Wednesday, May 28, 2014

2013 Pharmacy Market Analysis: Chains Up, Mail Down

The IMS Institute for Healthcare Informatics recently released its official 2013 market data in the thoroughly titled Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the U.S. in 2013 (Free download with registration.) The report offers many interesting (and some inaccurate) stats, but I focus here on the prescription data.

Below, I discuss the industry's winners and losers, and summarize the data in a tidy chart. Highlights:
  • Total outpatient prescription growth was 0.2% in 2013, a slowdown from the 1.2% growth in 2012.
  • Chains rebounded, in the biggest single-year market share increase in at least 10 years.
  • Supermarkets continued their comeback, returning this format’s share to 2005 levels.
  • Mail prescriptions took their biggest dive ever, shrinking sharply in both absolute size and market share.
  • Independents experienced another year of small declines, but the format’s share now equals that of mail pharmacy.
Take note: Some of IMS’s data changed significantly. Tricare stopped providing its data, for instance, while Walmart began providing data. I discuss details of these changes below.


We created from the chart below from the data on page 49 of the IMS report. Note that we present the data differently from IMS to offer insights into retail pharmacy industry dynamics. IMS reports that total prescription growth was 1.6%. Our growth rate (+0.2%) is lower because 1) we exclude long term care pharmacies from the computation, and 2) we use equivalent prescriptions (actual prescriptions x 3) for mail pharmacies.

[Click to Enlarge]


Chains rebounded in 2013. Prescriptions at retails chains—drugstores and mass merchants with pharmacies—grew more quickly than did overall prescriptions. Chain market share grew by 135 basis points, to a record-high 55.2% of all outpatient prescriptions. This reversed the overall loss of 2012, which we attribute to the market share losses Walgreens experienced when it chose not to participate in the Express Scripts pharmacy benefit network. As we show in 2013’s Top Pharmacies by Rx Revenues: The Big Get Bigger, the three largest chains—CVS (retail), Walgreens, and Walmart—account for 38% of U.S. prescriptions.

Supermarkets keep growing. Before 2012, supermarkets had been losing share. For the second consecutive year, supermarkets gained prescription share (+30 basis points). Kroger’s expansion has been particularly noteworthy. Kroger reduced its pharmacies—from 1,966 in 2010 to 1,947 in 2012. However, Kroger’s pharmacy revenues have grown by 21%, from $6.9 billion in 2010 to $8.3. Its late-2012 Axium acquisition accounted for only a minority of this impressive growth. Supermarkets have also been on the forefront of $0.00 prescriptions, led by such programs as Wegmans’ free generic Lipitor strategy and Publix’s free medication list.

Mail pharmacies keep shrinking. Mail pharmacies lost both absolute number of prescriptions (down 9.2%) and market share (-157 basis points). Note that the 2012 and 2013 data exclude prescriptions for Tricare, which now prohibits wholesalers from reselling data to such third parties as IMS Health. (Details below.) Even accounting for estimated Tricare scripts, mail prescriptions would still have declined significantly. Unfortunately for pharmacy benefit managers (PBMs), the 2013 prescription data are consistent with the long-term slowdown in mail pharmacy prescriptions. For the factors driving this decline, see the “Mail Pharmacies” section starting on page 34 of our 2013-14 Economic Report on Retail, Mail, and Specialty Pharmacies.

Independents down again. Independent pharmacies’ lost both absolute number of prescriptions (-0.3%) and market share, which declined by a (-8 basis points). Since independents’ losses were relatively mild, their market share (17.2%) was 2 percentage points higher than that of mail pharmacies. These data offer a useful reminder that the true competitive threats for independent pharmacies are not from mail order, but from chains and supermarkets.


