At Risk

Retailers have jumped feet first into the flu season and are waiting for demand to build

In the antiviral business everything changes.

The Centers for Disease Control and Prevention's U.S. map in shades of green indicates a low incidence of influenza in the country for week No. 44, ending Nov. 6. That wasn't the case last year at this time when all indicators were red and orange in high alert due to the H1N1 swine flu pandemic that disrupted the production and distribution of the seasonal flu supply.

Food retailers then were scrambling to get their seasonal influenza vaccinations. Some were forced to cancel their scheduled flu clinics. That isn't the case today.

All major players in the food, drug and mass merchandiser retail channels have gotten an early jump on the flu season due, in part, to the availability of supply, and the momentum built over last year's pandemic and the threat that influenza poses.

“Production is much more prevalent this year. The season started much earlier. Historically, CDC guided organizations and the public to think about their flu shots on Oct. 1 and last year they changed the mind-set because they were trying to get two vaccines into one season,” noted John Roehm, chief executive officer, Mollen Immunization Clinics, Scottsdale, Ariz., which operates clinics for retailers like Wal-Mart [2], Albertsons [3], Fry's Food and Drug, Bashas' [4] and others.

As of Sept. 1, Mollen had 90,000 flu shot clinics in operation and has given several million vaccinations. “We've had a great year. Patient volume increased. Business is up and we have more accounts than in the previous year,” Roehm told SN.

Last year's H1N1 virus impacted about 20% of Americans (approximately 60 million people), and resulted in approximately 274,000 hospitalizations and 12,000 deaths, according to CDC statistics. Flu-related deaths have ranged from a low of around 3,000 to a high of 49,000 Americans each year between 1976 and 2007. The cost of flu sickness results in more than $10 billion in lost productivity and direct medical expenses each year. Add to this another $16 billion in lost potential earnings, according to CDC statistics.

Seasonal flu vaccination rates reached historically high levels last year, according to a report, “Fighting Flu Fatigue,” produced by Trust for America's Health, an advocacy group. Forty percent of adults ages 18 and older, and 44% of children ages six months to 17 years old received seasonal flu vaccine.

CDC RAISES AWARENESS

Through its immunization summits and public awareness communications, the CDC has attempted to stimulate public demand for annual vaccinations. This year the Advisory Committee on Immunization Practices, which advises the CDC on vaccine issues, broadened its recommendations for those who should get an annual flu shot to all persons aged 6 months and older.

The recommendations are intended to remove barriers to flu immunization and to protect as many people as possible against the dangers of the flu. The decision is supported by evidence that the flu vaccination is a safe and effective preventive health measure with potential benefit across all ages.

Even healthy adults with no previously identified risk factors can develop influenza-related complications, including adults 19-49. That age group was not specifically recommended for vaccination in previous flu seasons, according to the CDC, but adults in that age group were particularly affected by the H1N1 virus.

Spurred on by government grants, drug manufacturers also see opportunities in investing in the flu vaccine segment. Facing declining prescription drug sales, big drug companies are seeking new avenues to keep profits up, and vaccines are said to be one such avenue.

GlaxoSmithKline, one of several drug companies competing in the flu segment, began shipping its first lots of some 30 million doses combined of FluLaval and Fluarix influenza virus vaccines in late July and early August.

Major chains like Kroger [5] began making flu shots available at the going price of $25 at its pharmacies and through its Little Clinic locations in August.

Retailers this year do not have to navigate a two-shot season. This year's single vaccination offers triple protection formulated with the H1N1 strain, a B strain and the H3N2 strain.

“Everyone has jumped in this year. You had to get a quicker start than the other guy. People only get one flu shot so it's not like they are going to come back for another one,” said Bruce Kneeland, a pharmacy consultant, Valley Forge, Pa.

The financial model also may have changed for retailers this year. Those who provided the H1N1 vaccine last year received it at no cost, backed by government support, and charged an administration fee to dispense it, noted Kneeland.

He sees a significant increase in flu vaccine services through retail. Drug manufacturers have promoted the flu vaccine business to retailers based upon its potential profitability and tie-in opportunities with related over-the-counter cough and cold products. Food retailers also view flu vaccine services as a way to build their image as a whole health provider. For the pharmacy, it is a way for those pharmacists, who are certified to give immunizations, to provide a valued medical service.

Retailers can make money on flu vaccines, especially if the price to consumers remains at the $25 to $30 range, and the vaccine is mostly given on a cash-only basis. With the cost of the vaccine and supplies running about $13, retailers can make about $15 per patient, said one observer.

However, the flu vaccine business does not come without its risks. This year could be even riskier than last year with reports that there is an oversupply of product coupled with a low public demand. That could mean a significant amount of investment dollars at risk for major retailers because theoretically flu vaccine is a perishable item and not returned for reimbursement.

For a retail chain like Walgreens, which boasts it delivered 50% of all flu immunizations administered through retail pharmacy last year, or 5.4 million seasonal flu shots, that represents significant risk.

“If done right, if calibrated right and if retailers understand the market and what the traffic looks like, it can be profitable,” said one observer.

But several industry watchers agreed that the 2010-11 flu season may cause some retailer panic if demand doesn't build and prove challenging. Some expect recalibrated retail strategies along with new virus strains in the 2011-12 season.