Rite Aid Profile
Rite Aid Corporation (Rite Aid), through its subsidiaries, operates as a pharmacy retail healthcare company in the United States of America.
The company delivers health care services and retail products to over one million Americans daily. Its pharmacists are uniquely positioned to engage with customers and improve their health outcomes. The company provides an array of whole being health products and services for the entire family through retail pharmacy locations across 17 states. Through Elixir, its pharmacy benefits manager, the company provides pharmacy benefits and services to members nationwide.
Segments
The company operates through two segments, Retail Pharmacy and Pharmacy Services.
Retail Pharmacy
The Retail Pharmacy segment consists of Rite Aid, Bartell Drug Company (Bartell Drug or Bartell) stores and Health Dialog (Health Dialog Services Corporation). This segment operates one of the largest retail drugstore chains in the United States. The Retail Pharmacy segment’s drugstores’ primary business is the sale of brand and generic prescription drugs. The Retail Pharmacy segment also sells a full selection of health and beauty aids and personal care products, seasonal merchandise, and a large private brand product line.
In the company’s Rite Aid retail stores, its highly-trained pharmacists dispense medications pursuant to prescriptions written by medical providers and educate the company’s customers on alternative remedies that can supplement traditional options. The company offers a wide range of healthcare services, including administering immunizations against COVID-19 (global coronavirus), the flu, shingles and more; assisting its customers with high blood pressure, cholesterol and diabetes; providing guidance on combating obesity and tobacco addiction; and educating the company’s customers on managing medications and potential side effects. Throughout the pandemic, the company’s pharmacists have been on the front lines of testing and vaccinating, and the company made great strides in changing perceptions of pharmacists as providers whose reach extends well beyond filling prescriptions.
In the year ended February 26, 2022, prescription drug sales accounted for 70.0% of the company’s total drugstore sales. The company’s pharmacy operations will continue to represent a significant part of its business due to a combination of the company’s efforts to expand the role of its over 6,400 pharmacists as whole-being health advocates; demographic trends, such as an aging population and increased life expectancy; the company’s focus on growth customers, particularly women between the ages of 25 to 49 who take care of themselves, their children, aging parents, and even pets; anticipated growth in the federally funded Medicare Part D prescription program as ‘baby boomers’ continue to enroll; and the discovery of new and better prescription drug and over-the-counter therapies.
In addition, the company offers a wide assortment of front-end merchandise to complement its pharmacy services and to provide convenience to the company’s customers. The company carries a full assortment of front-end products, which accounted for the remaining 30.0% of the company’s total drug store sales in the year ended February 26, 2022. Front-end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, pet care, and numerous other everyday and convenience products.
The company offers a wide variety of products through its portfolio of owned brands, which contributed approximately 19% of its front-end sales in the year ended February 26, 2022 and which the company is positioning for future growth.
The company completed the acquisition of the Bartell Drug Company during December 2020. The strategic acquisition of the Bartell Drug Company fits into its RxEvolution strategy, complementing its commitment to total health and wellness, the importance of the pharmacist as a trusted health advisor, and the critical role of the neighborhood pharmacy. This expansion within the greater Seattle area will allow the company to better service customers, health plans and healthcare providers.
The average size of each store in the company’s chain is approximately 13,600 square feet, and average store size is larger for its locations in the western United States.
Health Dialog is a provider of healthcare coaching and disease management services to health plans and employers. Health Dialog has robust analytics and service offerings that are designed in response to client requests. Health Dialog provides these services using a call-in line staffed by nurse practitioners and through an online platform. The company is revitalizing Health Dialog to better serve the changing needs of health plan clients, including assisting with reducing hospitalizations, increasing medication adherence and delivering significant savings.
Pharmacy Services
The Pharmacy Services segment provides a fully integrated suite of PBM (pharmacy benefits manager) offerings, including technology solutions, mail delivery services, specialty pharmacy, network and rebate administration, claims adjudication and pharmacy discount programs, through Elixir Pharmacy and Laker Software. Elixir also offers a national Medicare Part D prescription drug plan through Elixir Insurance (EI).
