Wednesday, May 15, 2013

How the Pharmacy Industry Ch-ch-changed in 2012

Last week, the IMS Institute for Healthcare Informatics released its official 2012 market data in the report Declining Medicine Use and Costs: For Better or Worse? (Free download with registration.) The report offers loads of interesting stats, but I focus here on the prescription data.

The highlights:
  • Total retail prescription growth was 1.2% in 2012, a rebound from 2011’s especially weak growth of 0.3%.
  • For the first time in nine years, chains lost market share, as they grew more slowly than the overall industry.
  • Supermarkets staged an unexpected comeback, outpacing all other dispensing formats.
  • Independents and mail pharmacies shrank both in absolute size and market share.
Read on for my observations on the 2012 data and the five-year (2008-2012) pharmacy market evolution. Time may change us, but we can't trace time.


The chart below was created from the data on page 46 of the IMS report. Note that I present the data differently from IMS to give insights into retail pharmacy industry dynamics.

To put the 2012 numbers in context, here’s a look at the five year change in total prescriptions from 2008 through 2012.


Chains under pressure in 2012. Prescriptions at retails chains—drugstores and mass merchants with pharmacies—grew more slowly than did overall prescriptions. I speculate that Walgreens is behind this unusual pattern. In 2012, Walgreen’s prescription business suffered due to its nine-month absence from the Express Scripts retail pharmacy network. Apparently, gains at CVS and Rite Aid couldn't overcome the overall chain sector decline. This is not their last dance, as I expect a return to above-market growth for chains in 2013.

From 2008-2012, chains were the winning diamond dogs. Despite a weaker 2012, prescriptions filled at chains have grown twice as fast as the overall market over the past five years. CVS, Walgreens, and Walmart have been the big winners over this longer period. See 2012 Market Share of Top Pharmacies for a look at 2012’s estimated share of prescription revenues by company.

Supermarket oddity. Calling Major Tom! Supermarkets were the unexpected winners, with market-leading prescription growth of 6.2%. The 2012 results break a multiyear trend of flat-to-negative prescription growth. I'm not exactly sure what happened. Did supermarkets pick up the lost Walgreen’s business? Did free generic Lipitor lure more consumers into food stores? Or, will IMS eventually revise these data to be more consistent with long-term trends?

Are mail’s golden years behind them? In 2012, prescription growth at mail pharmacies remained depressed. Mail pharmacies’ five-year total growth rate was only 0.4%. For a review of the multiple factors behind the slowdown, see pages 30-32 of the 2012-13 Economic Report on Retail, Mail, and Specialty Pharmacies.

Independents vs. scary monsters. It was ashes-to-ashes for independent pharmacies, which lost both absolute number of prescriptions (down 0.3%) and market share (-26 basis points). From 2008 to 2012, independent pharmacies were the only dispensing format to shrink, losing 31 million prescriptions (-4.0%). As the five-year chart above shows, the true competitive threat for independent pharmacies is other retail pharmacies, not mail order. Yet independent pharmacy owners still complain most bitterly about mail competition. As the late senator Patrick Moynihan said: “Everyone is entitled to his own opinion, but not his own facts.”

Let’s dance. What do you think? Are you surprised by the latest data? What are your predictions for 2013?


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  1. My question is really for IMS. Are we really losing market share, or just not showing up in their data set? If they can't see Indy numbers, they may be drawing incorrect conclusions.

    More Indys are partnering with software vendors who understand the power of Indy data, and as part of their vendor agreement include a ban on data selling. We know that chains often want that data in determining site location. I also have no desire for my data to be used by drug reps in pushing expensive "me too" brands on my doctors. I even get a sense of satisfaction at knowing the drug reps don't get credit for any Rxs coming our of my store :)

  2. Just a thought on why independent grow is declining that wasn't mentioned. From my experience, chains are buying out independents left and right. I am one of the few that work for an independent that got bought out and opened my on.

  3. I didn't mention independents declining, because the data show that the number of independents has been steady for more than 10 years. Chains do file buys, but new independents keep popping up.