How the Pharmacy Industry Changed in 2011

Last week, IMS Health released its official 2011 data in The Use of Medicines in the United States: Review of 2011. The report has lots of useful data. Just be aware that the so-called "spending" figures represent neither actual expenditures nor pharmacy revenues.

My annual slice-and-dice of the prescription data highlights industry trends both familiar and new:

• The total number of retail prescriptions dispensed grew by a paltry 0.3%, even slower than 2010’s depressing 1.2% rate.
• Chains won big again, growing six times faster than the overall industry.
• All other retail formats—independents, supermarkets with pharmacies, and mail-order pharmacies—shrank in both absolute size and market share.
• Mail pharmacies lost more market share and scripts than did independent pharmacies.

Read on for a detailed summary of 2011 along with a five-year view. Tune in Thursday for a deeper dive into the surprisingly weak mail pharmacy numbers.

THE 2011 STORY

The chart below was created from page 41 of the IMS Health’s report. (The Rx data are also available here.) Note that I present the data differently than IMS to facilitate insights into pharmacy industry dynamics. To remain comparable with previous years, this table excludes Long-Term Care. Click the table to enlarge it.

Chains win again. Chain stores—drugstores chains and mass merchants with pharmacies—continue to gain market share at the expense of all other dispensing formats. In 2011, drugstore chains such as CVS and Walgreen prevailed with new store openings, organic growth from larger and busier pharmacies, and acquisitions of regional chains. Walmart, which is now the third-largest chain, has used its $4 generic drug discount and preferred network contracting to increase traffic at its pharmacies. Even Rite Aid showed signs of life in 2011. (See Rite Aid: Smart or Lucky?)

For an overview of estimated national market share by company, see 2011 Market Share of Top Pharmacies. I expect 2012 will tell a slightly better story for non-chains, which have been mopping up most of the 90 million Express Scripts prescriptions previously filled at Walgreens. According to one recent survey, independent pharmacists say they have benefited from the Walgreens contract dispute by a two-to-one margin. See New Survey: Walgreens’ Customers Flock to Independent Pharmacies.

Independents shrink again. The 2011 data also show that independent pharmacies lost both absolute number of prescriptions (down 1.1%) as well as market share (-24 basis points). Iindependents’ share of prescriptions has declined from 37.1% in 1992 to 17.6% in 2011—a drop of nearly 20 percentage points.

Mail was down even more. Pharmacy owners can perhaps take solace in the fact that mail pharmacies shrunk even faster than independents. Prescriptions filled by mail order pharmacies dropped by 1.5%, while market share declined by 34 basis points. In other words, mail pharmacies lost more market share than did independent pharmacies. I’ll have more to say about this trend tomorrow.

Less hunger for supermarket prescriptions. Supermarkets filled about the same number of scripts as 2008, marking another year of weak performance. The Food Marketing Institute (FMI) has even given up on its Supermarket Pharmacy Trends report, which was last published in 2009.

THE FIVE YEAR STORY

To put the 2011 numbers in context, here’s a look at the five years from 2007 through 2011. As you can see, the number of prescriptions filled at chains grew twice as quickly as the overall market.

What do you think? Surprised by the latest data? Any predictions for 2012?