Elixir, the company’s mid-market national pharmacy benefits manager (PBM), provides a suite of PBM offerings, including technology solutions, mail delivery services, specialty pharmacy, network and rebate administration, claims adjudication and pharmacy discount programs. Elixir also provides prescription discount programs and Medicare Part D insurance offerings for individuals and groups. Elixir provides services to various clients across its different lines of business, including major health plans, commercial employers, labor groups and state and local governments, representing over 2 million covered lives, including approximately 0.7 million covered lives through the company’s Medicare Part D insurance offerings. Elixir continues to focus its efforts and offerings to its target market of small to mid-market employers, labor unions and regional health plans, including provider-led health plans and government sponsored Medicaid and Medicare plans.
Elixir is an integral component of the company’s strategy. The company is modernizing its technology platforms, enhancing its clinical programs, and launching its new specialty offering across its book of business. For its markets that overlap with Rite Aid and Bartell stores, the company can provide highly curated clinical offerings that engage members in its stores with its pharmacists.
Strategy
As a healthcare company with a retail footprint operating in diverse communities throughout the country and engaging over one million customers per day through the company’s various lines of business, it is positioned to continue making a meaningful difference in the lives of its customers, associates, and neighbors. During the year ended February 26, 2022, the company had been instrumental in America’s fight against COVID-19, delivering over 14 million vaccine doses and administering over 3 million PCR tests.
The company’s strategy includes deepening its share in the markets and segments it serves; expanding its offerings to new markets, segments, and customers; and creating new offerings leveraging its portfolio of assets to meet the evolving needs of customers and other stakeholders.
Products and Services
The company carries a full assortment of non-prescription, or front-end, products. It offers a wide variety of own brand products to meet the needs of its customers in virtually every non-pharmacy department. The company continues to focus on increasing own brand sales and penetration by expanding its assortment, redefining its brand architecture and brands, refreshing its package design, and driving greater support through its marketing.
The company, through Elixir, provides a fully integrated suite of PBM offerings, including technology solutions, mail delivery services, specialty pharmacy, network and rebate administration, claims adjudication and pharmacy discount programs. In addition to its PBM offerings, Elixir offers fully integrated mail-order and specialty pharmacy services through Elixir Pharmacy. Through Elixir Insurance (EI), Elixir also serves seniors enrolled in Medicare Part D. In addition, Elixir, through its Laker Software, performs prescription adjudication services for its own claims.
The company purchases its non-pharmaceutical merchandise from numerous manufacturers and wholesalers. The company sells private brand and co-branded products that generally are supplied by numerous sources. The GNC branded vitamin and mineral supplement products that the company sells in its stores are developed by GNC, and along with its Rite Aid brand vitamin and mineral supplements, are manufactured by GNC.
Customers and Third Party Payors
During the year ended February 26, 2022, the company’s stores filled approximately 238.1 million prescriptions and served over one million customers per day.
In the year ended February 26, 2022, substantially all of the company’s pharmacy sales were to customers covered by third party payors (such as insurance companies, prescription benefit management companies, government agencies, private employers or other managed care providers) that agree to pay for all or a portion of a customer’s eligible prescription purchases based on negotiated and contracted reimbursement rates. The largest third party payor, Caremark, represented 32.1% of the company’s pharmacy sales. The largest third party payor, CVS Health/Caremark, represented 32.1% of pharmacy sales during the year ended February 26, 2022.
During the year ended February 26, 2022, Medicaid and related managed Medicaid payors sales were approximately 18.2% of the company’s pharmacy sales, of which the largest single Medicaid payor was approximately 2.1% of the company’s pharmacy sales. During the year ended February 26, 2022, approximately 38.2% of the company’s pharmacy sales were to customers covered by Medicare Part D.
The company, through its Pharmacy Services segment, provides pharmaceutical solutions for the company’s clients, which are primarily employers, insurance companies, unions, government employee groups, health plans, managed Medicaid plans, Medicare plans, and other sponsors of health benefit plans, and individuals throughout the United States.
