A conversation with Jeffrey Berkowitz, Walgreens
The leading chain pharmacy steps up its role as healthcare provider and partner to pharma
Walgreens (Deerfield, IL), which celebrated its centennial in 2001, began as one store owned by Charles Walgreen, Sr., in Chicago’s South Side. While it boasts a long string of retailing innovations, its prescription-filling operations have always been the heart of the business. In the past decade, the company has targeted three key trends: becoming a provider of basic healthcare services in-store (through its Take Care Clinics); providing health and wellness services alongside prescription dispensing; and collaborating with life sciences companies and with healthcare providers to provide higher quality health outcomes. Last year, the company acquired Drugstore.com, one of the leading online pharmacies, to complement its own online services. Pharmaceutical Commerce sat down with Jeffrey Berkowitz, Senior Vice President, Pharmaceutical Development and Market Access (and also member of the Pharmaceutical Commerce Editorial Board), to talk about the pharma-facing side of Walgreens. Here’s what he had to say.
1) First, let’s get the big picture of Walgreens, which is well-known as the largest retail pharmacy chain in America. How does Walgreens position itself as a business, and as a healthcare services provider?
Walgreens is the largest drugstore chain in America, with nearly 8,000 stores at the most convenient locations, including the most 24-hour and drive-thru pharmacies of any national chain. The scale of the company is extraordinary, with more than six million people a day, 45 million per week walking into our stores for their prescription, health and daily living needs. They appreciate our convenient locations, focus on personal service, wide array of healthcare services and commitment to being more than a drugstore—we’re a helpful part of their lives.
As pharmacists have begun to play an expanding role in the delivery of care management services, Walgreens is proactively creating new care delivery models, with pharmacists as essential providers of that care. We call it “practicing at the top of the pharmacists license.”
2) Walgreens has been on a roll the past couple years, with high growth in earnings and dividends to stockholders. Is this a recovery from the Great Recession, or is something else going on?
It is definitely far more than just a recovery from the Great Recession. It’s really the realization of an important new strategy in healthcare. Walgreens has had an incredible legacy from a financial and investor perspective, and has been long considered one of those iconic “good to great” companies. Like all businesses, back in 2007, things changed from an industry perspective and from a financial perspective, allowing the company to re-think its core strategies. The company determined to slow store growth, which had been accelerating at a rate of a store opening every 16 hours, and focus on its core healthcare strategy. We are transitioning from a company focused on location, location, location to one focused on experience, experience, experience.
3) You’re SVP, Pharmaceutical Development and Market Access. Is that an operating unit of Walgreens? What does it do?
The role actually represents five operating units within the company. Walgreens originally sought out someone with large pharma experience because they truly believed that the company could leverage its assets to the strong benefit of pharmaceutical manufacturers.
One of the first things I did when I arrived was set up an account management and operational team that would translate the Walgreens value proposition in a way that would specifically resonate with pharmaceutical companies. Within the first year of operation, that team fundamentally changed the game and perceptions of Walgreens and reset the relationships with our pharmaceutical company suppliers.
The first piece of that is our contracts and pricing division, which addresses how we price and contract for our services, whether they be at a retail pharmacy or our relationships with employers around our Take Care Clinics and everything in between. The second piece is our payer marketing team, which is responsible for capturing our value proposition and making it pragmatically relevant to the key stakeholders that we call on, including pharmaceutical companies. The final piece is the managed markets sales team that harnesses the work that the contracts and pricing team and the payer marketing teams bring to bear, and communicates that to our myriad stakeholders. It is amazing to attend a meeting whose attendees had pre-conceived notions as to what Walgreens was, and their positive reaction to our potential impact in healthcare and the wide variety of our capabilities and services.
4) So, you negotiate directly with pharma manufacturers and their wholesalers. Price is undoubtedly one of the main negotiating topics. What is helpful or unhelpful in the positions that manufacturers take when sitting down with Walgreens? Is it possible to characterize how negotiations go with pharma manufacturers as a group, as compared to the consumer-goods supplier negotiations that Walgreens carries out?
For Walgreens, there are really three aspects that come into consideration when we think about our negotiations related to purchasing. Price is certainly one factor, but quality and supply are equally, if not more important. Walgreens will fill close to a billion prescriptions in 2012, representing approximately 20% of the retail pharmacy market. With six million people walking through our doors every day, we must assure that we have adequate supply, and more importantly, quality is non-negotiable. The real opportunity now is for pharmaceutical companies and wholesalers to see Walgreens as much more than a purchaser. Consumer-goods suppliers have always seen Walgreens as more than a purchaser, and work closely with Walgreens to maximize their presence in our stores through marketing programs, awareness campaigns and other avenues. Now pharmaceutical companies can work with Walgreens in similar and even more substantive ways.
Retail pharmacy can and will play a much greater role through relationships with manufacturers to help them educate, activate, and retain patients, and help patients acquire and adhere to their medication. As we build broader strategic relationships across all key segments, including brand, specialty, vaccine and generic drug makers, we believe that manufacturers will come to see the pharmacy as a key asset as a marketing channel for their products.
Consider also the benefit of pharmacist interventions on clinical outcomes for patients managing diabetes and other chronic diseases. In one study, we established that diabetes patients who participated in a disease-management program, leveraging face-to-face interactions with a pharmacist, demonstrated high levels of engagement (more than 90%), and significantly improved clinical outcomes.
