First, some context:
- Supermarkets made up 12% of 2005 retail pharmacy sales dollars.
- Supermarkets dispensed 470 million prescriptions in 2005, which is up 170%since 1992. For comparison, mass merchants (like Wal-Mart and Costco) dispensed only 365 million prescriptions, up only 96% since 1992.
- The biggest supermarkets with pharmacies -- Kroger, Supervalu, Safeway, and Albertsons – equal more than half of all supermarket pharmacy spending.
- Pharmacy contributes 9% of total store sales, which is about double the percent of sales from 8 years ago. The industry average mix (of stores with and without pharmacy) is 3% of sales.
- The “median of the average gross margin” for the pharmacy department was 19.6%. I find this interesting because chain pharmacies do not release any information about pharmacy margins which I presume to be roughly comparable.
- No companies are using RFID at a store level, suggesting that we have a long way to go before this technology has any impact on supply chain security. Only 4.9% plan to implement the technology in the pharmacy. I remain skeptical about the uptake of RFID at the pharmacy level, even though it could be an important way to stop counterfeiting on the demand-side.
- The ongoing strength of supermarket pharmacy is good news for chain-oriented drug wholesalers such as Cardinal Health and McKesson. According to IMS channel data, supermarkets are much less likely to get bulk/warehouse deliveries from wholesalers than chain pharmacy. As I point out in my post about the Rite-Aid-Brooks/Eckerd deal, wholesalers have become dangerously dependent on low-margin deliveries to the warehouses of large retail pharmacy chains. Even supermarkets with good self-warehousing networks rely more on direct-store delivery since pharmacy is a minority of sales.