Drug Stores Industry Snapshot

Drug Stores Industry Snapshot
accessed 11/23/10 thru www.LFPL.org – the Louisville Free Public Library membership website.

In 2006 drug stores posted retail revenues of $189.3 billion, a 7.9 percent growth rate over 2005, according to the National Association of Chain Drug Stores (NACDS). Chain drug stores, which account for about 35 percent of the industry's 61,200 stores, took in $144.8 billion, or 76 percent of the income. Total prescription sales in all types of stores (traditional chain, mass-merchandise, supermarket, independent, and mail order) in 2006 were $249.8 billion, up 7.7 percent from $232 billion in 2005. The retail volume of prescription sales was 3.4 billion prescriptions in 2006, an increase of 4.3 percent from 3.28 billion in 2005.
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The rapid growth in this industry toward the turn of the twenty-first century prompted powerful supermarket and mass-merchandise chains to enter traditional drug store markets, forcing the independent drug store industry to compete with these larger companies. In addition, the drug store industry faced narrowing profit margins due to the general push to reduce health-care costs in the United States; as a result, acquisitions and consolidation became prevalent. This combination of factors forced drug stores to concentrate on customer service, expand into niche markets, add products, form partnerships with suppliers and health-care providers, and automate operations for increased cost-efficiency.

Drug stores in the mid-2000s faced a future with potential for significant growth and unique challenges. The average age of the U.S. consumer is increasing rapidly as the Baby Boomer generation grows older. An aging population has increased...