Walgreens halts expansion of Theranos centers

by  

Phil Wahba

In the wake of a controversy surrounding Theranos’ blood diagnostics technology, Walgreens is putting the brakes on expanding the startup’s network of Theranos Well Centers.

Walgreens will not open any additional Theranos blood-testing centers in its pharmacies until it gets answers to questions surrounding the start-up’s technology, a Walgreens official told The Wall Street Journal.

Theranos, a blood diagnostics company that has been valued at $9 billion by private investors, found itselfembroiled in controversy this week after two lengthyJournal articles questioned the effectiveness of its technology. Theranos claims it requires only a few drops of blood drawn by finger-stick that are then analyzed by a compact, proprietary device. The Journal, among other claims, reported that the device handled only a small fraction of the tests sold to consumers at the end of 2014.

Walgreens, a U.S. drugstore chain operated by Walgreens Boots Alliance  WBA 1.50% , operates 41 Theranos Wellness Centers, mostly in the Phoenix area. When the two companies announced their deal in September 2013, they said they planned to bring Theranos technology to all Walgreens pharmacies, a fleet that now exceeds 8,000 locations, though they didn’t give a timeframe for that goal.

But any expansion is on hold for now.

“We are currently in discussions about the next phase of our relationship,” a Walgreens spokesman told Fortunein an e-mailed statement on Saturday. “Plans to open more Theranos Wellness Centers are dependent upon both companies’ ability to reach a mutually beneficial arrangement.”

News of Walgreens’ stance was first reported by theWall Street Journal. The newspaper reported that on Thursday, a Walgreens team met with senior Theranos executives, including founder and Chief ExecutiveElizabeth Holmes, in Palo Alto, Calif., concerned by theJournal’s articles.

While Theranos did not immediately respond to a request from Fortune for comment, earlier this week it did publish a detailed defense of its technology, as part of a rebuttal of the Journal’s articles, including the accusation that reporter was not objective and was misrepresenting its science. The Journal in turn has said it stands by its articles.

The Journal quoted Heather King, Theranos’s general counsel, as saying of Walgreens that “We are continuing to work with them on future opportunities and arrangements.” Walgreens owns a stake in Theranos, the Journal reported.

In Wake Of MCX Breach, Walgreens Looks Even Smarter For Embracing Apple Pay

Paula Rosenblum

Contributor

On October 29 I had the opportunity to have a wide-ranging conversation with Walgreen Co. Vice President of Digital Marketing and Customer Experience, Deepika Pandey. The topic was mobile payments, Duane Reade and Walgreens, and their decision to accept Apple AAPL +0.95% Pay.

This conversation happened before the announcement of a data breach at the Walmart-led consortium MCX, which is developing a rival mobile payments system. (MCX COO Scott Rankin called it an “attack” rather than a breach). We focused solely on the positive reasons behind the Walgreens decision. Still, it’s hard not do draw some comparisons.

Walgreens accepts multiple kinds of mobile payments: Apple Pay, Google GOOGL +1.33% Wallet, and Softcard  (formerly known as ISIS, its backers rebranded it in September for obvious reasons).  Walgreens became NFC-enabled (a key part of most mobile payment technologies) in New York City as part of its support for Google Wallet in 2011. It included NFC as a feature of its new Point-of-Sale (POS) system when it was rolled out in 2012. So all the groundwork had been laid, and foundations were in place.

English: A Walgreens pharmacy in San Jose. (Photo credit: Wikipedia)

You can’t argue with Walgreens’ logic. According to Ms. Pandey, its corporate philosophy has always been about customer choice and access.  What the company execs really want to do is to provide their customers the most convenient and frictionless experience.  “Frictionless” is a bit of a techy term, but it resonates. It means there are no irritants to get in the way of a positive shopping experience.

Most data on today’s shoppers supports this point of view.  Consumers want choice.  Choice of where, when, and in what places they shop.  That’s what has become known as the “omni-channel effect.” And now Walgreens is betting that those same shoppers will want a choice in how to pay as well.

While the chain became NFC-enabled as part of the rollout of Google Wallet, Walgreens has a long history of working with Apple as well.  Its paperless loyalty program, Balance Rewards, was integrated with Apple’s Passbook and was part of Apple’s rollout in the fall of 2012. Customers have reportedly been very happy with it. More than eighty-two million people have Balance Rewards accounts. It wasn’t made clear how many access their accounts using Passbook, but they can also access their accounts using their phone numbers if they choose to avoid Passbook.

Clearly the company has a history of being an early technology adopter. They like to think of themselves as innovators. The first Walgreens mobile app was launched in January 2010 and has been enhanced to a point where it can be switched into an “in-store” mode.