On page 43 of its report, IMS includes these footnotes:
“National Sales Perspectives reporting – as of January 2012 - no longer includes data from a major wholesaler reflecting sales in several channels associated with Tricare, the health care program serving uniformed service members, retirees, and their families, which prohibits wholesalers from reselling data to third parties like IMS Health. An approximately 2% impact on total sales is seen between 2011 and 2012.”
“National Prescription Audit reporting – as of January 2014 – reflected the addition of Walmart data, with restated periods from January 2012 to January 2014, replacing data which was previously projected. An adjustment has also been applied to the mail channel prescription volumes to account for the Tricare data disruption, which after the adjustments result in a trend break between 2011 and 2012.”
Here’s some clarifying explanation, based in part on my conversations with IMS:
  • McKesson still provides data to IMS. For 2012 and 2013, however, McKesson's Tricare Mail Order Pharmacy (TMOP) data were excluded from the reported IMS figures, per the terms of Tricare's contract with McKesson. IMS tells me that it was unable to reliably model the Tricare data “…because of the unique and non-systematic buying patterns of the government.” IMS therefore “elected to remove the projected activity from its estimates as opposed to attempting to improperly account for missing information.” Now you know.
  • The 2012 mail data (discussed in this Drug Channels article) have been revised downward, by 72 million prescriptions (-9.1%). In May 2013, the number of 2012 mail prescriptions was reported to be 789 million equivalent prescriptions. In April 2014, 2012 mail prescriptions were reported to be 717 million prescriptions. If Tricare data had been included, mail prescriptions would have declined by -12.4%.
  • The 2012 chain store figures were revised upwards, by 78 million prescriptions (+3.5%). I assume that the addition of Walmart’s data accounted for most of this restatement.


  1. Keep pushing that mandatory mail... the end users will love it... especially in NY & NJ, right?

    Keep refusing those darn co-payment cards... they will cost you more money.... I mean....your employer... I mean... (sigh)...

    Don't worry... the PCMA has "data"' that biologics work better when boiled first... So keep auto-shipping those biologics this summer to people on vacation. The plan sponsors love that extra $20 rebate on $15,000 of wasted Humira.

    And whatever you do, keep that MAC list off the mail scripts. It's only there to stop those greedy retail chains. It's a fact that mail orders always bill less than retail. PBMs have collected data on this for years. It's just that darn HIPAA prevents any such data to be 'released' to an independent third party for verification.

  2. Good article today – I love the phrase “thoroughly titled” – brilliant!
    Something struck me in reading your summary – you noted that your chart modifies the IMS data a bit, including multiplying the mail order Rx’s by three. I get that, of course, but then it occurred to me – how much growth has there been in 90-day retail in the past few years? I’m wondering if that might be some of the reason for the decline in mail order market share (although Tricare being left out matters, too). And does IMS count a 90-day retail Rx as just one script? If so, should you also modify their retail Rx figures to take into account however many 90-day retail scripts there are (ie, make those Rx’s times three, as well as mail)?

  3. Good questions.

    Nearly all (95%+) mail scripts are 90 days, so converting to equivalent scripts makes sense.

    As far as I know, IMS counts a 90-day retail script as a single script (same as their raw mail data). I don't have good data on the prevalence of retail 90. Converting retail 90 scripts to equivalent scripts would translate into even bigger share gains for chains, so the overall conclusions remain the same.

    I'm going to follow-up with IMS and see if I can get a more definitive answer.

  4. Adam,
    Thank you for a helpful summary of the IMS report. Given the restatement, it is not clear what the story is for 2012:

    1. Did chain segment lose or gain Rx in 2012 vs. 2011 (last year's report withouth WMT suggested they lost but this year's report with WMT suggests they increased?)

    Even more confusing about 2012 is this statement in the appendix of the IMS report: "For growth analyses of 2012 for either NSP or NPA, rather than calculating based on appendix tables in this report, please refer to last year’s report entitled Declining Use and Cost: For Better or Worse? A Review of 2012."
    Same question would hold for mail too - which numbers do we use for 2012 - this year's report or last year's report?

    In your follow up with IMS, could you please obtain some clarification on the above?

  5. Thanks. Will be interesting to see what IMS (or anyone else) has to say about this. Maybe 90-day retail hasn’t caught on, but I thought WAG was really pushing it at one time. I’m sure they would prefer to have three separate visits to their front end rather than only one over the course of 90 days, but I thought they were really nervous about mail eating their lunch on maintenance meds for folks who would be taking them for a long time and wouldn’t always want to have to “visit” every month. Maybe not – maybe folks like to visit every 30 days. Go figure. CVS/CMX is in a different place, of course. Not sure about other retailers.