During the year ended February 26, 2022, Medicare Part D payor revenue was approximately 56.1% of the company’s Pharmacy Services segment revenue, of which the largest single Medicare Part D payer was approximately 41.1% of the company’s Pharmacy Services segment revenue. During the year ended February 26, 2022, approximately 10.1% of the company’s Pharmacy Services segment revenue was to customers covered by Commercial payors. During the year ended February 26, 2022, approximately 6.3% of the company’s Pharmacy Services segment revenue was to customers covered by Medicaid payors.
Licenses, Trademarks and Patents
The Rite Aid name is the company’s most significant trademark and the most important factor in marketing the company’s stores and private brand products. Additionally, the company utilizes important tradenames for its Elixir operations and the acquired Bartell Drugs. The company holds licenses to sell beer, wine and liquor, cigarettes and lottery tickets. As part of the company’s strategic alliance with GNC, it has a license to operate GNC ‘stores-within-Rite Aid-stores’. The company also holds licenses to operate its pharmacies and its distribution facilities. Through the company’s 100% owned subsidiary, Elixir, the company holds a license to conduct Medicare Part D business with Centers for Medicare and Medicaid Services (CMS).
Seasonality
The company experiences seasonal fluctuations in its results of operations concentrated in the first and fourth fiscal quarters (year ended February 2022) as the result of the concentration of the cough, cold and flu season and the holidays. The company tailors certain front-end merchandise to capitalize on holidays and seasons. The company increases its inventory levels during its third fiscal quarter in anticipation of the seasonal fluctuations described above, including flu and other immunizations.
Regulation
The company’s business is subject to federal, state and local laws, regulations, and administrative practices concerning the provision of and payment for health care services, including without limitation, federal, state and local licensure and registration requirements concerning the operation of pharmacies and the practice of pharmacy; Medicare, Medicaid and other publicly financed health benefit plan regulations prohibiting kickbacks, beneficiary inducement and the submission of false claims; the Affordable Care Act; regulations of the U.S. Food and Drug Administration (FDA); the U.S. Consumer Product Safety Commission; the U.S. Federal Trade Commission; and the U.S. Drug Enforcement Administration (DEA), including regulations governing the purchase, sale, storing and dispensing of controlled substances, listed chemicals, and other products.
The company’s business is subject to regulations promulgated by state and other federal agencies, including state boards of pharmacy and medicine, concerning automated outbound contacts, such as phone calls, text messages and emails; and the sale, advertisement and promotion of the products the company sells, including nicotine products, drugs, medical devices, and alcoholic beverages. The company is also subject to laws governing its relationship with its associates, including health and safety, minimum wage requirements, overtime, sick leave, working conditions, equal employment opportunity and unionizing efforts.
Because the company submits claims and other information to Medicare, Medicaid, and other government-sponsored health care programs, the company is subject to various health care fraud and abuse laws, including the federal False Claims Act (FCA) and Anti-Kickback Statute (AKS), of which many states have similar state counterparts, as well as the federal Physician Self-Referral Law (Stark Law), and the beneficiary inducement provision of the Civil Monetary Penalties Law (CMPL).
The Department of Health and Human Services (HHS) has the authority to monitor the company’s operations and compliance efforts through audits and investigations, and noncompliance can result in the imposition of significant civil and criminal penalties and exclusion from future participation in government programs.
The company participates in the federal government’s Medicare Part D program as a stand-alone Prescription Drug Plan (PDP) through its EI subsidiary, and the company’s PBM business contracts to provide drug benefit administration services for other Medicare plans. Accordingly, the company is subject to federal, state, and local regulations, including rules, guidance, memoranda, and updates published by CMS.
Governmental agencies with regulatory authority to audit and/or investigate the company’s operations in this area include, but are not limited to CMS, DEA, DOJ, FDA, state pharmacy boards, state nursing boards, state controlled substance regulators, and the state attorneys general.