When entering a Walgreens store, the home screen changes so that the shopper can see content that works in context with the in-store experience.  Paperless coupons, account balances and other relevant in-store information is available on demand.  Ms. Pandey reports that this enhancement has been very successful, and it’s driving traffic into the store as well.

In my opinion, the key to the success of Walgreens innovations is its focus on the customer experience. To accomplish this, cross-functional teams support all technology implementations.  Employees, marketing, and finance at minimum are all involved in decision-making. The corporate credo is that if you’re going to get consumers to use a technology, it has to be easier than what they do today.  As my partner Brian Kilcourse says, a technology has to be easier to use than it is to ignore.

All this is very important and comes into stark relief when we look at what’s happened with CurrentC over the past few days.  First, CVS and Rite-Aid disabled their NFC readers because they are avid and singular CurrentC backers (One wonders how Google Wallet and Apple Pay got started at those chains in the first place – was it a rogue team of IT personnel?  Who was on that implementation team?).

Then as more details of how CurrentC is going to work emerged, we learned that standard issue credit cards won’t be supported as part of the first round of implementation.

What is the message to consumers? Rightly or wrongly, the message is “Less choice.”

It didn’t help matters that hackers managed to slip into the MCX system this week and steal all the email addresses of people testing the system. While it was called an “attack” rather than a “breach” by MCX COO Scott Rankin at a hastily assembled news conference, the perception is clear: data held in trust by MCX was lost.  Mr. Rankin says MCX has been under attack for “weeks.” It’s safe to say this is nothing compared to the attacks it will be under when the system goes live.  So coupled with the message of “less choice” we’ve got “questionable security.”  Not a good beginning for any payment company.

To be fair, Mr. Rankin did say that everything is up for change.  The company could switch technology horses and move from its current QR code based app to beacons, it will eventually support credit cards, and it will all get easier.

The irony in all of this remains that the dollar value of mobile payments used in retail stores remains the equivalent of a “rounding error.”  While Walgreens says its mobile payment volume has “doubled” since the introduction of Apple Pay, we have no base to go by. It’s a lot of noise over not a lot of money.  But it does give us a window into corporate mindsets.

The one thing we can say for certain is that Walgreens comes out of this looking really good, smart and innovative.  MCX….that’s a subject for another day.

Wall Street Be Damned, Moving Out Of America To Dodge Taxes Would Have Decimated Walgreens

Laura HellerContributor

Walgreens has put to rest the idea that it would relocate its headquarters to Switzerland for tax purposes. The board voted this morning to stay put in the United States.

While this may be received badly by Wall Street, it’s a whole other story on Main Street, where Walgreens actually does business.

Walgreens, it seems, finally woke up to the fact that it’s a consumer-facing retail business first and not a slave to Wall Street and its financial principles that dictate lowering costs, regardless of the cost.

The Deerfield, Illinois-based drug chain had been considering a tax inversion, something that would allow it to be headquartered in Europe and realize a significant tax savings. In June 2012, Walgreens embarked on a strategic partnership with Switzerland-based Alliance Boots by buying a 45 percent stake in the company with the option to buy the remaining 55 percent by August 2015.

Walgreens said it will acquire the remainder of Boots and blend the two companies, but that it will remain headquartered in the United States.

Wall Street was clamoring for the deal, Walgreens could have saved up to $4 billion in taxes over five years had it moved to Switzerland.

But it would have lost a good many of its customers in what many view as a traitorous and self serving act. It could have decimated the company.

Although the company’s official stance is that a tax inversion would have required the original agreement to be entirely rewritten to qualify for an inversion, something that could have cost hundreds of millions of dollars and might not have withstood IRS scrutiny.

There’s no mention of consumer scrutiny.

Walgreens is a very conservative company, rooted in tradition. Leadership is practical and measured. I heard the arguments in favor of inversion and it sounded like a practical financial decision.

And a terrible one for a company that relies on U.S. shoppers for its revenue.

Not only don’t shoppers care about the intricacies of corporate finances, they increasingly resent corporate entities, their profits, their profiteering and self-serving accounting. Business decisions are not necessarily good decisions for a business.

While I understood the math, shoppers didn’t or didn’t care. In the weeks leading up to this decision, there were a growing number of angry articles, blog posts and protests. Calls for a Walgreens boycott started cluttering up my news feeds.

People not only didn’t understand why Walgreens wanted an inversion, many seemed to think it already had happened.

Then there’s CVS, once the second largest drug chain after Walgreens. CVS has surpassed Walgreens in size. It aggressively bought up physical locations, snapped up Walgreens pharmacy customers in the dispute with Express Scripts and isn’t afraid to make decisions that might be unpopular with Wall Street. The idea that it would give up the profit from the sale of tobacco products isn’t smart for its bottom line, but it won CVSmore customer loyalty.

