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Walgreen Company (WAG), CVS Caremark Corporation (CVS): The Halo Effect of EHRs in Drugstores

Back in 2010, a study by Dr. Rainu Kaushal, a professor of medical informatics at Weill Cornell Medical College, revealed that 37 errors occurred out of every 100 paper prescriptions. That whopping figure, which didn’t even include legibility issues, was far worse than the seven errors that occurred out of 100 when doctors used e-prescribing software. Since Kaushal’s study was published, the market for EHR (electronic health records) has grown substantially, and e-prescriptions are now a crucial part of that package.

Walgreen Company (NYSE:WAG)

The two leading pharmacies in America — Walgreen Company (NYSE:WAG) and CVS Caremark Corporation (NYSE:CVS)  — have partnered respectively with EHR companies Greenway Medical Technologies, Inc. (NYSE:GWAY) and Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) to offer their customers full EHR solutions. The deployment of these services not only makes their pharmacies more efficient, but can also have a halo effect in improving same-store sales significantly throughout the stores.

Walgreen Company (NYSE:WAG) and Greenway Medical Technologies, Inc. (NYSE:GWAY)
Walgreen Company (NYSE:WAG) and Greenway Medical Technologies, Inc. (NYSE:GWAY) have worked together since 2010, when Walgreen Company (NYSE:WAG) installed Greenway Medical Technologies, Inc. (NYSE:GWAY)’s PrimeSUITE EHR at its worksite health centers. Last August, Walgreen Company (NYSE:WAG) began deploying Greenway Medical Technologies, Inc. (NYSE:GWAY)’s WellHealth EHR in its retail pharmacy locations as the backbone to its HealthCloud initiative. WellHealth EHR gives Walgreen Company (NYSE:WAG) full access to a patient’s latest health testing and immunization records, regardless of where the service was administered.

For Walgreen, HealthCloud is part of a broad reinvention of its stores, centered around its 370 Healthcare Clinics (formerly known as Take Care Clinics), which are fully staffed by nurses and physician assistants connected to doctors via EHRs and the Internet. These clinics can even provide treatment for chronic diseases such as diabetes, asthma, and hypertension.

However, Walgreen’s strategy goes a step beyond clinical care. At several locations, Walgreen has introduced massage services, coffee shops, and wine bars to make visiting a clinic a more relaxing experience. One flagship location even serves sushi and smoothies. These experimental stores are aimed at solving one of Walgreen’s oldest problems — lagging front-end same-store sales growth.

Walgreen reported a 6.3% gain in same-store sales in July, topping the Thomson Reuters’ consensus estimate of 5.3%. Pharmacy revenue rose 8.8%, beating the consensus estimate of 6.6%, but front-end same-store sales only increased 2.3%, falling short of the 2.7% gain that analysts had expected. Yet both figures were a significant improvement from its lackluster third-quarter earnings, when it reported a same-store sales decline of 3.9%.

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