We are essentially creating P&L-based relationships with our pharmaceutical company suppliers. In many instances we are their largest purchaser and distributor of product. For the large multi-national branded companies, we often have relationships across several divisions that add up to billions of dollars of sales. Generic drug manufacturers appreciate our 20% market share and the reach that provides, while specialty pharmaceutical companies can leverage our capabilities with limited distribution networks, REMs and patient support programs. We are even starting to work with drug companies around clinical trial design and enrollment and delivery.
Pharmaceutical companies are all struggling with limited access to physicians, compliance and adherence issues, spiraling costs of clinical trials, and they are beginning to see the importance of retail pharmacy and the role of the pharmacist, and how it can impact their business positively. As it relates to other stakeholders, such as managed care organizations and pharmacy benefit management companies, the dialogue is getting much more complex, and the way it works best is when organizations are working collaboratively on the complex issues associated with the delivery of healthcare in the United States today, and even more so, with a view toward what it will look like in the next five to 10 years. As a result the architecture of negotiations needs to change. Negotiations can no longer take place every three years with a black hats/white hats, win/lose mentality. The dialogue has to be ongoing and productive as marketplace dynamics continue to evolve.
5) You’ve indicated that there’s more going on at Walgreens drug-dispensing than picking up prescriptions at the local pharmacy. What will that experience be like in the future?
Take a walk through one of our new “Well Experience” pharmacies, and you realize immediately that Walgreens is not your mother’s drugstore anymore. Walgreens has become a destination for health and daily living. In our new store designs, we have fully integrated our front end and our back end. In the pharmacy, we have taken pharmacists from behind the counter to a space out front where they can regularly interact with patients. There is a private consultation room where a pharmacist can counsel a patient on a drug, provide injection training or inject a vaccine. There is a community education room, which can be used for educational purposes around disease states, such as asthma or diabetes, and there is a Take Care Clinic for primary or urgent care. These are all capabilities that can be leveraged by pharmaceutical manufacturers.
6) Before Walgreens, you worked at Schering-Plough and Merck. How do you look back on your manufacturer days?
I look back on my pharma days with great nostalgia. I started my career as an attorney at a large law firm and then moved into Schering-Plough as a lawyer. After years in the law department, I moved over to the business side of things during a time of great change. Schering-Plough had become the subject of a consent decree and a corporate integrity agreement, and as a result had a brand-new CEO and management team. It was a wild ride from 2003 through 2009 as leadership was turning around the company, and I was proud to be part of that turnaround. Schering-Plough was a very entrepreneurial and globally focused organization, which allowed forward thinking and innovation. When my team and I saw the trends around market access and reimbursement as being one of the most impactful on the industry, executive management supported us to stand up a first-of-its-kind division focused on market access and value and connecting those issues globally.
We realized quickly that bringing a product to market was no longer about just safety and efficacy, but about whether or not anyone would pay for it. It was also a very customer-focused organization as well. I really appreciated the opportunity to go to executive management with solutions and get their backing if it made good business sense. When Schering-Plough got acquired by Merck in one of the largest transactions ever in the pharmaceutical industry, I made the transition to Merck to lead a global division and take a role on the Global Human Health and Emerging Markets leadership teams. A year after the merger, I realized that big pharma was going to be an extremely challenging environment, particularly at that scale, and I began to explore other opportunities to leverage my experience, but in an entirely new industry.
7) In joining Walgreens, you moved into an entirely new industry, with a new team in a new city. How has the transition gone?
Moving over to Walgreens was a bit of a shock to the system. I have always prided myself on agility in my career, having moved from a law firm to pharma, and then from law to the business side, and then taking on global responsibility, in differing businesses and managing large teams. Moving from large pharma to retail pharmacy has been a humbling move. It’s a very different, dynamic business operating at much thinner margins in a complex ecosystem. After 13 years at Schering-Plough and Merck, having built a strong team of trusted and known leaders, I was on my own in a new city, in a new industry and with new teams. The only thing I could do was dive right in and roll up my sleeves.
I think the team was surprised at first, at the level of detail and review that I was seeking, but it was the only way to learn the business quickly. I walked right into the issues around our relationship with Express Scripts, which really forced me to learn the business on my feet. While I was taking on responsibility for some established divisions, I was also starting up a new division focused on the pharmaceutical company sector and needed to quickly bring in talent and skills that didn’t exist within the organization. Finally, with Walgreens being such an iconic organization with such a rich history, I really had to take the appropriate time to listen and learn and earn people’s trust so that I could leverage that heritage while driving new thinking and building new skills.
As an officer of the corporation, I really enjoy being able to weigh in on a variety of strategic initiatives outside of my areas of expertise, and it has stretched me in many ways. I am becoming a true retailer, and have a hard time driving past a Walgreens in any town that I am in to do a quick run-through and ask the manager and staff how things are going. At Walgreens, working in a store, even as an executive, is a critical component of what we all do. Everything we do has to translate to those 8,000 points of service and the 45 million people who walk through our doors every week. Everything needs to be seamless.
It is busy to say the least. I always tell people, I have two things in my life, work and my family. If I am not working, I am with my wife and three kids (two boys 14 and 12 and a daughter, 9). We try to create some balance with the demands of work, by traveling extensively as a family. We have just recently returned from Costa Rica and Iceland. Iceland was a great way to reconnect and do something unique and memorable. Just within a long weekend in Iceland, we chased the Northern Lights, hiked on a glacier with crampons and pickaxes, went snowmobiling and swam in a geothermal pool atop a volcano. We plan ahead so we have something to look forward to, and we have already plotted our next adventure to the Galapagos Islands this August.