Walgreens to acquire Brookshire Grocery's pharmacy operations

[wnetmacman]

While a small footprint compared to CVS and Target's relationship (120 stores with pharmacies), it's significant for BGC to give them up:

https://www.super1foods.com/sm/pickup/r ... 3-92940570

Even though the link comes from Super 1 Foods, it also covers Brookshires and Fresh by Brookshires stores. It does not cover the recently acquired Reasors in-store pharmacies, which BGC will continue to operate. BGC also noted that a few will close.

[Alpha8472]

This is unusual for Walgreens to keep operating pharmacies inside of food stores. Usually Walgreens likes to takeover a group of pharmacies and close down the pharmacies.

Walgreens then expects the customers to flock to Walgreens increasing sales at Walgreens stores.

Pharmacies attract customers to fill prescriptions and then shop in the rest of the store. The few cent profits on cheap blood pressure and cholesterol medications don't make much money. It is the sales in the rest of the store that make the most profit.

The pharmacy business has gotten so bad recently. The insurance companies are reimbursing pharmacies less and less. Pharmacies are losing around $100 on those weight loss medications.
A few years ago you would make a small profit on insulin. Now some insulins end up costing more to obtain than you can sell them for.

It is criminal that these insurance companies are ripping pharmacies off. Pharmacies are going into negative profit. That is why so many supermarkets are freaking out and trying to close down their pharmacies or dump them on a drugstore chain that can absorb these negative profits.

The only way to make profits now is to desperately get customers to get a vaccination. The profit from one shingles vaccination can make up for the losses in the expensive drugs.

It is a delicate balancing act trying to make a profit at a pharmacy when insurance companies are out to make as much profit as they can and don't care if pharmacies are being pushed to the point of losing money.

How does Walgreens make a profit? Walgreens is notorious for understaffing. They hire the bare minimum amount of employees and work them to death. They cut their work hours to barely full time and then they enforce a zero overtime policy. Employees are stressed out and burned out everyday.

Walgreens also refuses to accept many money losing low income Medicaid insurance plans. Many customers may be forced to switch pharmacies or travel huge distances to find a pharmacy that will take their insurance now.

[storewanderer]

I find it interesting they are keeping the OK Reasor's pharmacies. I wonder what factors make those worth keeping.

AWG appears to have some kind of a pharmacy program it has stores that they supply on. Reasor's was definitely on that program. I wonder if the Brookshire stuff was with Good Neighbor or some other pharmacy network.

[wnetmacman]

I find it interesting they are keeping the OK Reasor's pharmacies. I wonder what factors make those worth keeping.

AWG appears to have some kind of a pharmacy program it has stores that they supply on. Reasor's was definitely on that program. I wonder if the Brookshire stuff was with Good Neighbor or some other pharmacy network.

Brookshire ran their own pharmacies. Included in the sale was their Central Fill facility.

[wnetmacman]

This is unusual for Walgreens to keep operating pharmacies inside of food stores. Usually Walgreens likes to takeover a group of pharmacies and close down the pharmacies.

Walgreens then expects the customers to flock to Walgreens increasing sales at Walgreens stores.

It is possible that they are seeing what CVS saw in Target. Walgreens has been building a lot of pharmacy-only stores to make up for the losses they had in the front of the store.

Pharmacies attract customers to fill prescriptions and then shop in the rest of the store. The few cent profits on cheap blood pressure and cholesterol medications don't make much money. It is the sales in the rest of the store that make the most profit.

The pharmacy business has gotten so bad recently. The insurance companies are reimbursing pharmacies less and less. Pharmacies are losing around $100 on those weight loss medications.
A few years ago you would make a small profit on insulin. Now some insulins end up costing more to obtain than you can sell them for.

I will say for the sake of fairness that I recently removed all my prescriptions from a Super 1 Foods store because the pricing and customer service had gotten out of hand.

It is criminal that these insurance companies are ripping pharmacies off. Pharmacies are going into negative profit. That is why so many supermarkets are freaking out and trying to close down their pharmacies or dump them on a drugstore chain that can absorb these negative profits.

The only way to make profits now is to desperately get customers to get a vaccination. The profit from one shingles vaccination can make up for the losses in the expensive drugs.

It is a delicate balancing act trying to make a profit at a pharmacy when insurance companies are out to make as much profit as they can and don't care if pharmacies are being pushed to the point of losing money.

The pharmacy business climate is exactly why BGC is getting out - to concentrate on food.

How does Walgreens make a profit? Walgreens is notorious for understaffing. They hire the bare minimum amount of employees and work them to death. They cut their work hours to barely full time and then they enforce a zero overtime policy. Employees are stressed out and burned out everyday.

Walgreens also refuses to accept many money losing low income Medicaid insurance plans. Many customers may be forced to switch pharmacies or travel huge distances to find a pharmacy that will take their insurance now.