Walgreens wasn’t willing to match this move.

Wall Street may punish Walgreens for staying the in the United States, but that’s nothing compared to the beating it would have taken from U.S. shoppers.

Walgreens Buys More Drugstores While Expanding Lab Services For Obamacare

A day after announcing a new relationship to bring quicker lab tests for cholesterol and other conditions into its stores, Walgreen WAG +3.03% Co. (WAG) said it would buy a North Carolina-based retail drugstore and specialty pharmacy business.

The acquisition of Kerr Drug, announced Tuesday, brings in more than $380 million in additional annual sales from 76 stores and related businesses. Financial terms of the purchase were not disclosed.

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But Walgreen executives said the Kerr deal enhances the retail drugstore giant’s presence in the fast-growing North Carolina market, particularly smaller communities where the retail drugstore sees the ability to expand services.

“We are closely aligned on the important task of expanding the health care role that community pharmacists can have with their patients, and we share the common goal of stepping out of the traditional drugstore format to create a new experience for our customers,” Walgreens chief executive officer Greg Wasson said.

To be sure, Walgreen is aggressively expanding into new businesses to increase its presence into the delivery of primary care services. Its competitors, too, like CVS/Caremark (CVS) and Wal-Mart Stores WMT +0.32% (WMT) are also ramping up opening retail clinics and CVS told Forbes it “works with a number of vendors to do point of care testing” at its MinuteClinics, including testing cholesterol levels and “A1c testing” for glucose screenings.

Earlier this week, Walgreen announced a “long-term” partnership with Palo Alto, Calif.-basedTheranos Inc. to bring the firm’s less invasive and lower cost lab testing into Walgreens stores. The companies said the tests on “micro-samples” are done more quickly and available to physicians within hours.

“Clinicians can now see their patients having received lab results from fresh samples in a matter of hours,” Theranos chairman and CEO Elizabeth Holmes said.

The deals come after a parade of moves designed in part to take advantage of millions of new patients who will soon have the ability to pay for their health care thanks to the expansion of medical coverage under the Affordable Care Act.

Earlier this year, Walgreen said it would expand into “management for chronic conditions” such as high cholesterol, diabetes and hypertension. Walgreen said its more than 330 clinics staffed by advanced degree nurses known as nurse practitioners were expanding the scope of the health care services beyond routine maladies like treating strep throat or pink eye.

The acquisition of Kerr brings 76 retail drugstores and its specialty pharmacy business into the Walgreen operation, which includes more than 8,100 drugstores in all 50 states and the District of Columbia. Walgreen had $72 billion in sales for its fiscal 2012.

Price Check! Which Drugstore Chain Is Most Likely to Overcharge You?

Shoppers understand that prices for the same items can vary quite a bit among competing retailers. A new study shows that shoppers shouldn’t expect consistent pricing among stores with the same name — even if they’re located just a few blocks apart.

One of the biggest appeals of a chain store is that there’s some consistency with the brand — no matter the location, every store with the same name and logo has essentially the same products, prices and services. A certain level of comfort and familiarity comes with shopping at a trusted chain retailer.

But a new study from the National Consumers League demonstrates that it’s unwise to let your guard down while hitting the aisles of your local chain drugstore. Researchers conducted price checks on 25 standard drugstore products — Huggies diapers, Tropicana orange juice, Folgers coffee, a bottle of Claritin allergy tablets — at 485 CVS, Rite Aid and Walgreens locations across the U.S. The results could be disturbing to anyone who hates overpaying.

(MORE: Why Is Walgreens Selling Sushi? The Changing Business of Drugstores)

While the study found inconsistent pricing among all three chains, Walgreens came out looking the worst by far. “Walgreens stores in a single market were up to five times more likely than a competitor to charge different prices for the same item,” the report states. What’s more, “Walgreens had more than eight times the number of products with a 20% or greater price range than CVS. Rite Aid had no products with that big of a gap. Walgreens also had more than twice the number of products with a price range over $1 than both competitors.”

Walgreens’ fancy flagship stores, which might offer sushi, smoothies, wine and manicures in addition to the usual selections of cold medicine and shampoo, were found to be particularly more expensive than other nearby locations. The total price for the basket of 25 items at New York City’s flagship Walgreens was $38 more (20% higher) than what the same items cost at other Walgreens locations in the city.

In a statement released to CNN Money, Walgreens spokesman Jim Graham confirmed that prices among locations are not consistent. In fact, variable pricing is part of the business model. “Costs can vary from one location to another, even when they are a few blocks apart in dense urban areas, based on the store’s cost of real estate, its hours of operation, including whether it is open 24 hours, labor costs and the number of customers it serves each day, among other factors,” the statement reads.

(MORE: Are There Really More Dollar Stores Than Drugstores in the U.S.?)

