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04/11/2022

E-commerce rivals: Retailers adapt to threats from online sellers

Retail pharmacy is up to the challenge of meeting consumers’ evolving needs and has proven over time that it has the edge over the efficiencies of e-commerce alternatives.

Traditional retail pharmacies will need to evolve to meet the rising expectations of their patients around cost and convenience, industry leaders said.

Online competitors continue to try to siphon off sales of both prescription drugs and other products — from CBD and vitamins to greeting cards — but so far brick-and-mortar drug stores have met these challenges by investing in solutions, such as online ordering and delivery to drive-thrus and curbside pickup. They also are emphasizing their in-store services that differentiate them from online players.

An increasing number of competitors are entering the space, however, including, most recently, tech entrepreneur Mark Cuban. The “Shark Tank” star has invested in the newly renamed Mark Cuban Cost Plus Drug, which is promising “huge savings” on hundreds of generic drugs.

[Read more: Mark Cuban intros online pharmacy offering affordable generics]

Before Cuban’s investment, e-commerce giant Amazon acquired PillPack in 2018, a deal that was feared to have the potential to disrupt traditional pharmacy.

Amazon was seeking to capitalize on inefficiencies in the traditional brick-and-mortar drug store industry by offering a more streamlined, low-cost model, according to a report from consulting and investment firm Back Bay Life Science Advisors.

“We see this less as the beginning of a new era for prescription drug distribution or the beginning of the end for traditional pharmaceutical chains,” Back Bay said in a report on Amazon’s pharmacy operations. “Instead, we see adaptation ahead.”

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CoverMyMeds 2022 Medication Access Data Guide statistic

Back Bay cited e-commerce efforts from traditional drug store operators such as CVS and Walgreens, as well as the challenges Amazon faces in providing some pharmacy services online.

Brian Sullivan, senior systems sales manager of healthcare solutions at Knapp North America, which provides central prescription fill and other solutions for pharmacies, said pure play online pharmacies have had difficulties penetrating the prescription drug market.

“Amazon has the resources to handle a lot more volume, but because they don’t have the kinds of contracts that the large PBMs have, or the chains, they’re not getting the volume I think that they were expecting,” he said. “They don’t really have a brick-and-mortar presence, and that’s where I think the retail chains and independent retailers extend their advantage because they are neighborhood health hubs.”

Traditional drug stores have proven over time that the convenience they offer, the high level of personal care and the ability to offer in-person disease management have so far given them the edge over the efficiencies of e-commerce alternatives. Although online operators often tout lower prices, they tend to attract “commodity” shoppers who may need a one-off prescription, rather than the high-value customers who depend on their local pharmacies for a range of services, said Kurt Proctor, senior vice president of strategic initiatives at the National Community Pharmacists Association.

“I don’t think [online channels] have been a big threat yet,” he said.

[Read more: NCPA survey finds patients disapprove of PBMs]

While the purchase of some front-end items has migrated online, the core business for community pharmacies remains prescription drug sales, he said. In addition, most community pharmacies have long offered home delivery of prescriptions, including same-day delivery, and many also allow shoppers to order additional items from other areas of the store.

Still, the increased use of online channels during the pandemic should inspire even small, independent retailers to consider enhancing their e-commerce capabilities with a mobile app and other online and text-based services, Proctor said.

“Most of the customers of our independent members are not swayed by home delivery because if they want it, they can get it from their pharmacy,” Proctor said. “Or their independent pharmacy may be very conveniently located to them, and they like the human interaction of going in and taking care of their business there.

“Pharmacies must embrace remote monitoring and diagnostics, and rethink their digital capabilities to maintain and increase patient engagement opportunities.” — Eyad Farah, president, Health Mart and Health Mart Atlas

“I think everybody is trying to meet the customers where they want to be met and offering convenience,” he said.

Food and drug retailers have proven during the last two years that they are up to the challenge of meeting consumers’ evolving demands, said Steve Anderson, president and CEO of the National Association of Chain Drug Stores, or NACDS.

“Before and throughout the COVID pandemic, NACDS chain and associate members have remained focused on meeting the overall health-and-wellness needs of patients and consumers, as well as serving as a go-to source for an array of consumer products,” he said. “Over the past two years, the NACDS membership rose to the unique challenges presented by the COVID crisis — innovating boldly to meet changing consumer demands and mindsets, including changes in the way that consumers shop.

[Read more: NACDS urges administration, Congress for funding to sustain equity-driven COVID-19 response]

“This includes omnichannel, digital, click-and-collect, delivery and much more,” he said. “We have heard NACDS chain members say they have accelerated the development and deployment of new technology by several years.

“It also is worth emphasizing that throughout the pandemic, pharmacies have provided trusted, convenient and equitable access to services ranging from COVID testing to vaccinations for COVID, flu and many other vaccine-preventable illnesses,” Anderson said. “Services will remain a central and unique aspect of the pharmacy value proposition.”

Many food and drug retailers have been at the forefront of pharmacy innovation and have taken steps to compete against the threats of online players.

