Script for expansion: Increasing control, boosting business

The biggest pharmacy chains' interest in retail clinics is only part of a strategy to branch out or expand into other ventures to become one-stop health shops.

By Bob Cook, AMNews staff. Aug. 27, 2007.

As the local independent pharmacy once gave way to the mega-colossal drugstore chain, the mega-colossal drugstore chain is now giving way to the self-described "health care company" -- one that is shaking up the genteel physician-pharmacy relationship.

Chains such as CVS Caremark and Walgreens are expanding into pharmacy benefit management, specialty pharmacies, mail-order distribution. They look for anything that can increase control, store traffic and negotiating leverage in a business that on one side faces intense price and convenience competition from grocery and big-box retailers, and on the other, risks being squeezed by third-party payers.

Their interest in retail clinics -- in the case of CVS Caremark and Walgreens, an interest that led each to buy clinic chains -- is but one part of an overall business strategy. They are seeking to provide convenience to patients, who can meet their everyday health needs at one location, and employers, who can contract through the drug chains to pay less for drugs and some services.

But do pharmacy chains see themselves as competing with doctors, like the chains might compete with the likes of Wal-Mart? "The short answer is no," said Chris Bodine, president of CVS Caremark Health Care Services, the division that oversees its MinuteClinic in-store clinics. "We wouldn't get into a business that we thought was competing with our physicians."

But that's not how physicians necessarily see it. The AMA House of Delegates in June adopted policy that called for state and federal investigations into possible conflicts of interest between clinics and the pharmacies that own or host them. The new policy also opposes special treatment that might give traditional practices a competitive disadvantage, such as waiving regulations for clinics that do not otherwise comply with standards for medical facilities, and insurers reducing or lowering co-pays to encourage in-store clinic use.