Rite Aid’s Business Not Made To Mail-Order

Sep 08, 2004

By George Anderson

Rite Aid’s feel-good turnaround story took a pause yesterday when the chain announced it expected to miss its full-year revenue and profit expectations. The chain said performance was off due to competition from mail-order pharmacies.

Reuters reports that Rite Aid and others have lost pharmacy sales as “companies that manage prescription drug plans for employers push for mandatory mail-order prescription refill programs, which typically offer the same medicines at a cheaper price, to stem the rise in drug costs.”

Large pharmacy benefit companies are requiring employer plan participants to order prescription medicines through the mail. One of the largest pharmacy benefit companies, Medco Health Solutions said it added 3 million of its members to mail order programs in the first six months of 2004.

Drugstore rivals CVS and Walgreen do not participate in pharmacy benefit plans requiring prescriptions be filled through mail-order.

Moderator’s Comment: How big a threat to traditional pharmacy operations is mail-order? What should be the response of Rite Aid, CVS, Walgreen’s and
others to this competitive threat?

The Reuters report said Rite Aid was developing a plan to compete with mail-order but the company did not provide specifics.

One thing for sure is that mail-order prescription services are not going away. Employer plans now cover 60.4 percent of Americans, according to the
U.S. Census Bureau and with health care insurance premiums experiencing double-digit annual increases, there is no alternative but to find a way to reduce costs.

George Anderson – Moderator

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