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CoverMyMeds 2022 Medication Access Data Guide stat

David Carmouche, senior vice president of omnichannel care at Walmart health and wellness, said the Bentonville, Ark.-based retailer is well positioned to face today’s competitive pressures.

“Walmart revolutionized the healthcare industry 15 years ago when we launched the $4 generic drug price program, and we continue innovating today to provide health-and-wellness products and services to our customers when, where and how they want it,” Carmouche said. “What our customers have told us is that they want convenient access to care by qualified healthcare professionals in their community who they know and trust. We are well positioned to provide accessible care, both in person at our Walmart Health clinics, vision centers and pharmacies or through our growing telehealth offering and Walmart+ pharmacy benefits.”

Retail Pharmacies Evolve
Danny Sanchez, senior vice president and general manager at EnlivenHealth, said that much like the way growth of mail order has stalled, pure play online pharmacy also faces headwinds as traditional retailers have proven their ability to evolve to meet the needs of their customers and patients.

“There is a certain segment of patients that will use mail order, but for the most part, brick-and-mortar didn’t go anywhere,” he said. “It’s still very much alive.”

Similarly, he said, retail pharmacy offers a level of personal interaction and trust built up over years that online pharmacy can’t match. “Certainly there are services where you have telepharmacists, and those are fantastic and they can answer questions, but nothing is going to replace your local pharmacists,” Sanchez said.

In-store services are especially important for patients who are on multiple medications and seeking to manage chronic diseases. Having a trusted pharmacist who they can discuss their medications with not only benefits the patient but helps reduce the overall costs of health care, he said.

[Read more: EnlivenHealth’s patient-engagement solution aims to mitigate staffing shortages]

In addition, pharmacies are only going to become more involved in patient care through activities such as the test-to-treat initiative that President Biden recently unveiled for COVID-19, in which patients can get tested and receive a prescription on the spot.

“I think test and treat is going to go beyond COVID and will extend to the flu and other ailments and other opportunities,” Sanchez said. “I think that is the beginning of the curve. It is opening the door for pharmacists, and I think that is fantastic.”

Sanchez also said he envisions that digital connectivity among pharmacies and physicians’ offices will continue to advance, so that patients might begin their journey with a telehealth visit with a physician, who then sends them to a pharmacy for a test. Patients then may be able to pick up a prescription through an agreement with the physician or through prescribing rights that the pharmacist may have.

“Services will remain a central and unique aspect of the pharmacy value proposition.” — Steve Anderson, president and CEO, NACDS

That could save both time and money, Sanchez said, describing retail pharmacy as “the lowest cost of entry into health care,” compared with urgent care clinics or physicians’ offices.

Sandra Canally, founder and CEO of The Compliance Team, which provides certifications for a variety of pharmacy services, agreed that traditional drug stores can compete with emerging online players by offering more clinical services.

“This is especially true for patients with chronic diseases that need extra attention,” she said, noting that these patients often spend more time visiting their pharmacist than they do their primary care doctors.

[Read more: DSNTV: Sandra Canally outlines The Compliance Team's COVID-19 immunization certification program]

Immunizations, screenings and other face-to-face services are the kinds of offerings that distinguish brick-and-mortar retailers from online competitors, Canally said. Some pharmacies also have integrated their services with some primary care practices and leveraged the retail dietitians in their stores.

“These are all positive add-ons that can impact patient outcomes, and obviously are good for the pharmacy’s operation as well,” she said. “It’s all about expanding the business model. If you have the space for a nurse practitioner, or someone to meet with customers to do diabetic teaching, you’re expanding services to meet the needs of the patient.”

Pharmacies will continue to play an important role in helping patients manage their diseases and “keep them out of the emergency room,” Canally said.

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CoverMyMeds 2022 Medication Access Data Guide statistic

“The prescriber will take note of that,” she said. “They are going to want to do business with the pharmacy that is doing more to help their patients than just fill their scripts.”

Knapp’s Sullivan said that in addition to offering more services to patients as a point of differentiation from online players, retail pharmacies can also take steps to make their own operations more convenient and efficient.

“If you think about online, what’s their advantage? Their advantage is convenience and cost,” he said. “If pharmacies can address their cost through the reduction of fulfillment and labor costs by using a centralized fill solution, that’s one thing that they can do. If they can add convenience and add more revenue to their operations by differentiating their offering for the patients, now they’ve added more value for the customer, and the guys without the brick-and-mortar can’t play in that space, at least as they’re structured today.”

Sullivan noted that pharmacies that offer more services and allow pharmacists and technicians to practice at the top of their licenses also provide a more rewarding work environment for those individuals, which is helpful in a tight labor market.

Pharmacies Support Communities
The pandemic helped emphasize in consumers’ minds the importance of community businesses, as each helped support the other during the challenging times, when shopping became challenging for some people and businesses sought to juggle safety, supply chain and labor issues.

“The past two years cemented what we’ve always known about pharmacies: They play an integral role within their local healthcare ecosystem and supporting patients in their communities,” said Jenni Zilka, president of Good Neighbor Pharmacy, the independent franchise arm of AmerisourceBergen. “The expansion of clinical services offered at pharmacies throughout the pandemic has been critical in our country’s effort to curb COVID-19 infections, and the pandemic experience has been proof that access to brick-and-mortar locations is essential.”

