With Walgreens two trends - omnichannel retailing and ACOs - are already taking shape in 2013
Walgreens chief Greg Wasson had a new vision to share with the pharmacy operator's faithful shareholders for 2013. It was a vision that firmly placed the Express Scripts dispute in the rear-view mirror and refocused on the road ahead, that includes expanding the role of pharmacy and even what it means to be a U.S. pharmacy operator with its acquisition of Alliance Boots.
Two major announcements were made in the wake of the shareholders meeting, both of which were identified by DSN as two of the top six big trends to watch through 2013. Walgreens reiterated its commitment to fostering an omnichannel experience for its shoppers and, a day after the shareholders meeting, Walgreens became the first retail pharmacy operator to partner on three Accountable Care Organizations.
DSN is batting .333 already and the 2013 season has hardly begun — it only took 10 days into the New Year to prove DSN right on those two counts.
Regarding omnichannel retailing, Wasson made it clear that the company doesn't care where the customer shops, so long as it's with Walgreens — in the store, through an app, online, wherever and whenever and however she wants to shop. "Our goal … is to step completely out of the drug channel as it exists today and [create] something new and unique," Wasson said.
Walgreens is clearly on the forefront of this new kind of retailing. It requires a different mindset. It's no longer about placing a location, or even a product, along the projected travel pathway of a consumer. It's about being "there," no matter how the shopper defines "there." And that means serving as a valuable resource to that shopper. She needs to know that no matter what she's looking for — the most value-oriented means to get that item is through a Walgreens resource.
And Walgreens has good lead engaging this omnichannel consumer, especially now with a 50-million strong and still-growing Balance Rewards loyalty program. Walgreens already has a firm handle on how to make it easy for a shopper to use her own media devices, phone or tablet, to connect with Walgreens. With a push of a button (and the free app), she can print photos directly from her phone to a Walgreens location. She can locate merchandise in a store based on the planogram of the store she's in. And she can scan and text refills. You think of a way for a shopper to shop better on a phone or tablet, and Walgreens likely already has an app serving that need.
But Walgreens isn't going to win pharmacy retailing on the front-end. And they're not going to win pharmacy retailing across the back bench of pharmacy either, at least not the pharmacy business model of yesterday. Filling prescriptions and stocking the tens of thousands of front-end SKUs is a business model that inevitably leads to commoditization. That's why innovation is so important. You've got to mix things up, because the competitor down the street has the same offering, maybe even at a penny less.
Tomorrow's pharmacy business is about creating healthcare value for the payor. Kermit Crawford, Walgreens' president pharmacy, health and wellness, immediately following the shareholders meeting sat down with a gaggle of reporters to discuss whatever was on their minds. First question? OK, the first question was about re-acquiring former Express Scripts patients (It's really too cloudy to delineate, Crawford said, focus on overall prescription comps.) But after that the conversation centered on how Walgreens is transforming retail pharmacy.
"What you're seeing are pharmacists are playing a greater role in the accountable care network as a part of the Affordable Care Act," Crawford said. "If you think about the reason for healthcare reform, it is about providing convenient access to affordable care. … We feel we are really aligned with healthcare reform." The emphasis was on "really."
The way a Washington Post article on the deal couched it, ACOs represent a group of healthcare providers who band together and accept a lump sum payment to care for Medicare patients. They are then incentivized to provide high quality care at a lower price. It's a quality vs. quantity model.
Jeffrey Kang, Walgreens SVP health and wellness services and solutions, told The Post that pharmacy-run ACOs represents an ideal business model. Pharmacy is still the most convenient point of healthcare access and more and more basic health care needs — vaccinations and preventative check-ups — are occurring in the retail pharmacy setting.