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Retail Healthcare Sees Significant Upside Under the ACA

smiling retail pharmacistMany arguments are made regarding the positive or negative impact of the Affordable Care Act (ACA) on physicians, hospitals, health insurance companies and other providers of care. While over 7 million consumers have signed up for health insurance on the exchanges, most of these enrollees were previously insured. As more people enroll over time, a higher percentage of uninsured should be covered, fulfilling one of the aims of the ACA.

With millions more patients covered by health insurance, the demand for physician and hospital services should increase. On the surface, this sounds like a good thing for health care providers; however, this influx will strain patient access to physicians as a finite (and shrinking) resource, and reimbursement for exchange-based coverage may not keep pace with the administrative costs required by the ACA.

In this environment, retailers across Food, Drug, Mass, Club and Online channels are in a position to capitalize on a significant opportunity. 

Retail as a Center for Wellness and “Self Care”

The best insurance is to not get sick. This may be a little simplistic, but the spirit of this sentiment is valid. If consumers adopt a healthier and preventative lifestyle, their need for physician services should decrease. Retailers provide easy access to healthy products and services, addressing nutrition, exercise, home diagnostics and education (e.g., books, magazines and pharmacy literature). Moreover, retail is the first line of defense for acute, symptomatic illnesses such as cold and flu with its large assortment of over-the-counter medicines, home remedies, and booming retail clinics. Growth in this “self care” approach should help alleviate some pressure on the medical system, if health care shoppers adopt this mindset.

My earlier 2-part article on retailer strategies under Health Care Reform (Winning Retailer Strategies Under the ACA: Retail and Reform Part 1; Health Care Solutions and the Shopper: Retail and Reform Part 2) addresses these particular opportunities to a great extent, so I won’t expound on it further here.  What I would like to focus on in this article is the tremendous amount of revenue currently being left on the table by retailers who have not positioned themselves as the go-to resource for self care.

Millions of Dollars in Opportunity Cost

The c2b Consumer Diagnostic  is an in-depth study of the U.S. health care consumer, covering many topics such as prescription and OTC medicine purchasing behavior. Over 50 bricks & mortar and online retailers are included in this research, but specific retailers will remain blinded in this article.

We asked respondents to identify the retailers where they purchased Rx and OTC products:

  • Any time over the past 12 months
  • As their USUAL source of purchases

The difference between “Any time” and “USUAL” represents the opportunity cost associated with a lack of loyalty to retailers. What we found should be a wake-up call to retailers and a significant source of upside. For example, with a certain leading Mass Merchandiser:

Mass Merchandiser X

% of Respondents Who Purchased in the Last 12 Months

% of Respondents Indicating USUAL Location for Purchase


Prescription Medicine



-6 pts/-38%

OTC Medicine



-13 pts/-41%

n = 4, 184

This Mass Merchandiser is losing nearly 40% of its potential Rx and OTC business because its shoppers go elsewhere for their purchases. Given the size of this retailer, this is an opportunity cost that runs in the billions of dollars.

Another way of measuring opportunity cost is to compare a retailer’s share of dispensed prescription sales with its share of OTC sales. If a retailer is able to raise its share in one category to match the other (since it has these shoppers in store, anyway), it would translate into sizeable revenue. 

Referencing the 2013 Annual Report of Retail Pharmacy by Chain Drug Review for prescription revenue and The Business of OTC by Drug Store News for OTC revenue, one major Grocery Chain achieved the following results:

Grocery Chain Z

Prescription Medicines

OTC Medicines

Market Share (Revenue)



$ Revenue

$8.0 billion

$766 million

ow much added revenue would this Grocery Chain realize if it increased its OTC share to match its Rx share? A simple calculation shows it could be north of a half billion dollars. 

Separately, this Grocery Chain’s OTC revenue is roughly 10% of its prescription revenue. For perspective, Mass Merchandiser X from the earlier example enjoys OTC revenue that is 32% of its Rx revenue; if Grocery Chain Z matched this level of OTC sales, it would gain an additional $1.8 billion.

Obviously, the scenarios above are over-simplified and there are many variables for which to account; however, this does illustrate the scope of the opportunity and even closing a fraction of the Rx/OTC share gap translates to significant dollars.

The Payoff

Today’s environment is accelerating health care consumerism and a need for consumers to adopt a self care approach. The move to wellness and preventative behavior will pay societal dividends in longevity and productivity, but for a retailer who can position itself as “Self Care Central,” this trend should also prove very lucrative.

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