The company’s business is also subject to patient and consumer privacy obligations. The company is subject to the requirements imposed by the Health Insurance Portability and Accountability Act (HIPAA), as modified by the American Recovery and Reinvestment Act of 2009, including the Health Information Technology for Economic and Clinical Health Act. As a HIPAA covered entity, the company is required to implement privacy standards, train its associates on the permitted uses and disclosures of protected health information (PHI), report breaches of PHI, provide a notice of privacy practices to the company’s pharmacy customers and permit pharmacy customers to access and amend their records and receive an accounting of disclosures of PHI. The company is also subject to regulations governing the receipt of remuneration in exchange for PHI and is subject to audit for HIPAA compliance and failure to satisfy HIPAA standards may result in civil and criminal penalties.
The company’s business is subject to federal and state privacy and data security laws, with respect to its receipt, use and disclosure by the company of personally identifiable information (PII), which laws require the company to provide appropriate privacy and security safeguards for such information. The Cybersecurity Information Sharing Act of 2015 invites business entities to share cyber threat indicators with the federal government and directs HHS to create a set of voluntary cybersecurity best practices for health care entities. In addition, the company is subject to the California Consumer Privacy Act (CCPA), which established numerous consumer rights, including rights of access and deletion of consumer’s data upon request.
The company is also subject to the Payment Card Industry Data Security Standard promulgated by the payment card industry in connection with handling credit card data.
In addition to the protection of personal data, the company’s business is required to comply with other federal and state consumer protection laws. Applicable federal laws include the Federal Trade Commission Act, the Federal Postal Service Act, and the Consumer Product Safety Act. The company’s retail pharmacies and clinics are also subject to federal and state laws regarding the accessibility of goods and services to people with disabilities.
The company also engages in certain telemarketing activities that involve outbound phone calls, texts and emails. Accordingly, the company is subject to various federal and state laws, including but not limited to, the federal Telephone Consumer Protection Act and similar state laws and the federal Telemarketing Sales Rule, under which federal and state regulators and private individuals may be authorized to take legal action and seek financial penalties for violations.
Pursuant to the Affordable Care Act, the company’s PBM and PDP businesses, and its health plan clients, have been subjected to greater government oversight and regulation, including in relation to minimum Medical Loss Ratio requirements, benefit plan design mandates, and group rating and pricing practices.
The company falls under the oversight of the U.S. Federal Trade Commission (FTC) and state regulatory authorities that are charged with investigating and enforcing laws relating to unfair and deceptive trade practices and ‘unfair methods of competition’.
The company’s business operations include, among other things, the distribution and dispensing of prescription drugs, the sale of over-the-counter medications, including homeopathic drugs, and products, the private labeling of certain drug products and medical devices, and the sale of prepared food, all of which are regulated in whole or in part by the FDA.
The company’s PBM business provides prescription drug administrative services for various employer and union-sponsored health plans, in accordance with plan designs adopted by the plan sponsors. The company must comply with the Federal Employee Retirement Income Security Act of 1974 (ERISA), as well as implementing regulations issued by the U.S. Department of Labor (DOL) comprehensively regulating certain employee benefit plans that contract with the company to provide PBM services, as well as those plans’ service providers.
The company offers various financial products and services at certain of its retail store locations that include money (wire) transfer services, bill payment, money orders, check cashing, prepaid gift cards, and digital payment platforms.
The company has monitored and implemented relevant legislative and regulatory corporate governance reforms, including provisions of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), the rules of the Securities and Exchange Commission interpreting and implementing Sarbanes-Oxley and the corporate governance listing standards of the NYSE.
Suppliers
The company purchases all of its brand drugs, and with limited exceptions, all of its generic drugs from a single wholesaler, McKesson Corporation.
Competition
The company’s retail drugstore operations compete with, among others, retail drugstore chains (such as Walgreens Boots Alliance, Inc. and CVS Health), along with independently owned drugstores, supermarkets (such as Kroger), mass merchandisers (Walmart Canada and Target), discount stores, wellness offerings, dollar stores, and mail order and internet pharmacies.
The company’s pharmacy benefit management company competes with other pharmacy benefit managers, such as Caremark, Express Scripts, OptumRx and mid-market PBMs.
History
Rite Aid Corporation was founded in 1962. The company, a Delaware corporation, was incorporated in 1968.
