Rite Aid is going in a new direction.
After two scrapped acquisitions and various C-suite changes in the past five years, the company is ready to carve out a space for itself in the retail pharmacy and pharmacy services spaces with a new approach to how it uses its pharmacists, a new store format and an overhauled merchandising strategy. It is also looking to establish a stronger e-
commerce and omnichannel offering — all alongside a rebranded PBM that is looking to position itself as a mid-market leader.
In exclusive conversations with Drug Store News, executives from the Camp Hill, Pa.-based chain made clear that the entire rollout of their new strategy, titled RxEvolution — no small feat in a regular year, but downright audacious during a global pandemic — is designed to strengthen the company’s position among patients and consumers. It will also build bridges with any organizations looking for a PBM partner that is not also owned by an insurer. In addition, it puts the pharmacist, whose role is being expanded with Rite Aid’s new approach to be more consultative and more able to engage with patients who need assistance with OTC product or with clinical services, at the center of this transformation.
For all of these reasons, Drug Store News has named Rite Aid its 2020 Pharmacy Innovator of the Year.
Heyward Donigan, who was named CEO in August 2019, and COO Jim Peters, who joined a month after Donigan’s appointment, have made the company’s turnaround an imperative, and, as Donigan put it, ushered in a “significant end-to-end change” at the retailer, which operates more than 2,400 stores in 17 states.
With a growth target demographic in mind — Gen X and millennial women, who comprise roughly a third of the population — and a small army of pharmacists and pharmacy techs, as well as a PBM, at their disposal, the two executives hit the ground running.
“Our vision was not to incrementally change Rite Aid,” Peters said. “We knew that we had an opportunity and, frankly, a mandate to demonstrably and significantly change what Rite Aid meant to the community, our shareholders and the broader healthcare value chain. For us, the RxEvolution is at the heart of how we plan to do that.”
“We have the ability to be extremely nimble, very focused in our communities, and we’re really excited about our markets and our ability to move faster.”
No Longer Behind the Counter
Donigan is clear about the fact that the RxEvolution starts with the chain’s pharmacists, and while there is a rebranding, new logo and new store format — dubbed the “Store of the Future” — that comes along with the RxEvolution, the cosmetic changes are just the tip of the iceberg that she calls a “significant end-to-end change.”
“What we’ve done is we have rolled out an entirely new brand and identity, along with a new brand promise at all of our stores,” Donigan said. “That means not just a new façade and a beautiful new logo, it means a wholesale change to our merchandise and a wholesale change to the promise of what the pharmacist and the front-end teams are expected to deliver to their customers.”
In an effort to make pharmacists more consultative, the company has invested in making sure that the industry-staple concept of freeing up the pharmacist is actually happening to enable more customer touchpoints. “You can’t just say you’re going to free up a pharmacist’s time,” Donigan added. “You have to have capacity, workflow changes and trained technicians who are proficient.”
In order to figure out how to enable pharmacists to spend their time out from behind the counter, Rite Aid focused on a group of pharmacists and pharmacy technicians and analyzed workflow that provided insight into how to best spend their time. Among the takeaways Donigan pointed out was pharmacists typically spend too much time doing work that could be delegated to pharmacy techs, many of whom just needed better training to rise to the occasion. Another critical takeaway for structuring pharmacists’ days was that most patients will come to pick up their medications between 1 p.m. and 7 p.m., with acute prescription needs coming mostly in the morning.
With these insights in hand, Donigan said pharmacy technicians are armed with training and the time needed to fill prescriptions is spent in ways that allow pharmacists to be approachable during the peak prescription pickup for clinical services — including medication management and immunizations, which soon will include the COVID-19 vaccine — comprising roughly 20% of a pharmacist’s day.
Pharmacists also play a critical role in personalizing the store experience for patients and highlighting OTC offerings for various needs. Donigan said that the company is highlighting certain categories near the pharmacy — beginning with immunity, which has grown in interest during the pandemic — to enable patients to ask pharmacists questions about the categories. Armed with tip sheets and six-hour certifications as integrative specialists, the company’s more than 6,300 pharmacists are able to walk patients through any questions they may have about the category being showcased (future pharmacy-adjacent categories will include sleep and pain management).
“We’re positioning our pharmacists as whole-health advocates to offer personalized health recommendations and consultations for all members of our community who come into a Rite Aid,” Peters said. “They’re ready to provide personalized tips on everyday health questions — how to get sounder sleep, alleviate stress, support immunity and address pain. These are things that are often not diagnosed or not treated among our target demographic, but critically important inputs to quality of life.”
Know Thy Customer — and Meet Them Online
The theory with Rite Aid’s RxEvolution is it is not enough to change how the pharmacist spends their time to enable customer interactions. There also has to be a mix of merchandise that is relevant to the typical Rite Aid shopper and the company’s target growth demographic.
