Walgreen Company (WAG), CVS Caremark Corporation (CVS): OTCs & Then Some

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Walgreen Company (WAG): Will a New Loyalty Program Help This Drugstore?My grandfather still uses the word “drugstore” to describe a general retail establishment where one can purchase medication, food and beverage items, and a variety of other household consumer goods. His perception of this type of store came long before the nationwide rise of Wal-Mart Stores, Inc. (NYSE:WMT), Target, and dollar stores that now dominate retail. Although barriers to entry may appear to be tall, Walgreen Company (NYSE:WAG) is showing no signs of being intimidated. This company is much more than a showcase for big pharma, as it was in the past, and its market climb deserves a closer look.

Healthcare transformation

The real profits in retail healthcare appear when deals are made between complementary companies. Walgreen Company (NYSE:WAG) was able to rebuild its relationship with Express Scripts Holding Company (NASDAQ:ESRX), and although it seemed like a gamble at the time, the stock shows no evidence of the damage from last year, as it’s already up 38% in 2013. Although the terms of the deal were not disclosed, the point is that Walgreen is once again filling prescriptions for Express Scripts Holding Company (NASDAQ:ESRX)’ vast pool of consumers, and likely at a higher price.

Prior to the agreement, Walgreen Company (NYSE:WAG) had refused to fill “unprofitable prescriptions.” The two companies don’t share the friendliest of relationships, but Express Scripts Holding Company (NASDAQ:ESRX) needs the customer loyalty that Walgreen can provide, with the hopeful result being a sales climb for both based on volume. This paid off, because unlike its rival CVS Caremark Corporation (NYSE:CVS), which has its own Caremark Pharmacy Services subsidiary, Walgreen continues to define its boundaries with its insurance liaison without exclusive control of ExpressScripts. It also remains free to explore other profitable options if necessary.

Starting with Take Care Clinics, Walgreen Company (NYSE:WAG) is monetizing the healthcare crisis in the US. Not enough doctors, Obamacare, and skyrocketing costs for both the government and for individuals are a problem. Walgreen offers services such as vaccines, physicals, care for more serious conditions such as pink eye, and assistance for accidents such as minor cuts and wounds. Insurance is always the primary payment option, but the drug store chain allows customers to pay out-of-pocket at prices more affordable than at hospitals. Just as Wal-Mart Stores, Inc. (NYSE:WMT) and Target aim to keep prices low for everyday goods, Walgreen intends to keep costs lower for healthcare.

The most important step in developing these clinics is the planned increase of nurse practitioners (NP) and physician assistants (PA), both of which are at record demand. Unless college graduates begin to assist at a faster rate, the pool lies in temps. A reported 10% of the total requests of Staff Care, a healthcare staffing company, was for temporary PA’s and NP’s. However, when it comes to schedules, benefits, pay, and overall lifestyle, a company such as Walgreen Company (NYSE:WAG) will be able to offer more than a couple of paychecks at a hospital. There’s nothing wrong with working for hospitals and urgent care centers, but large retail establishments merging with healthcare providers may find a niche that’s beneficial for both the company and the employee.

When you enter a store such as The Home Depot, Inc. (NYSE:HD), you can find an expert on paint, kitchens, tools, and many other store offerings. In a Walgreen Company (NYSE:WAG) store, the idea is to offer a pharmacist to provide drug assistance, a physician assistant to perform physical exams, and a nurse practitioner who can diagnose patients. This team-based, customer-centered approach to acute and chronic problems that plague the country could be a gold mine, and the sources of the profits shown here.

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