Healthcare Business News

Rite Aid expects scant revenue gains from newly insured

By Virgil Dickson
Posted: April 10, 2014 - 3:00 pm ET

Rite Aid, the country's third-largest pharmacy chain, expects little new income from customers who purchased private coverage through federal and state insurance exchanges, President and CEO John Standley told analysts during an earnings call Thursday.

That's because many of those individuals already were Rite Aid customers, according to an internal analysis of recent enrollees into pharmacy benefit plans. Specific figures were not released.

Rite Aid is the first of the big retail pharmacy chains to comment on how the health reform law is impacting its bottom line.

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“One thing we see is an overlap, where we already have a relationship with them,” Standley said. “The overlap is probably higher than expected.”

New Medicaid beneficiaries account for the strongest stream of new Affordable Care Act-related revenue, he said.

Standley also discussed Rite Aid's recent acquisition of RediClinic, an operator of 30 clinics in the Austin, Houston and San Antonio areas. Initially, Rite Aid hopes to expand RediClinic's footprint in Texas, where it provides services within grocery stores. Once there is a sense of how the business operates, expansion into other Rite Aid markets could follow, Standley said. Financial details of the deal were not disclosed.

Rite Aid reported profits of $55.4 million in the fourth quarter of 2013, a 55% drop from the $123.1 million it earned in the same period last year. Revenue increased 2.2% to $6.6 billion. For the full year, the company recorded revenue of $25.5 billion, with net income of $249.4 million. For the 2015 fiscal year, it anticipates revenues of $26 billion to $26.5 billion.

Also during the call, Standley said Rite Aid has no plans to follow competitor CVS Caremark's lead to stop selling tobacco products.

“We also have a convenience (store) element and we want to meet that need the best we can,” Standley said, explaining the company's decision. However, he said he would not rule out reconsidering the matter in the future.

Follow Virgil Dickson on Twitter: @MHvdickson

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