In the country’s heartland, however, Walgreens isn’t merely being accused of inconsistent pricing — which is perfectly legal, if aggravating from some consumers’ perspectives — but also of crossing the line by allegedly overcharging customers and using false and misleading advertising. A couple of weeks ago, Missouri Attorney General Chris Koster filed a civil lawsuit against Walgreens after a two-month investigation revealed that eight Walgreens in the state charged more than the price listed on shelves for roughly 20% of the items purchased. Instances of overcharging, according to the St. Louis Post-Dispatch, included clearance items that were rung up at full price and products advertised on sale that weren’t discounted at the register.

“This level of consumer deception is inexcusable from a corporation as sophisticated as Walgreens,” Koster said at a press conference. “In fact, it’s appalling.”

In Koster’s opinion, the pricing glitches weren’t a simply a matter of “sloppiness,” but occurred on purpose to get more money out of unsuspecting customers. “This is a business practice that is consciously intending to steal from sick people that go into Walgreens, from old people that go into Walgreens,” he said. According to the Post-Dispatch, the company has settled suits in other states after being accused of similar tactics.

(MORE: Hey Walmart, It’s Hard to Make Sales When Store Shelves Are Empty)

“While we won’t comment on the complaint itself, we were disappointed and disagree with the attorney general’s comments,” reads a statement in response from the Walgreen Co., per the Chicago Tribune. “However, we are prepared to have a constructive dialogue about the issues he raised and address any appropriate concerns.”

SEE ALSO:  The Big Surprise of Martin Luther King’s Speech

Read more: http://business.time.com/2013/09/09/price-check-which-drugstore-chain-is-most-likely-to-overcharge-you/#ixzz2ePq11500

Flu Epidemic Is Boon For Drugstore Chains Like Walgreens, Cough and Cold Marketers

While the flu epidemic has no doubt been a drag for Americans who’ve caught the bug, these fever-ridden coughers have sent drugstore chains and manufacturers of over-the-counter remedies all the way to the bank.

The Centers For Disease Control has reported heightened incidences of the flu in the U.S., including outpatient visits for flu-like symptoms at 4.6 percent, “above the national baseline of 2.2 percent,” according to the CDC’s report on week two (January 6-12).

In turn, everything from over-the-counter cough, cold and flu meds to thermometers and toothbrushes are flying off the shelves at drugstore chains, including the nation’s biggest one, as “this has been a more active flu season than we’ve seen in … years,” Jim Cohn, a Walgreens spokesman, told Forbes.

(Walgreens hasn’t released its January sales figures yet, so Cohn couldn’t quantify the uptick in sales of flu-related merchandise just yet.)

The retailer has honed its marketing messages in light of the flu frenzy.
For one, it’s plastered checklists in its 8,000 stores that alert shoppers to what they’ll need to fight the bug, from cold and flu medicine to lip balm.

Walgreens pharmacists are also spending more time advising shoppers on” flu-related matters,” be they flu shots or over-the-counter remedies, he said.

What’s more, the retailer, the biggest provider of flu shots after the federal government, has administered a staggering number of flu shots this month more akin to October levels, the height of the season, Cohn said.
Windfall For Cold-EEZE

Ted Karkus, CEO of ProPhase, says its Cold-EEZE Cold Remedy products are selling briskly on account of the flu outbreak.

The worst flu season in more than a decade has been a boon for cough-and-cold giants such as Johnson & Johnson, maker of Tylenol cold and flu remedies, and Reckitt Benckiser, which owns the Mucinex brand, AdAge reports.

It’s also boosted sales at small business pharmaceutical and cold remedy provider Cold-EEZE Cold Remedy.

“No one was looking for this great spike [in business] that came out of the blue,” Ted Karkus, CEO of ProPhase Labs, maker of Cold-EEZE, told Forbes. “It did catch us by surprise.

“We’re shipping more products, displays and [filling] orders at a moments notice from all of our major retailers, such as CVS, Rite Aid and Walgreens.
“The incidences of upper respiratory illnesses are up more than 20 percent versus any time in the last three years, according to SDI Fan data, so retailers have to respond accordingly,” Karkus said.

The rise in sales of its product comes even though Cold-EEZE is not officially a flu medication, but a cold remedy, because consumers often treat flu-like symptoms with cold medications, he said.

As ProPhase manufactures Cold-EEZE itself, it’s been able to nimbly meet heightened demand.

And sales of new products Cold-EEZE Oral Spray and QuickMelts, have sold at an unexpected, brisk pace due to the flu outbreak.

In turn, “we had to ramp up manufacturing [of these new products] and fortunately, we were able to barely stay ahead of the curve due to the unusual spike in activity,” as there was less new product in the pipeline than Cold-EEZE’s established remedies, he said.