tag:blogger.com,1999:blog-28450497.post5861400506000985370..comments2009-02-02T10:19:16.074-05:00Adam J. Fein, Ph.D.http://www.blogger.com/profile/12217252282643255442noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-28450497.post-84412028555004796432009-02-02T10:06:00.000-05:002009-02-02T10:06:00.000-05:00It is great analysis. You analyzed the reason about the sharp slowdown in year-over-year growth at drug store. Furthermore, Could you give us a general explanation about the trough for drug store revenue happened during 2004 and 2005?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28450497.post-81216041567058409622008-12-11T16:10:00.000-05:002008-12-11T16:10:00.000-05:00Adam,<BR/><BR/>Thank you for your explaination. Using the "change", the correlation is -0.1. Not quite at -0.4, but the merit of your argument is well-taken. Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28450497.post-56123202430780522232008-12-11T12:08:00.000-05:002008-12-11T12:08:00.000-05:00Re: the correlation<BR/><BR/>I correlated the *change* in sales at pharmacies to the *change* in retail sales. I believe that you are reporting the correlation between the *level* of sales at pharmacies to the *level* of retail sales.<BR/><BR/>If you correlate the level of sales, then the correlation is artificially inflated because there is a common time trend a.k.a. <A HREF="http://en.wikipedia.org/wiki/Unit_root" REL="nofollow">a unit root</A>. <BR/><BR/>In other words, retail sales of all kinds tend to grow over time, so correlations of sales levels are really just showing the correlation of the time trend. Taking the first difference (change in sales) removes the time trend and highlights the true relationship.<BR/><BR/>Sorry if that was not clear. I edited the text of the post to clarify that I am discussing correlation between the changes.<BR/><BR/>Note that I also aggregated the Census data to calendar quarters to smooth out the monthly variability.<BR/><BR/>AdamAdam J. Feinhttp://www.blogger.com/profile/15774296048321605590noreply@blogger.comtag:blogger.com,1999:blog-28450497.post-47892241852081137362008-12-11T11:49:00.000-05:002008-12-11T11:49:00.000-05:00Adam,<BR/><BR/>Using Bureau of the Census data, I calculated the correlation between total retail sales and pharmacy sales back to 1992. My result is 0.99, far far away from -0.40 mentioned in your blog. I wonder from what data did you get the -0.40 number. Thanks for your time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28450497.post-43469478192056596442008-10-16T10:21:00.000-04:002008-10-16T10:21:00.000-04:00Regarding the second comment above, today's AIS Health Business Daily newsletter leads off with the following quote:<BR/><BR/><I>"We are facing a continuation of the slowest-growing prescription drug market in 47 years, according to IMS Health. We believe the biggest impact has been the very tough economy."</I> — Jeff Rein, chairman and CEO of Walgreen Co. <A HREF="http://www.aishealth.com/Bnow/recent/HBD101608.html" REL="nofollow">Source</A><BR/><BR/>An especially interesting statement in light of Mr. Rein's recent "retirement."<BR/><BR/>AdamAdam J. Feinhttp://www.blogger.com/profile/15774296048321605590noreply@blogger.comtag:blogger.com,1999:blog-28450497.post-66163570065185611492008-10-16T10:14:00.000-04:002008-10-16T10:14:00.000-04:00Sounds like you disagree with Jeff Rein!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-28450497.post-52564789155379124132008-10-16T08:16:00.000-04:002008-10-16T08:16:00.000-04:00Great analysis, Adam. But your last comment about discount stores makes me wonder about the impact of $4 generics. <BR/><BR/>If discount stores are gaining during a recession AND they are focused on pharmacy now, does it mean that drug store sales will be lower in the future because they lost market share?<BR/><BR/>I'm thinking about your comments on Wal-Mart a few weeks ago and wondering if the recession will make them much bigger in pharmacy by 2010 or 2011. Any ideas?Anonymousnoreply@blogger.com