Walgreen feels pain of falling drug sales
The chain suffers for a fifth straight month after the termination of a contract with a key pharmacy benefits manager.
Walgreen's (WAG) sales continued to decline for the fifth consecutive month after the disruptive discontinuation of Walgreen's contract with pharmacy benefits manager Express Scripts (ESRX) this year. Express accounted for more than 12.7% of Walgreen's business in May 2011, and its exit helped to send same-store sales down by 5.8% in May 2012. Walgreen walked out of Express Scripts' network last year over a reimbursement-rate dispute. Walgreen's dispute with Express Scripts and its prescription business exodus has significantly benefited its rivals, particularly CVS Caremark (CVS) and Rite Aid (RAD).
Walgreen and Express Scripts have recently dropped the legal claims filed against each other in September, fueling market expectations that there might be a reconciliation between the estranged companies. However, Walgreen has denied any connection between the withdrawal of legal claims and the possibility of a new contract.
Walgreen's sales continue to suffer
Walgreen's May sales decreased by 1.6% compared to May 2011 on reduced pharmacy sales, which were partly offset by the opening of seven new stores and the acquisition of 28 Bioscrip community pharmacies.
As a result, prescriptions filled at its comparable stores declined by 8.5%, leading to 4% lower pharmacy sales. Comparable-store pharmacy sales also were negatively affected by 4 percentage points because of generic drug introductions. Prescriptions processed by Express Scripts composed 12.7% of Walgreen prescriptions in May 2011 and contributed to a 10.8 percentage point decline in comparable-store prescriptions. Decreased footfall due to Express' exit also moderated front-end sales. Overall, 3Q sales for fiscal 2012 were 3.3% lower compared to the same period last year, with 6.5% lower comparable store sales and 9% fewer prescriptions.
Walgreen's biggest competitors, CVS Caremark and Rite Aid, have significantly benefited from the fallout last quarter gaining millions of new prescriptions as Express members looked for non-Walgreen pharmacies to fill their prescriptions, and ended up at CVS or Rite Aid stores. In particular, CVS has raised its full-year guidance, and is trying to make the new customers permanent, taking advantage of the delays in hammering out a new deal. CVS could tap up to 20 million transferred prescriptions if the impasse continues through 2012.
We value Walgreen with a $35 Trefis price estimate of its stock, 10% ahead of the current market price.
First of all, it's Walgreens, not Walgreen. Now then...
My husband is a long-time Walgreens pharmacist and pharmacy manager with over 20 years of service. Walgreens used to be a great place to work, but the culture has definitely changed in the last several years. It's tough to provide great customer service with unhappy employees. Pharmacy hours have been cut, tech hours have been cut, and store managers are not willing to help in the pharmacy. But that's just the tip of the iceburg.
My husband's store has lost 20% of their business with the Express Scripts debacle, through no fault of his own. Yet, corporate has demanded that HE come up with a plan to regain that business in his store. In addition, he is required to visit a certain number of local physicians to "market" the pharmacy -- on his own time. He is required to call local businesses and beg to let Walgreens set up a flu clinic at their location. He is not a salesman and has no desire to be. He is required to attend countless "leadership" and "marketing" meetings.
And, I would also like to note that he delivers excellent service to his customers. I know this because we live in a smallish community and we constantly see his customers while out and about. They are always happy to see him, call him by his first name, and strike up conversations. It is apparent that he is well-liked and respected.
But Walgreens is now more concerned with marketing and buzz words (Be Well!) than the happiness of their employees. Do more with less. Work harder. Sell, sell, sell! Sadly, my husband is looking for another job. All the stress, combined with the bad attitude from corporate, is just too much. It's such a pity... he used to be proud to work for Walgreens and now he is ashamed. Very telling.
I am an employee at Walgreens. I no longer enjoy working for them because you are so under- appreciated for your work and no matter how good of a job you do there is never a thank you - good job from managers / store manager. Nothing is good enough for them or for the District office or corporate. Sell, sell, sell is all they think of never thinking we are doing the best we can. We have to constantly bug customers to buy " suggestive sell items " at our registers. If we don"t we can be written up and lose our job. There is no caring about our customers ...this company thinks only of their bootm line and that"s why they are at the bottom of the list.. Right where they belong.
Most comments here are based on a customer service perspective. The poor service is a direct result of understaffed pharmacies due to poor reimbursement from Your Insurance company. I might add that reimbursement rates are negotiated by all the higher up corporate goons that never set foot in a retail pharmacy or pay for their own insurance or prescriptions so they are way out of touch with how it all goes down at the pharmacy counter. The real issue is that:
(Express Scripts = Your Insurance Company) is reimbursing (Walgreens & all other pharmacies for that matter) BELOW the pharmacy's cost to fill a prescription. Walgreens was the only major chain I know of that had the size, strength, and balls to say NO to Express Scripts for their strong arm / dirty pool / take it or leave it business tactics.
Here is a simple SHORT example of how it works everywhere: They fill your prescription with $10 worth of drug, hopefully they caught all the drug allergy, drug interaction, duplicate therapy warnings etc, to prevent your doctor from accidentaly killing you.
Express Scripts pays the pharmacy $1-2 dispensing fee and $6-8 for the drug. Barely break even and usually at a loss. It is now up to the pharmacy to make up the LOSS and pay their staff by selling you soap, bandaids, soda, etc...
You can not pay the pharmacy electric bill at the end of the day with reimbursment like this or provide enough salary to staff the pharmacy with enough pharmacists and staff (who mostly have Ph.D educations these days). It is a bare bones, race to the bottom business model.
