Walgreens Vs. CVS – Who will blink first?
Today CVS/Caremark (NYSE:CVS) announced they are eliminating rival Walgreens (NYSE:WAG) from their pharmacy-benefit manager network. This move comes after Walgreens had announced it was dropping out of CVS Caremark’s drug-benefits network, citing CVS’s promotion of prescription plans that require patients with chronic conditions to use either CVS stores or the Caremark mail-order pharmacy.
This cat fight between these two retail pharmacy heavyweights is just the latest in series of blows between the companies. Both CVS and Walgreens are fighting tooth and nail to capture customers with chronic conditions and diabetes is at the centerpiece of this fight. According to industry the customer with diabetes is the golden child for retail pharmacies. These patients spend on average $4,500 per year, visit stores more frequently and tend to buy products that carry a higher margin for the retailers.
This is also why both CVS and Walgreens are making a major push to capture the valuable diabetic consumer. Recently CVS announced a rather lame attempt to capture the patient with diabetes with their Diabetes Advantage program. A program that merely rewards CVS customers with double ExtraCare card points for buying products that they would buy anyway.
Walgreens for their part is taken a far different and more encouraging approach as they getting set to adopt the successful Asheville protocol in their stores. Using this health coaching approach Walgreens hopes patients will remain loyal to their pharmacy as the pharmacy will no longer be viewed just as place to pick up their prescriptions but become a valuable part of their diabetes management. Or put another way, Walgreens believes patient education will not only translate into better patient outcomes but increased sales as well. Seems to Diabetic Investor that we’ve heard that somewhere before.
We have known for years that education works but until Walgreens came along education was treated as a second class citizen. This is what makes CVS’s efforts so transparent. Rather than put education ahead of product sales, the company somehow believes that by rewarding patients for buying products they already use will magically help them achieve better outcomes. Frankly the CVS approach is nothing more than frequent buyer program that everyone has and will do to enhance customer loyalty or improve outcomes.
For years Diabetic Investor has noted that 80% of patients with diabetes are treated by primary care physicians who lack the time and infrastructure to adequately educate their patients with diabetes; and let’s not forget they are given little incentive to provide this education as reimbursement is either nonexistent or inadequate. We also know that while Certified Diabetes Educators are a dedicated group of individuals there just isn’t enough CDE’s available to meet the demand created by the epidemic growth rate of diabetes. Finally Diabetic Investor has noted on numerous occasions patient education would never gain traction until someone actually understood they could profit from providing this education.
To their credit Walgreens understands that educated patients are more compliant with their daily therapy regimen, monitor their glucose levels more frequently and achieve better overall outcomes. Just as important for Walgreens they also understand that they can profit from patients who better manage their diabetes as they will fill their prescriptions more frequently and visit their stores more often. Simply put Walgreens understands that patient education is a win-win scenario, patients achieve better outcomes and Walgreens experiences greater sales.
While Diabetic Investor has no idea how this latest cat fight between Walgreens and CVS will turn out, we can say that when it comes to getting it right with patient education Walgreens is light years ahead of the competition. Imagine that a company that actually understands that patient education works, who would have thunk it.