Tracing the growth of a pharmacy juggernaut

In 2006, Health Mart was a loosely cohesive buying and marketing group of 268 independently owned and operated drug stores, falling under McKesson Corp.’s store-support umbrella via its purchase of the old FoxMeyer wholesale business in the mid-1990s. Today, just seven years after its reinvention and relaunch by McKesson, Health Mart is the nation’s biggest independent pharmacy franchise and one of the fastest-growing drug store networks of any kind, with more than 3,100 member stores doing business in thousands of communities across the United States.

It was an idea whose time had come, said Kevin Kettler, SVP marketing for McKesson U.S. Pharmaceutical. Given the massive challenges confronting independents — daunting competition from chain pharmacy, mounting operating and marketing costs, and a shifting healthcare reimbursement system, to name a few — the conditions were ripe for a new kind of high-concept, comprehensive store-support model. One that blended the traditional strengths of independent pharmacy with the sophisticated marketing, merchandising, technology and the kind of clout with payers and pharmacy benefit managers that McKesson could provide through Health Mart.

The concept “clearly resonated” with independents and met “a need in the marketplace,” Kettler said. “When Health Mart relaunched, we had a goal of bringing the local identity and personalized service of an independent together with the recognition of a national brand for payers, patients and manufacturers,” he explained.

Health Mart’s success, Kettler added, derives from “the anchor that is independent pharmacy, and from supporting the core aspects of what our individual pharmacists and pharmacies do in terms of serving their patients.”

The economies of scale provided by corporate parent McKesson are clear in many segments of Health Mart’s business. For instance, Kettler said, “we didn’t have to go build a private-label team” when Health Mart introduced its own line of store-brand OTC products and vitamins in November 2011. McKesson’s store-support team already had developed a very successful private label, Sunmark, and was able to “leverage the capability” to launch the Health Mart brand, he told DSN.

Kettler oversees market strategy, product development and customer programs for all McKesson market segments, totaling more than $90 billion in annual sales, as well as development of store-support programs for both Health Mart and McKesson’s complete universe of independent pharmacy customers.

It’s a growing menu of capabilities, including programs specific to Health Mart — such as the revamped Local Marketing Support program and the consumer-facing online platform and mobile app, Your Pharmacy Online — and the broader suite of services available to all McKesson customers.

“We’re able to leverage the scale of our 6,000-plus independents in certain circumstances where appropriate, and we’re also able to use those capabilities to tailor solutions specifically for Health Mart,” Kettler explained. “So it’s the best of both worlds.”

It goes without saying that the franchisees under the Health Mart umbrella participate more fully in McKesson’s full menu of store-support services, and thus are eligible for the highest level of commitment and services the company has to offer. “There are some [support services] that naturally fall into the Health Mart-only bucket,” Kettler acknowledged.

Examples include the Health Mart private-label program and the newly revamped Local Marketing Support program, “where we’re able to leverage the brand of Health Mart and create the design, writing and advertisements that support our Health Mart franchise.” Also included in that bucket is a variety of recently revamped store design options that puts the focus even more sharply on pharmacy and health services.

Another major benefit available to Health Mart franchisees is priority access to a still-growing arsenal of technological solutions that extend their reach to patients and their peers via mobile, social and online tools. For instance, the Your Pharmacy Online offering provides a turnkey website, a mobile website and a smart-phone app for pharmacy owners, letting patients order refills, receive reminders, or check store information. While the web-site option is available to all independent customers, the smartphone app is currently only available to Health Mart customers.

What’s next for Health Mart? Kettler sees the transformations currently upending the U.S. health system as ultimately of huge potential benefit to pharmacy. Health Mart, he said, “is very well-positioned” for the shift to what he calls an “evidence-based” reimbursement system and “the payer evolution, whether it’s narrow or exclusive networks, or some other system,” he told DSN. “If you look at the relationship and trust our Health Mart pharmacists have established as care providers in the community, combined with the value they bring from a clinical support perspective, we’re very optimistic.”

Seven years into its transformation, Health Mart has grown into a major force in community pharmacy. And with the changes coming under health reform, and the strong leverage McKesson gives Health Mart members among patients, payers and physicians, the next seven years could be even more transformational.