turned into a “vitamin vault.”

The new Well Experience stores, still considered a pilot project, are a hit with local politicians and developers who see Walgreen as revitalizing decaying buildings that include some architectural gems. It also boosts Walgreen in these neighborhoods. “They help lift our brand and that’s what we are trying to do,” Wasson said.
Much is at stake.

Walgreen will need the stores to be successful to improve on last year’s lackluster sales, which were down nearly 1 percent to $71.6 billion in the company’s fiscal 2012, which ended Aug. 31, 2012.

Wasson took heat from some shareholders over the Express Scripts contract dispute, which has led to a loss of millions of prescriptions.

Still, Wasson has said the Deerfield, Ill.-based company is winning back customers as fast as they were leaving during a nearly nine-month period last year where customers who had Express Scripts benefit plans could not get discounts at Walgreen pharmacies.
In June of 2011, Walgreen and Express Scripts began a battle over payment issues, which continued through the fall open enrollment season of 2011 and ended Jan. 1 of last year with the two parting ways. That left millions of Americans with Express Scripts drug plans looking for a new pharmacy.

Express Scripts is a pharmacy benefit manager, or PBM, that works as a middleman between drug-makers and employers when it comes to buying drugs. PBMs pay pharmacies to dispense the drugs.

“The headwinds of last year are the tailwinds of this year,” Wasson told shareholders.

www.forbes.com