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A significant factor in pharmacy.

NEW YORK-- Discount stores have carved out a small but significant share of the prescription drug market, accounting for 9.8% of total retail pharmacy sales in the United States, according to the most recent figures from the National Association of Chain Drug Stores. Five of the top 50 pharmacy chains by dollar volume are discount store operators (six, if warehouse club operator Costco Wholesale Corp. is included).

Discount stores rang up a 5% increase in pharmacy sales to $24.77 billion in 2008, the most recent period for which full-year sales figures are available. Still, the format remains the smallest retail channel for pharmacy sales, where chain drug stores dominate with a 41.1% market share and sales of $104.14 billion, up 2.9% in 2008.

The lion's share of discounters' pharmacy volume comes from Walmart, which is ranked No. 3 overall and generated $19.63 billion in prescription sales in 2008. While that represents almost 80% of the channel's total Rx sales, much of that volume is processed through the chain's supercenters, which include a full-line supermarket under the same roof as a conventional discount store.

Target Corp. also is in the top 10 of U.S. pharmacy providers, with its $4.2 billion in 2008 sales ranking it No. 8. Sears Holdings Corp. is No. 15 on the list, with an estimated $1.5 billion in prescription sales through its Kmart and Sears pharmacies, and No. 17 Costco is close behind with $1.41 billion.

Although they account for less than 10% of pharmacy sales, discount stores have driven innovation in this category, especially in pricing. Walmart launched a price war of sorts when it introduced $4 generic drugs a few years back--a strategy that has been widely copied. Last year it upped the ante, offering a 90-day supply of 300 generic prescriptions for $10 via free mail order.

Target, too, has been stepping up its emphasis on pharmacy, rolling out a new marketing campaign in 2009 and relocating the pharmacy counter to the front of the store.

"Our pharmacist-administered vaccination programs are a great service that provides our guests with a convenient solution for flu shots and other common vaccinations," says a spokesman for the chain. "Our auto-retail program provides a convenient way to ensure that our customers' prescriptions are always ready when they need them."

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Title Annotation:State of the Industry/The Issues
Comment:A significant factor in pharmacy.(State of the Industry/The Issues)
Publication:Chain Drug Review
Geographic Code:1USA
Date:Apr 26, 2010
Previous Article:Traditional discounters find it harder to stand out.
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