Tuesday, June 09, 2015

2014’s Winners and Losers: Prescription Market Share by Dispensing Format

In April, IMS Health released Medicines Use and Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014. (Free download with registration.) While reading it then, I discovered a serious error in its data. After I pestered IMS for a few weeks, it finally acknowledged the mistake and has just issued a revised report. (Let’s hope IMS is more careful with its paid data services.)

Using the revised data, we can at last analyze 2014's market share by outpatient dispensing format. The results are a little surprising.

In 2014, 90-day prescriptions accounted for one in nine retail scripts. After converting these scripts to 30-day equivalents, we found that chain drugstores dispensed an astounding half of all U.S. outpatient prescriptions. Mail pharmacies were the big losers, while independent drugstores grew slightly. Full details below.


Here’s our exclusive analysis of 2014’s market share for 30-day equivalent prescriptions. Be sure to read the important methodology notes below.

[Click to Enlarge]

Note that this year’s numbers are for 30-day equivalent prescriptions. While 90-day prescriptions are common in mail pharmacies, IMS reported that 10.9% of retail prescriptions were also 90-day scripts. Thus, the 30-day equivalent prescription market share numbers differ from our previously published figures. In an upcoming follow-up post, I’ll analyze 90-day prescriptions in depth.


Chain drugstores continue to dominate. Prescriptions at chain drugstores grew much more quickly than did overall prescriptions. When we account for 90-day prescriptions, chain drugstores’ prescription market share grew by 141 basis points, to a record-high 49.1% of all outpatient prescriptions. In 2014, the three major chain drugstores—CVS, Rite Aid, and Walgreens—all had same-store prescription growth rates of 4% to 5%. This growth is reflected in the overall market share figures.

Independents have held position. You wouldn’t know it from the doom-and-gloomsters out there, but independent pharmacies are doing OK. Total prescriptions grew slightly (+1.3%) even as this format’s market share dropped—because its growth was below that of the overall market. As I explain in section 2.4.3. of our 2014-15 Economic Report on Retail, Mail, and Specialty Pharmacies, pharmacist-owned independent drugstores remain an important industry segment. The true competitive threats for independent pharmacies are chains and supermarkets, not mail pharmacies.

Mass merchants’ growth has accelerated. When we account for 90-day prescriptions, mass merchants with pharmacies have been consistently growing during recent years. In 2014, this format gained market share of prescriptions (+32 basis points). We estimate that Walmart accounts for about 70% of total pharmacy business at mass merchants with pharmacies. Walmart is an aggressive participant in Medicare Part D preferred networks, per Walmart and Walgreens Dominate 2015 Part D Preferred Networks, With Independents Close Behind.

Supermarkets have slowed down. Before 2012, supermarkets had been losing share. This year, IMS significantly revised the supermarket data to show little growth from 2012 to 2014. Though supermarkets grew slightly in 2014, this format lose prescription share (-17 basis points).

Mail pharmacies lost share again. Mail pharmacies lost both absolute number of prescriptions (down 9.6%) and market share (-144 basis points). IMS Health's reporting of mail data has been very inconsistent, but I presume that the year-to-year comparison is valid. Mail pharmacies’ revenues are growing (not shown), due to increasing utilization of more-expensive specialty pharmaceuticals. That's why PBM-owned mail pharmacies with substantial specialty operations are among the industry's largest pharmacies, per 2014's Top Pharmacies: Specialty Shifts Industry Leadership.


We derived the above table from page 44 of the IMS Health report. Our prescription numbers differ from the IMS reported figures in three important ways:
  • We estimated the share of IMS Health's “Chain Store” prescriptions that were dispensed by independently-owned franchise members. These prescriptions are shown in the Independent Drugstore category.
  • We estimated the share of IMS’s “Chain Store” prescriptions that were dispensed by mass merchants with pharmacies. IMS does not report mass merchants in its own category.
  • To estimate 30-day equivalent prescriptions, we analyzed the IMS data to compute the percentage of 90-day prescriptions at different dispensing formats.

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