Tags: Pharmacies | Flu | Shots | Draw | Spending

Pharmacies Hope Flu Shots Draw Spending

Monday, 13 Sep 2010 03:05 PM

Signs of a weaker U.S. flu season this year may come as a relief to many, but drug stores such as Walgreen Co., CVS Caremark Corp. and Rite Aid Corp. are offering flu shots earlier and more conveniently to keep sales from slumping.

Last year's flu season was a bit harrowing, with swine flu infecting millions and the late-developed vaccine leading to long lines and short tempers. Flu season normally runs from October to May in North America.

But with no expected H1N1 outbreak along the lines of last year's heavily hyped version, this season's sales could be slower for drug stores, groceries and big-box retailers as fewer flu-stricken consumers come into pharmacies looking for cures and Kleenex.

Walgreen, for example, recently said that lower demand for flu-related prescriptions cut 0.3 percentage point from its same-store sales growth in August.

To compensate, drug stores have been offering flu shots earlier and with less hassle this year, hoping to draw consumers who will shop for other items once they are there. Drug stores began promoting flu shots in late August, about a week earlier than last year.

"It's fair to say that the majority of the transactions with people coming in to get a flu shot, they end up buying something else too," said David Magee, an analyst who covers drug stores for SunTrust Robinson Humphrey. "That's the draw — so they buy other things that are probably higher-margin."

This year's vaccine, which costs $25 to $30, guards against both seasonal and H1N1 flu. The Centers for Disease Control and Prevention expect enough people will get the shot to prevent a 2009-style outbreak. The CDC recommends everyone age 6 months and older receive the vaccination.

Drug stores also face increasing competition when it comes to offering flu shots. Grocery stores Supervalu Inc. and Kroger Co., and big-box retailers such as some Target Corp. locations have been offering flu shots.

That is one reason retailers began pushing vaccines earlier, analysts said. Manufacturers made the shots available earlier this year as well.

CVS and Walgreen are battling the hardest. Both have announced millions of dollars' worth of flu-shot vouchers for uninsured individuals, and CVS briefly offered a free shot to customers who purchased $30 worth of Procter & Gamble Co. products.

"I suspect they're doing that mostly for competitive reasons. You only get one flu shot per year," said Matthew Coffina, an analyst with Morningstar.

"Especially with increasing pressure from companies like Target or Wal-Mart (Stores Inc.), this is a more competitive business for drug stores than it's ever been," he said. "They're seeing pharmacy as sort of a strong anchoring point for the store."

Retailers hope to use the push for flu shots to take advantage of consumers' reluctance to spend on doctor visits by bringing them to in-store pharmacies and clinics, which have already grown into an estimated $18 billion patient-care arena that includes screenings, diagnostic testing and vaccines, William Blair analysts wrote in a research note.

 

Retailers have been trying to turn pharmacies into community preventive-care providers  — often staffed with nurse practitioners or physician assistants — that are more convenient than the doctor's office.

Supervalu pharmacies offer diabetes education classes, cholesterol and thyroid tests, and immunizations. Target's 36 clinic locations offer similar services.

"Five years ago, you wouldn't have even thought about going to a retailer for a shot," Magee said. "You've got this shift in the mindset. It's just so much more convenient than going to a doctor's office."

Walgreen administered more than 5 million vaccines by the end of November 2009, compared with 1.2 million in the entire previous flu season. The drug store chain said two-thirds of flu-shot recipients had not filled a prescription at a Walgreen pharmacy in the previous six months.

As many as a quarter of Supervalu's and half of Target's flu-shot customers each year are new to the pharmacy, representatives of the companies said.

Retailers would not say how many doses of flu shots they ordered this year, but many have said they expect to administer more than last year.

The Centers for Disease Control and Prevention expect manufacturers to produce about 160 million doses of the all-in-one vaccine, compared with 114 million doses of seasonal vaccine and 91 million doses of H1N1 vaccine produced last year, said CDC spokesman Tom Skinner.

Walgreen shares were up 0.3 percent at $29.06 on the New York Stock Exchange on Monday afternoon. CVS shares were up 0.4 percent at $29.14 and Rite Aid stock was up 2.3 percent at $1.02.

© 2017 Thomson/Reuters. All rights reserved.

 
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Signs of a weaker U.S. flu season this year may come as a relief to many, but drug stores such as Walgreen Co., CVS Caremark Corp. and Rite Aid Corp. are offering flu shots earlier and more conveniently to keep sales from slumping. Last year's flu season was a bit...
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2010-05-13
Monday, 13 Sep 2010 03:05 PM
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