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Consumers Spending Less on Prescription Drugs

Retailers can manage perception of price and price itself Kurt Salmon Associates says

NEW YORK, Feb. 25 /PRNewswire/ -- Consumers say they are spending an estimated 3% less on prescription drugs this year versus last year thanks, in part, to the economic downturn, according to Kurt Salmon Associates' recent evaluation of more than 8,000 shoppers' opinions.

The decline is likely the result of a continued shift towards lower-cost generic drugs and an increasing number of consumers who are looking to save money by self-medicating or simply reducing overall drug consumption.

KSA's analysis suggests that retailers that can manage consumers' perceptions of price -- as much as price itself -- are the most likely to be successful in the prescription drug category, especially in the present economy.

Wal-Mart gaining share; Target gets high advocacy and price-to-value

For example, many retailers have adopted discount and generic drugs programs. But Wal-Mart Stores Inc. has been the most successful at marketing its discount drug offering and appears to be gaining share from traditional drug chains, such as Rite Aid Corp., which consumers perceive as having higher prices.

Target Corp. also could prove an advantage in the prescription drug category. Consumers give the multiline retailer high advocacy and price-to-value scores.

Conducted in partnership with Prosper Inc., a leader in online market intelligence, the research includes more than three years' worth of comprehensive consumer data and shows that:

  • Prescription drug users are increasingly price sensitive. In January 2009, 20% of prescription drug consumers cited price as a reason for switching retailers, which is up from 16% in 2008.

  • Retailers with a value orientation are winning the share war in this economy. Wal-Mart grew its customer base 9% over the past year.

  • The share gains for value-based retailers come at the expense of the stores that consumers perceive as having higher prices. Rite Aid lost a disproportionate amount of market share to Wal-Mart, approximately 2% over the past year, because consumers believe it has higher prices.

  • Despite the increasing importance of price perception, location remains the no. 1 reason why consumers choose a particular retailer for prescription drug purchases. Walgreens and CVS continue to maintain share based primarily on convenient locations.

  • Price-sensitive consumers are responding to discount prescription drugs programs. More than half (57%) of Wal-Mart pharmaceutical shoppers cited the retailer's $4-generic-drugs program as a main reason for their choice of retailer.

SOURCE Kurt Salmon Associates
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