Healthcare Reform Could Be Shot in the Arm for Pharmacies

Food Marketing Institute's 1994 Supermarket Pharmacy Conference Looks Forward to Change

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SAN FRANCISCO-Healthcare reform might just be the prescription for ailing supermarket pharmacy sales.

That was the opinion of experts at the Food Marketing Institute's 1994 Supermarket Pharmacy Conference. The trick, they said, is to reposition the supermarket as a "total healthcare" store providing good nutrition as a part of wellness.

Supermarket pharmacies have seen profit margins erode, falling to 25% in 1993 from 29% in '90. The success of mail-order operations, discounters, competition from large-volume drugstores, and managed-care contracts with health maintenance organizations and corporate healthcare plans all contributed to the supermarket pharmacy slide, an FMI study released at the recent conference concluded.

About 20% of the nation's 29,800 supermarkets have pharmacies, according to Stamford, Conn.

As consumers are more concerned about good nutrition as part of wellness, the supermarket pharmacist is in a position to do more than simply hand out pills.

"The role of the pharmacist is changing," said Robert Coopman, VP-pharmacy at H.E.B. Grocery Co., San Antonio. "He is now available for therapeutic interchange and disease monitoring." For the supermarket, "the synergies are there."

Also expected to help the supermarket pharmacy is the trend of switching prescription drugs to over-the-counter products, such as the planned introduction of Syntex Corp.'s and Procter & Gamble Co.'s Aleve, the first new non-prescription painkiller in the U.S. since ibuprofen was introduced in 1984. It's expected to have a built-in market of 7 million people now taking Syntex's prescription Naprosyn and Anaprox.

Ronald W. Turner,VP-member affairs and education at the General Merchandise Distributors Council, Colorado Springs, Colo., said projections indicate sales of new OTC products will jump to $14 billion in 1996, a 220% increase from 1992. (A number of prescription drug patents will expire in or by 1996.)

Prescription-to-OTC drug sales "offer supermarkets high-ticket rings, incremental sales and strong per-unit profitability," Mr. Turner said. "In addition, retailers report that gross margins on these items are typically higher than the average in health & beauty care" as well as dry grocery, dairy and frozen foods.

Strategies for success include getting the pharmacist out from behind the counter to meet and talk to customers. Chains that have pharmacies in some stores but not others could offer a phone line to a store that does have a pharmacist. One southern supermarket operation is taking a different approach-building private rooms where pharmacists can talk confidentially with a customer.

Cross-marketing between pharmacy items and the rest of the grocery store also has its place, such as offering a free turkey with a prescription transfer or a free children's video rental with an antibiotic for earaches.

"We want to keep them in our food stores. We don't want them to take a second trip to a Walgreen's," said Bob Storch, VP-professional services-health & beauty care, Dominick's Finer Foods, Northlake, Ill., which has 60 pharmacies in its 101-store chain.

Emily DeNitto coordinates Grocery Retailing News.

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