While reading the August 16/17 2008 issue of the Financial Times to keep up with the global political news in Russia and Georgia, and Olympic medal drama in Beijing, I ran across a story that hit much closer-to-home: “Bitter pills in fight for drugstore dominance.”
Drugstore Dominance, and the Walmart Wild Card
The announcement by CVS Caremark that it would acquire the Longs Drugs store chain for over $2.5 billion is the latest salvo in the battle for the neighborhood pharmacy. This is CVS’s major incursion into California and other western states, where Walgreens enjoys a dominant market share.
The most important point in the FT article is in its last paragraph: “Walmart has indicated that it is interested in exploring the creation of smaller format stores focused on health and wellness,” basically in the fight for market share (and consumers’ dollars) on Main Street.
Health Populi’s Hot Points: The pharmacy market will continue to consolidate as firms try to drive down overhead and leverage purchasing power in the era of Walmart-scale competition. We’ve seen what Walmart has done to supply chains in consumer goods. Now we’ll see them continue to innovate for health care on Main Street. I expect that this will go well beyond expanding retail clinics into new concepts for consumer-facing health. At the far end of the scenario spectrum, Walmart could leverage its expertise in information technology and get involved in chronic health management with real teeth. At a minimum, perhaps we’ll see expansion of wellness-geared pharmacies with lower price points…a sort of Trader Joe’s version of Pharmaca.