“We’re building an experience that speaks to a whole net new customer base for us,” Peters said. “Millennial and Gen X women are taking care of not only themselves but also their children, their aging parents, their spouses and their pets. These women are a significant portion of our current drug store shopper across the industry, and we realized that we needed to have a strategy that was underpinned by a number of components that allow us to win.”
While unlocking the pharmacy’s value is part of that, so is revitalizing the retail and digital experience for Rite Aid’s customers. It starts with a merchandising overhaul, led by chief merchandising and marketing officer Erik Keptner, who joined the company in May 2019. The company assessed categories that were slow turning or not relevant to the consumers — including motor oil, clothing and electronics — and deleted them from their merchandise mix. On the other hand, Rite Aid also is bolstering its offerings in better-for-you consumables, trendy skin care and the aforementioned pharmacist-assisted OTC mix, as well as adding some air to the planogram and trying to inject some fun into the shopping experience while supporting holistic health and well-being.
“We’re not just about getting healthy, we’re about getting thriving,” Donigan told DSN in March when the RxEvolution was unveiled. “And thriving is not just about not drinking soda and getting the right medications. It’s about having fun. It’s not a clinical experience, it’s a ‘radiating wellness and getting thriving’ experience that’s fun and nonjudgmental.”
Besides the right merchandising mix, Rite Aid also is focused on meeting its consumers where they are — largely online, particularly throughout the pandemic. “We’re not white-knuckling onto the physical brick-and-mortar store as the only vessel through which we will create value for our consumers,” Peters explained. “We’ve really needed to place a concerted effort on the omnichannel experience in a way that we had never done at Rite Aid.”
He noted that while the pandemic moved up the timeline on Rite Aid’s expanded digital offerings, it did not catch the company unprepared. “The reality is that this was always a part of our strategy,” he said, noting that the company began supporting more than 15 times its historical product volume by late March and April — a trend that has continued in the ensuing months.
Offering an Elixir
Alongside its retail strategy, Rite Aid also has an ace in the hole for growing its business and opening up new partnerships and revenue streams. Unlike many of the changes, the company’s PBM is not new to the company, but Donigan noted that it has been underutilized.
Purchased as EnvisionRxOptions in 2015 in an effort to diversify the business, the newly rebranded Elixir encompasses PBM services — including Medicare Part D programs — a mail-order pharmacy service, specialty services, savings programs and various other components that include third-party rebate administration and claims adjudication.
Donigan and recently named Elixir president Dan Robson see Elixir as a way for Rite Aid to gain a foothold in the $400 billion PBM market among clients who want an independent PBM offering.
“Our main differentiators are that that Elixir is the only PBM that’s not aligned to health plans and also that it has a retail pharmacy footprint,” Robson said. “This allows us to have a higher degree of vertical integration with neighborhood pharmacies. While our transformation will take some time — I believe a couple of years — we remain bullish on Elixir and believe it represents the biggest long-term growth opportunity for the organization.”
The state of Washington has been identified as a high-priority market, and Rite Aid’s recent purchase of Seattle-based chain Bartell Drugs is part of its efforts to strengthen its standing in a market dominated by a few regional health plans and health systems. “This makes us No. 1 in the market hands down, not only in terms of stores but in terms of scripts and our ability to really shape health care in the state of Washington,” Donigan said, noting that many of the health plans partner with the big three PBMs aligned with larger payers out of necessity. She said Elixir can help offer a unique approach.
“It would be exciting if Elixir and Rite Aid partnered with some of the major health systems there to offer telehealth in our stores and clinical programs for their members, where the pharmacies are just an extension of the health system,” she added. “We have a once-in-a-lifetime opportunity to engage consumers in ways we’ve never seen before in health care. This is not only an opportunity for Rite Aid but for Rite Aid as an integrated pharmacy offering with Elixir.”
Robson noted: “We can deliver a differentiated solution to improve cost of care and quality metrics in tandem with Rite Aid and Health Dialog to close care gaps. Elixir is laser focused on helping orchestrate the patient experience across all channels with a priority on driving digital adoption and upgrading our tool kit.” Health Dialog provides personalized, analytics-driven health management services, including member health coaching and medication adherence, to close gaps in care.
With the three pillars in place — empowered, knowledgeable pharmacists; a unique and targeted merchandising approach with omnichannel support; and a PBM that can make inroads in promising markets — Donigan and her leadership team are looking ahead with optimism. Since taking the helm, Donigan said she has seen several promising trends, including consistency in meeting earnings guidance and growing market share. But she and Peters acknowledge there is still work to be done.
“It’s going to be a fast and furious over the next two years as we have to keep up with our customers, and they are a demanding lot, as they should be,” Donigan said.
Peters highlights the chain’s drive and determination. “We won’t be out-hustled,” he said.