Those reasons are exactly why they make a profit. They do not overstaff, and do not take unprofitable plans. That can hurt the folks who need it the most.

I will say most of BGC's pharmacies have fallen victim to the understaffing recently, and have shortened hours. That could also be a major factor in the company getting out of this business.

[Romr123]

This is exactly what Schnucks' and CVS did---mutual opportunity to add scale to WG and de--risk for Brookshire.

[jamcool]

And more patients get their prescriptions via mail.

[rwsandiego]

Another reason for supermarkets to exit the pharmacy business is the pharmacy benefit managers (PBMs) often give small operators crappy reimbursement rates because they have lower volume than Walgreens and CVS. I worked for an independent PBM (that is, not an Express Scripts or CVS Caremark) who was among the few who didn't rip off small pharmacies. Now, that was over twenty years ago. Can't say what they are doing today, but it would surprise me if they messed around with smaller players.

If AWG has a pharmacy program that services the acquired stores, it is likely that program is treated the same as one of the large chains.

Regarding Walgreens operating the in-stores vs buying the records, it could be a function of Brookshire's wanting to have pharmacies in their stores. If Walgreens is buying a central fill facility, we could see them leverage it for their nearby stores.

[buckguy]

PBMs aside, prescription pharmacies involve lots of SKUs and dealing with regulation which varies by state. That creates costs and administrative headaches that you don't get from other service departments or from adding some new, sizable non-food line. If they can't make money despite these costs and if the pharmacy isn't driving traffic, then it doesn't make snese for them to keep the business.

Adding pharmacies (in-store or as a separate business) was predicated on adding high margin merchandise. A few chains were very successful with this like Jewel/Osco. Some never had many standalone stores but managed to build up a prescription trade and never spent much time trying to sell a lot of GM (Giant-Landover)----they essentially used a variation of the 1960s discount drug store model. Some learned enough from standalone stores to essentially incorporate the prescriptions and some GM, along with expanded HBA in to new stores, but get rid of the drug stores (Kroger, Acme, Stop & Shop) and some chains never bothered with any of this but added prescriptions later, like Schnuck's or A&P. You needed to be a fairly dynamic chain to make the first and third models work, otherwise you get stuck with weak standalone locations, which happened to Kroger in places like Chicago and Cleveland where they were a laggard. Some of the chains that waited to add pharmacies did well enough for years not to bother, some simply weren't very dynamic and couldn't invest much in new builds or expansions and never had pharmacies before they went into the sunset.

It's probably a good business decision for a lot of chains to get out of the prescription business and we'll probably see more regionals do this in the future.

[wnetmacman]

PBMs aside, prescription pharmacies involve lots of SKUs and dealing with regulation which varies by state. That creates costs and administrative headaches that you don't get from other service departments or from adding some new, sizable non-food line. If they can't make money despite these costs and if the pharmacy isn't driving traffic, then it doesn't make snese for them to keep the business.

Adding pharmacies (in-store or as a separate business) was predicated on adding high margin merchandise. A few chains were very successful with this like Jewel/Osco. Some never had many standalone stores but managed to build up a prescription trade and never spent much time trying to sell a lot of GM (Giant-Landover)----they essentially used a variation of the 1960s discount drug store model. Some learned enough from standalone stores to essentially incorporate the prescriptions and some GM, along with expanded HBA in to new stores, but get rid of the drug stores (Kroger, Acme, Stop & Shop) and some chains never bothered with any of this but added prescriptions later, like Schnuck's or A&P. You needed to be a fairly dynamic chain to make the first and third models work, otherwise you get stuck with weak standalone locations, which happened to Kroger in places like Chicago and Cleveland where they were a laggard. Some of the chains that waited to add pharmacies did well enough for years not to bother, some simply weren't very dynamic and couldn't invest much in new builds or expansions and never had pharmacies before they went into the sunset.

It's probably a good business decision for a lot of chains to get out of the prescription business and we'll probably see more regionals do this in the future.

Most retailers, be it grocery, GM, or anything else that has a pharmacy other than drug stores added that department as an added convenience to their customers. As you say, some did well with it, and others made it very obvious that they were doing it because everyone else did and they didn't want to lose customers, but their heart wasn't in it. In the 80's, BGC didn't have but a few pharmacies, mostly spurred on by the expansion of Super 1 Foods, all but about 4 of which do not have a pharmacy for one reason or another. But they had no expertise, and relied heavily on Malone & Hyde (of AutoZone fame) to run the departments initially. When M&H backed out of everything but AutoZone, they spun up their own department, and it worked for a while, but it started being more like a supermarket gas station - you know they had to be losing money on it with the deals they had. And then staffing started to suffer, then the deal prescription list shortened. It was only a matter of time. The biggest question here is this: Who's next?