Ever wonder why real pharmacists look unhappy and worried in contrast to those stupid TV commercials where the pharmacist stops everything they are doing to come out from behind the counter to talk to you,....most pharmacists work 12-14 hour shifts with NO Lunch, NO breaks, and NO technician help. This is due to inferior reimbursement from YOUR insurance company.
Don't be mad at the pharmacy, be mad at the insurance companies. The pharmacists are mad about this too.
Most of your insurance premiums go to Express Scripts Shareholders (yes they profit off your insurance premiums instead of providing you good health care) and to Express Scripts CEO's who make Millions/Billions for managing your prescription insurance. The pharmacy does not set the price or make any profit on your prescription Your Insurance Company or Pharmacy Benefit Manager does! How did this happen? I wish we could turn this around because this is not how it worked when my dad owned his own small town neighborhood pharmacy 50 years ago.
Don't be mad at the pharmacy, be mad at the insurance companies. The pharmacists are mad about this too.
Most Retail Chain Pharmacies operate at a loss if they are staffed well enough to fill prescriptions safely and provide good customer service.
Drug sales is a subject I have info which all Americans need to know and take heed. The cost of meds is far to great as is all medical costs here in the United States. I first must say America is the greatest country in the world and I would never want to live anywhere else. I was the third generation born on the cattle ranch where I grew up 55 years ago. I am pro business and as such a business must have profit , fair profit, to maintain existence, sustenance and grow.
At one point I also used Walgreens but changed to Walmart due to proximity. Now I have change to an on-line pharmacy. The reason for this is gouging costs. I am not looking for sympathy or a bleeding heart liberal. The latter is a lot of the problems we see today. I take a number of meds and 5 of those meds were costing me $732 per month to use, COPD. I lost my job in December and could not afford the cobra offered therefore I am on my own, no state aid, no SSI, no assistance. This out of pocket cost was destroying my limited budget at $25 per day cost. I began investigating the on-line pharmacies selling the same pharmaceuticals, Pfizer, GlaxoSmithCline,Teva and lowered my out of pocket cost to $2.50 per day for these 5 meds. What is wrong with this picture? How can Pfizer sell their meds on the open world market for a fair profit to a third party who in turn will mark this medicine up with a fair profit and sell it to me and ship it to me at a cost 1/10 the price of buying same med here in the local marketplace? Is the mark-ups the same to the states and federal agencies? Grossly overpriced? I stated earlier I am pro business, but at what point does fair profit turn to excessive greed and extortion? Last week I heard a brief partial news bite that the federal government will not allow the pharmaceutical companies to sell meds in the United States at world market pricing. Please someone enlighten me.
For those of us who understand...Walgreens generates 95% of their profits FROM prescription drugs...its glaringly evident that there are far too many people commenting on this thread that have NO idea what their talking about. Unlike Walmart, Costco, Target, [insert whatever big box store here]...they could care less about drug sales. They want you to take the long walk through the store and watch for the Blue Light Special - essentially they want you to buy stuff you don't need. THAT's THEIR bread and butter. Walgreens cannot (not will not....cannot) compete with them in that game. And neither can Rite-Aid or CVS! And yes...those guys will also taste the wrath of Express Scripts when their new contract(s) [at some point in the near future] ]come due. Watch and see.
That being said...the Walgreens 'suits' had better get their house in order, and remember from whence they came: Pharmacists placed in executive, decision making positions (as it used to be)! Quit hiring the egg-head, number crunching, pencil pushers; and start listening to what going on in the trenches. The bottom line IS customer service, you morons! Make service your hallmark [ once again]!
I hope you're reading some of these comments from customers regarding such. Let your pharmacists be pharmacists - they're not nurses or lab technicians, etc., et. al. And cutting Tech's hours isn't a move in the right direction either. Way too many Pharmacists are pushed to the limit!
I work for walgreens this ceo is the worst I have everseen. He will do walgreens in. He is very into technolgy but not for a human employee his goal is to have robots serving cusomers and do away with all human beings. Also treats employees like robots. Threating jobs if we don't say Welcome to Walgreens, and Thank you and be well. Most of my customers hate this and they want to be spoke to a perosn not like a robot that can't think or have any emotions at all.
While CVS enjoys this windfall they have not earned the business nor did they prepare knowing months ahead of time new business was heading their way.
Yes, they added staff but with complete idiots who know nothing about customer service and could care less about their new customers.
In the long run- they are heading for a fall and the retreat is on to alternatives
from sources that simply care.
I'm flat done with them !!
CVS is absolutely abhorrent with their service and customer care. Their pharmacy personnel change daily and there is no cohesive structure. My mother had 10 prescriptions there that were all refillable at the same time and were on their 'auto-refill' program. I would get the monthly calls that each prescription would be filled, and then a call that the prescriptions were ready. However, when I arrived to pick them up, only one or two of them were filled, they had to check the computer, they'd tell me I was wrong about the others, they were never on auto-refill, I never received a call - in short, I was lying and I didn't know what I was talking about. So we would get all the others on auto-refill, put in orders to get them refilled, arrange for me to drive back the next day to pick up the refills. I'd come back the next day and guess what. Only a couple had been refilled and we had to go through the whole dance again. I put up with this for a year (because Mother's Rx's were on Express Scripts) and then I said, "no more". I moved her Rx's to Walgreens where mine are and everything has been absolutely beautiful. And I wrote Express Scripts about the service at CVS and corporate CVS about the service at that store.
Sorry...should have read ALL the comments below before my comment...because I would have used more "CAPS" to emphasise the fact that I have NEVER had any difficulty with my local Walgreens Pharmacy in Bellevue, NE. They were ALWAYS on top of everything...even re-adjusting one of my wife's meds to our pay because it was better than the generic, which is all that Express Scripts would pay for.
Truly sorry to have lost Walgreens!
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