You’re already at Kroger to pick up a prescription to lower your cholesterol, so you pick up some cholesterol-reducing milk.
At least that’s how the supermarket giant hopes it goes. The milk, released last year, is sold under an expanding in-house brand, Active Lifestyle, and is part of a growing industry effort to reach health-conscious consumers.
As prescription sales grow in proportion to overall sales, supermarkets and superstores are increasingly positioning themselves as one-stop health shops.
Almost half of food retailers provide health seminars, disease management programs, health-focused store shelf tags and tours featuring healthy products in at least some stores, according to an industry survey released last month.
The portion of supermarket business that comes from drug sales increased from 6 percent in 1997 to 9.4 percent last year, according to annual surveys by Food Marketing Institute. The trade association surveyed 55 food retailers operating 4,978 pharmacies for its most recent report. Its surveys found sales per pharmacy have increased, boosting overall store sales.
But not everyone is getting medication at the same place they’re buying groceries. Standalone pharmacies, which outnumber supermarket pharmacies by a 4-1 ratio, tout their focus on medications as an asset to customers. Independent pharmacies, in particular, market their superior customer service.
As a group, stand-alone drugstores – chains and independents – have seen drug sales rise at a faster rate than supermarket pharmacies.
But supermarkets are working hard to sell themselves as an advocate for the health-conscious consumer, and their in-store pharmacies are central to that strategy.
“Pharmacies are strategically essential to food retailers,” Catherine Polley, the institute’s vice president of pharmacy services, said in a statement. “The health and fitness initiatives that many supermarkets emphasized are anchored in the pharmacy. Pharmacists bring expertise and credibility that help these initiatives succeed.”
The traffic pharmacies attract spills over into other departments.
Scott Lahren, pharmacy district manager at Wal-Mart, said he’s seen total prescriptions and store traffic increase since the superstore launched its $4 generic drug program, which expanded into Indiana in 2006. Lahren declined to provide specific figures on prescriptions filled or total pharmacy customers.
In May, the discount generics program expanded to offer 90-day supplies of prescriptions for $10 and several women’s health medications, including drugs to treat breast cancer and hormone deficiency. The store also lowered the price of more than 1,000 over-the-counter drugs.
The Bentonville, Ark.-based retail giant reported record earnings last quarter, a net income of $3.45 billion for the period ended July 31. That was up 17 percent from $2.95 billion a year ago.
Superstore and supermarket officials say being a one-stop destination for everything from medications to banking (offered through in-store tenants) is appealing to consumers who want to spend less on gas. By the way, gas is also sold by many of these stores.
Food, fuel, pharmacy and financial services are the four retail anchors, Kroger spokesman John Elliott said.
“Pharmacy is a critical piece of that,” he said.
Pharmacists dispense medications and advice on healthy food choices for customers, Elliott said. Customers visit grocery stores often, making it easier for them to develop relationships with staff, he said.
Elliott said the supermarket chain has a dietician on staff in Indianapolis. The dietician reports through the advertising department and contributes pieces for publication, healthy recipes and nutritional advice.
In May, Kroger announced it was expanding its generics program, following Wal-Mart’s move to do the same.
Cincinnati-based Kroger added 11 prescriptions – six medications, some offered in varying dosages – including the cholesterol-lowering drug Pravastatin. Those drugs cost $4 for a 30-day supply or $10 for a 90-day supply. It also increased the number of women’s health medications offered at a discounted price.
Just like Wal-Mart, it saw increased traffic and prescriptions as a result. Elliott declined to disclose figures but called it “a very strong trend.”
In Kroger’s most recent earnings report, David Dillon, the company’s chairman and chief executive, touted its expanded generic drug and discount gas programs.
The supermarket chain reported net earnings of $386 million for the first quarter ended May 24, up 15 percent from $336.6 million during the same period a year ago.
Overall, U.S. prescription sales by food stores were $22 billion in 2007, according to IMS Health, a health care information company based in Norwalk, Conn. That’s down slightly, about 1 percent, from $22.3 billion in 2006, but up from $21.4 billion in 2005.
The number of total supermarket pharmacies has actually dropped somewhat in recent years, according to the Food Marketing Institute’s latest report. There were 9,859 last year, down from a high of 10,867 stores in 2004, according to information IMS Health provided for the report.
But a longer view shows strong growth.
The number of supermarket pharmacies increased 65 percent in 10 years, from 6,155 in 1996 to 10,163 in 2006, according to estimates by the National Association of Chain Drug Stores.
The estimates were based on data from IMS Health and the National Council for Prescription Drug Programs.
Polley, of the Food Marketing Institute, speculates that might be why the median number of prescriptions dispensed daily by supermarket pharmacies decreased from 139 in 1997 to 126 in 2007. It takes time for new pharmacies to build their customer base, she said.
Still, many consumers choose to get their medications at standalone pharmacies or through the mail.
In 2007, chain drugstores recorded $98 billion in U.S. prescription sales, up from $79.1 billion in 2003.
Mail-order services, which are known for deeply discounted prices, saw an even larger proportionate increase in drug sales from $28.9 billion to $44.6 billion during that period. Even independents pharmacies, which have been plagued by closures in recent years, saw sales rise as a group from $31.8 billion in 2003 to $38.7 billion in 2007.
Independents face stiff competition from supermarket pharmacies and larger chains, but they compete with service, said W. Howard Bell, owner of the Pharmacy of Canterbury.
The pharmacy on St. Joe Road is the only one in Fort Wayne that delivers medicines to sick and shut-in patients, he said. Those who come to the store are assured one-on-one attention, time to bond with their pharmacist, he said.
Bell gets complex cases from doctors who trust his work.
“We do a lot of specialty medicines,” he said.
Consumer Reports drugstore surveys conducted since 1998 show consumers consistently rank independents above other types of stores. Pharmacists at those stores get high marks for being accessible, approachable and easy to talk to and knowledgeable.
Though they don’t generally rate as high as independents, supermarket pharmacists should – in theory – have time to build close relationships with patients, Consumer Reports says. That’s because “druggists in supermarkets fill fewer prescriptions per day on average than in other types of stores,” the consumer publication reported.
Whether supermarket pharmacies will get a bigger piece of the pie remains to be seen. But industry insiders say they have the capacity to bring in more business for other store departments. And having other departments can offset hits from drug reimbursement changes and other variables that affect pharmacy profits.
Supermarket pharmacies have continued to post strong results despite pressures related to increased competition, including mail-order drug sales, and Medicaid and Medicare reimbursement rates, Polley said.