Recently surpassing its 1,000-member milestone, the franchise that McKesson rebuilt has come a long way
In the early 1990s, when Health Mart was owned by regional wholesale distributor FoxMeyer, it was little more than a franchise tallying 800 stores. Now it is a pharmacy franchise logging 1,280 stores. The chain has experienced nearly a 400% growth rate over the past 10 months. Health Mart anticipates it will log systemwide sales (combined retail sales for all franchisees) of $1.7 billion when it closes its books on 2007. This significant growth helped Health Mart nab Drug Topics' 2007 Pharmacy Chain of the Year award.
McKesson's stewardship
When McKesson acquired FoxMeyer in 19%, it inherited the Health Mart franchise. Like a builder renovating an existing structure, McKesson began to gut the franchise three years ago. 'We redesigned this franchise from the ground up,' said Stefan Linn, Health Mart's president. McKesson tapped Interbrand, a leading brand consultancy to redefine the Health Mart brand and logo. Design Forum, an affiliate of Interbrand, was called in to redesign the Health Mart prototype store.
Today, Health Mart is practically unrecognizable from its early days. The makeover provides franchisees with a viable way to compete with the giant chains, offering a unified approach to managed care contracting services, marketing and advertising tools, front end programs, and operational support. A new logo, store design, and d�cor have been created to help pharmacists reinforce their role as community healthcare counselors.
The market response to the Health Mart franchise has been overwhelming. Since July 2006, when Health Mart was relaunched at the McKesson Trade Show in Las Vegas, the franchise has grown by 100 stores a month. 'When we started to roll out our program, we bottomed out at 200 stores and those stores were located in an L shape-centrally throughout the United States-from Wisconsin down to the South then over to Florida. That was where FoxMeyer's business was strong. Since then, we have grown very rapidly across the nation. In California we have grown from zero to over 100 stores. We're in over 40 states now,' Linn boasted.
Franchisees appear satisfied with the face-lift. David Whalley, R.Ph., owner of Newport Health Mart Prescription Center, Newport, R.I., said, 'At its 2006 Trade Show, McKesson kicked off a new vision for Health Mart and an aggressive campaign to grow the franchise. Now my success is parallel to McKesson's success.'
Whalley has quickly adopted McKesson's new image. He has installed exterior signage as well as interior drop-off and pickup and pharmacy signs inside the store. The store's walls sport the chain's green and blue accent colors. He has also installed a 'department store' for home health care. 'The whole look of the store has changed. It's obvious it's a total integrated package of Health Mart. I've gotten very positive comments from customers that they like the colors. It's important for independent pharmacies to have some continuity-not just the Health Mart name, but when someone goes into a Health Mart store, they recognize the continuity from one store to another,' said Whalley.
Tim Davis, Pharm.D., owner of Beaver Health Mart Pharmacy, Beaver, Pa., which had its grand opening in February, said, 'One reason I decided to become a Health Mart customer is that it's a strong brand and it gives me a strong presence. There are a lot of tools to help me not only run the store but to truly take care of my patients and focus on them and not worry about the backend issues that concern most pharmacies today.'
Recognition from PBMs
Understanding that success hinges on recognition from pharmacy benefit managers (PBMs), Health Mart offers franchisees the opportunity to join a managed care network, powered by AccessHealth. 'They [franchisees] are all together in one managed care program and they can approach PBMs jointly about their contracts. Health Mart is approaching PBMs like any other chain, and as a result Health Mart is now recognized in most PBMs' benefits booklets. Now patients understand that their Health Mart local independent pharmacy is included in their current network,' said Linn.
It pays to advertise
Health Mart is also intent on helping its independent pharmacies differentiate themselves from the chain pack when it comes to advertising strategies. In May, Health Mart will kick off a national advertising campaign that includes TV, radio, and print ads, carrying the theme 'Caring for you and about you.'
The TV ad effort consists of two commercials aimed at a target audience of consumers between the ages of 35 and 65 who have a chronic disease or who are taking care of a child or an elderly parent. The messages are slated to air on daytime and evening news shows. 'We're also bringing stores together in advertising parties to pool their money and work with our advertising company to develop a locally customized plan,' said Linn.
Staying connected
McKesson's policy for success also includes efforts to ensure that its franchisees are not operating in isolation. 'Independent pharmacists may not have a lot of opportunities to connect with their peers. Our franchisees come together on a regular basis online and at national trade shows to leverage the knowledge they have,' said Linn.
McKesson has also instituted measures to ensure that franchisees have access to a broad range of specialists. 'It's easy for them to tap into these resources. There are specialized resources around managed care, marketing, and branding that really give them the support to put these programs together,' said Linn.
When it comes to providing franchisees with the latest technology, Andy Burtis, VP for marketing services, McKesson, noted, 'McKesson is the exclusive distributor of Parata robots in the United States. In addition, through our relationship with McKesson Pharmacy Systems, we offer all Health Marts preferred pricing on McKesson pharmacy systems. We make sure they have access at the most competitive prices possible to the best technology in the industry.'
Yet another factor driving Health Mart's growth is its fixed-fee model. 'We charge a flat fee of $350 a month per store,' said Linn.
Burtis chimed in, 'McKesson spent a tremendous amount of time touring the country and talking to customers who were part of the FoxMeyer version of Health Mart, as well as to other customers. We heard loud and clear their fear of being locked into a long-term arrangement. The model was specifically designed to provide franchisees with a 90-day-out clause. So despite a 10-year agreement, if McKesson falls short of what pharmacists expect, they only have to give us 90 days' written notice and they are out of the program.'
Yet one more strategy for success is the Front End Merchandiser program. A merchandiser visits every Health Mart store once a month. As Tim Canning, senior VP, Independent Segment at McKesson, explained, 'When it comes to the mix of products that independent pharmacies have on their shelf, they don't have the sophisticated marketing and category management departments that the major chains have. McKesson has the resources to analyze categories and determine what the best-selling products are, depending on the amount of space they have for that category. We provide those tools to these merchandisers, helping our Health Mart stores find an efficient, optimal mix of products so they stock the best items while allowing for regional, local products.'
Canning predicted that Health Mart will grow to reach 2,000 stores over the next year. 'We've seen an overwhelming uptake from pharmacists who are interested in this model. It allows them to maintain their independence, which is important to them, but also leverage their collective strengths. Now that we've built this infrastructure, you can start to do a lot of innovative things down the road.'
