Health and wellness destination?
The CEO believes they can be
more than just a store that fulfils prescriptions. "With nearly 70 percent
of the U.S. population either without a primary care physician or not utilizing
one, and more than 30 million people gaining insurance coverage in 2014 under
health care reform, we are well-positioned to fill the void in care,”Greg
Wasson, CEO. Having the largest drugstore footprint means convenience for
customers and provides an alternative to expensive physician or hospital care.
WAG will be the option for customers if they cannot get a doctor's appointment
and need after hours help.
WAG believes that they can can
lower healthcare costs by delivering health services such as flu shots, health
testing, coordinated wellness care and work-site health centers. The work site
centres are particularly attractive for companies as instead of
employees taking a half day off they can visit the on site clinic run by WAG.
Health and wellness to the world
WAG is aiming to create the
first global pharmacy led health network. WAG has acquired a 45% stake of
Alliance Boots in the UK (the largest pharmacy chain in Europe) with plans for
full ownership by 2015. Together these two companies are betting that they can
create a global drug chain. Consolidating their purchasing power will result in
large synergies for the combined company.
Earn reward points by walking?
Last September WAG launched its
first ever rewards program. Shoppers can earn points buying items, filling
prescriptions, being immunised and joining the company's healthy-lifestyle
programs, like Walk With Walgreens. That's right points by walking!
Utilizing technology WAG has made their reward card mobile.
Downloading the rewards app customers can scan their phone at checkout no need
to carry a card. In just 6 months WAG has enrolled more than 60 million
customers. This helps WAG to reduce marketing costs by moving away from print
promotions to digital within their rewards loyalty program.
Technology is making WAG even more convenient for customers with mobile apps. This year, the
company launched its Pill Reminder mobile app and expanded its mobile
prescription refill and transfer capabilities. WAG has also created an in-store
map that allows customers to use a digital shopping list to map and locate
items in a store and a “find your pharmacist” tool. This tool allows
customers to select a pharmacist by matching their health care needs to areas
of expertise, like specialties, languages and clinical backgrounds of Walgreens
pharmacists. These tools differentiate WAG from independent chains which are
estimated to account for 20% of the industry.
Taking the red pill
As with every investment there
are risks, ongoing reimbursement pressure from payors like Express Scripts have
negatively impacted WAG. Express Scripts is basically the middleman between
drug makers and employees, Express pays pharmacies to dispense the drugs to
their customers. Hundred of thousands of Express Scripts customers were shut
off due to disagreements over payment reimbursement. The dispute last year was
estimated to have cost WAG more than $4 billion in revenue. Customers
either switched to another pharmacy or paid more for drugs if they stayed with
WAG. Both parties have agreed to a new multi-year service agreement
however WAG now has to win these customers and their prescriptions back. I
suspect that WAGs move to become a health and wellness destination has been
motivated to decrease reimbursement pressure.
Reality or wonderland
Just like the Matrix as an
investor you have a choice. "
Disclosure:
Decisive is long WAG
The
material in this article is for informational purposes only and in no way
constitutes a solicitation of business or investment advice. The material has
been prepared without regard to any client's or other person's investment
objectives. Before making an investment decision you should consider the
assistance of a financial adviser and whether any investment or service is
appropriate in light of your particular investment needs.
