This is the list for the competition for Rite Aid:
CVS, Walgreens, Costco, Amazon’s PillPack, Walmart, and other mail order pharmacies.
By doing a risk assessment using Michael Porter’s five forces or threats:
1. Threat of Entry: the pharmacy business is regulated by the state’s board of pharmacy and is regulated by the FDA and the DEA, so depending on the pharmacy that the pharmacy is located at entry could vary. In addition, depending on the pharmacy, if the pharmacy wants to sell prescription drug to another state or dispense control substance medication, they would need to obtain a license depending on what they want to do.
2. Threat of Rivalry: The pharmacy business is a very competitive environment as anyone could enter. As any pharmacist can open their own pharmacy as long as they have the appropriate licenses to open a business and to handle prescription medication. So Rite Aid have to deal with both big players (CVS and Walgreens) and small players (independent pharmacies).
3. Threat of Substitutes: This section would be similar to Threat of Rivalry, but the the differences might be customer service.
4. Threat of Powerful Suppliers: Pharmacies would need to find suppliers, such as Mckessons or distributors to supply them with prescription medications for Rite Aid or other pharmacies to sell to their customers. In the pharmacy game, if a pharmacy is unable to buy their supplies at a price point where their margin can be high enough to be profitable. This is important because selling some generic medication does not have much profit, so by not buying medications at a price where the margin is not high, could cause the pharmacy money if you considered about the labor and overall cost. For example, a hypertension pill could cost 3 dollars for a 30 day supply, but insurance only pay 3.50 plus dispensing fee. Not much profit is gain from there.
5. Threat of Strong Buyers: Rite Aid and many other pharmacies have been pressured by private insurance companies, HMO’s, and other federal government insurance programs to reduce the price of their drugs that they have dispense or prevent the pharmacies from marking up their prices. This cause the pharmacy business to be in peril as other pharmacies are struggling. In the past Rite Aid sold off half of its asset to Walgreens and currently in the process of selling the rest, once it can find a buyer. However, with government regulation, such as the FTC, it will be difficult for Rite Aid to be acquire by other pharmacies as they are scared it might create a monopoly.
Alan's Perspective 