[Read more: Good Neighbor Pharmacy administers more than 5M COVID-19 vaccines]

Pharmacies had already been supporting comprehensive clinical services such as immunizations, weight loss management, diabetes management, smoking cessation counseling and others, she said.

“Then, the pandemic taught us just how agile community pharmacies are and how much capability they have in delivering trusted and valuable care to their communities,” Zilka said. “From testing to vaccinating to delivering COVID-19 therapeutics — I think we’re seeing just the tip of the iceberg in terms of what pharmacy has the capability to do.”

Retail pharmacy is also proving to be a line of support for local healthcare systems, especially in rural or underserved areas, she said.

“Community pharmacies will continue to thrive and continue to evolve into well-rounded healthcare destinations, especially as health equity remains a priority,” Zilka said. “Pharmacies are well positioned to address health disparities in our country because they’re accessible, highly trusted, ingrained in communities, and independent pharmacists specialize in personalized care for the individual. So, there’s still tremendous opportunity, and still a great deal of demand, for local pharmacies to serve as true healthcare destinations for communities.”

“From testing to vaccinating to delivering COVID-19 therapeutics — I think we’re seeing just the tip of the iceberg in terms of what pharmacy has the capability to do.” — Jenni Zilka, president of Good Neighbor Pharmacy

Still, patient expectations around e-commerce have risen during the pandemic, said Eyad Farah, president of Health Mart and Health Mart Atlas, the independent franchise divisions of McKesson.

“Coming out of the pandemic, the biggest challenge to traditional pharmacies may simply be the expectations for convenience and customer service that people experience with online shopping,” he said. “Truthfully, these expectations are now patient demands, and they are increasingly being applied to health care as well.”

Patients are progressively accessing health care via digital channels, with a wider range of options for care and medications, Farah said. He noted that 84% of patients participated in a telehealth appointment in the last 12 months, according to the 2022 CoverMyMeds Medication Access Report.

Pharmacies need to consider the patient journey and the role pharmacy plays in that journey, he said. “While patients have higher demands, they still want a personal touch, whether virtually or in person, that only local, community pharmacies can provide with convenient, one-on-one quality care,” Farah said.

[Read more: Industry experts offer big ideas]

He also said that while competition from digital pharmacies has grown during the pandemic, this trend has also created opportunities for pharmacies to implement solutions of their own that can improve convenience, speed and transparency.

“Pharmacies must address an omnichannel experience, offering both online and real-world ways for patients to access services and information that help them manage their health,” Farah said. “This could be as simple as a robust website with online refill capabilities, home and mail delivery, or creating two-way digital communication with patients via an app.”

The use of point-of-care diagnostic tools, including fitness trackers and smartwatches that can collect patient data and send it directly to pharmacists and other providers, has also been increasing, he said.

“Pharmacies must embrace remote monitoring and diagnostics, and rethink their digital capabilities to maintain and increase patient engagement opportunities,” Farah said. “Consumers are using virtual visits more than ever before and plan to continue using them past the pandemic.”

[Read more: Health Mart Digital Portfolio provides suite of digital tools, services]

To help improve patient care through technology, Health Mart recently launched the Health Mart Digital Portfolio, a solution designed to help pharmacies attract new patients, highlight unique pharmacy services and build stronger relationships within the community.

Powered by Tabula Rasa HealthCare’s PrescribeWellness platform, the Health Mart Digital Portfolio provides pharmacies with a new suite of digital tools and services, including a consumer web portal and mobile application, to enhance pharmacy reach and patient outcomes via a multichannel online platform. It also includes a customer portal, giving pharmacies the ability to provide an easy-to-use prescription refill option for patients.

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Creating awareness key for community pharmacy

By Mark Hamstra

Local independent pharmacies are expanding the range of clinical services they offer and investing in digital capabilities to make their stores more convenient to consumers.

As competitive threats continue to grow, retailers need to make sure their customers are aware that these new services are available, said Kurt Proctor, senior vice president of strategic initiatives at the National Community Pharmacists Association.

Marketing isn’t always a pharmacist’s strong suit, he said, so it may help to recruit someone on the staff who knows their way around the digital marketing and social media world to help promote these offerings.

Retailers that seek to specialize in offering services around specific conditions, such as diabetes or weight management, also should consider making connections with other healthcare providers that specialize in those areas.

“Get out and talk to providers in your area, or other groups that are related to your particular expertise, and let them know of the kinds of services you’re offering and the expertise that you have,” Proctor said. “Get them to understand how you will help those types of patients navigate their way through all of the things that affect them in their lives because of that disease state.

[Read more: NCPA, MPECrx launch Pathways to Pharmacy Ownership initiative]

“Don’t be afraid to toot your own horn,” he said. “Let people know you’re there, what you do, how well you do it.”

Emphasizing convenience is especially important when promoting such services, Proctor said.

“Always be looking for ways to make those things more convenient for your customers because that’s the angle that those competitors are coming from,” he said. “That’s why you’ve got to make sure folks understand how convenient you are.”

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