DME

Delivered June 8th, 2017

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Please provide me a detailed look at how Walmart tried to make an entrance into the Durable Medical Equipment (DME) Market.

Hello, and thanks for you question asking for a detailed look at how Walmart tried to make an entrance into the Durable Medical Equipment (DME) Market.  I have found that Walmart are a main player in this multi billion dollar market.  They aim to be the number one health care provider in the retail industry, and are getting there through making strategic partnerships and through having identified the opportunity in the market early on.  Below you will find a deep dive into my research, along with all the details as to how I came to this conclusion.

OVERVIEW
Overall the global Durable Medical Equipment (DME) is currently worth about $140.9 billion, and is expected to grow to $242 billion by 2024.  The most recent stats I found for the size of the US market showed that in this region it was worth around $26 billion in 2010, and $31 billion in 2013.

Walmart is looking to take a big chunk of this market.  I have researched each of your distinct questions that you mentioned you were interested and have answered them below.  In answering your question I found articles on the Walmart website, along with the PwC report to be most useful.

FINDINGS
- When they entered and how?
After a thorough search I found no evidence of when exactly Walmart began selling DME products.  This source suggests that they have been a long standing part of the DME market.  

Walmart successfully entered this market by foreseeing its potential and getting in early.  For example, it is predicted that by 2020 around 20% of US GDP will be spent in healthcare.  They saw the opportunity they had in the 150 million customers that visit their stores weekly, not to mention online.  Their aim was to "transform how people thought about retail healthcare and unite the wide range of Health & Wellness products and services they already offered (e.g., pharmacy, clinics, DME, immunisations)"

- What types of products do they offer?
Walmart offer a wide range of DME products.  They offer: Wheelchairs, walkers, crutches, mobility scooters, bathroom aids, canes, health monitors, sleep apnea products, enteral nutrients and specialty pharmaceutical.

- Do they accept third party billing?
Yes, Walmart accept payment through insurers including Medicaid.  They accept: Tricare, Aetna, United Healthcare, Blue Cross Blue Shield of Texas, Medicare Part B, Medicaid Georgia and South Carolina Plans, and Walmart Associate Health Plans.  

- Have they exited the market?
No, Walmart are still operating in this market and only have plans to grow rather than pull out.

- How is their business doing in the DME market?
Walmart is doing well within this market.  If you take their position in the DME market as part of how their are doing as a healthcare provider you can see that they are ahead of the competition.  Walmart has claimed that it wants to be "the #1 health care provider in the retail industry".  They are making partnerships in order to strengthen this position, for example they recently partnered with DirectHealth.com. 

Walmart is growing its reputation as a retailer who is committed to helping its customers live healthy lives.  It is becoming the go-to one-stop-shop for groceries and healthcare.  For these reasons they may reach their goal of becoming the number one health care provider.

- Info on sleep apnea devices, and home medical equipment
In terms of sleep apnea, Walmart offer a limited number of products.  However, in the field of home medical equipment they offer a wide range of products.

CONCLUSION
Overall I have found that Walmart were early to notice the potential in the DME market and began differentiating themselves in this market early on.  They aim to be the health care provider in the retail industry, and are making strategic partnerships to help make this happen.  They offer a wide range of DME products and accept third party payments for these.

Thanks for using Wonder, please let us know if there's anything else that we can help out with!

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Please provide me a detailed look at how Walgreens tried to make an entrance into the Durable Medical Equipment (DME) Market.

Hello! Thanks for your question about how Walgreens tried to make an entrance into the Durable Medical Equipment (DME) Market. The short version is after searching extensively through news articles, industry reports, and company filings, I’ve determined that the information you requested is not publicly available because Walgreens discloses its financial information in broader business segments. Additionally, the company entered the DME market in 2001 and exited in 2011, limiting the availability of online news articles about the company.  However, I was able to learn the company entered the market through its Pharmacy Benefits Management (PBM) subsidiary, which operated home care services in 6 states. Below you will find a deep dive of my research and methodology. 

METHODOLOGY
I began by searching Walgreens company filings. I found that their SEC filings currently report three business segments: retail pharmacy USA, retail international, and pharmacy wholesale. Unfortunately, they do not report more detailed information, except for the amount in sales for prescriptions. The unavailability of this information means it is not possible to say how profitable or in what business line they managed DME. I then searched through news reports and found that Walgreens expanded to the Home Care business in 2001 through its subsidiary, Walgreens Health Initiative (WHI). 

The challenge was obtaining information from news reports from so far back. I found mostly reports that referred to the same news story, and some additional reports about the acquisitions made by WHI in order to have access to the market. I was unable to find information regarding the types of products they offered, whether they entered online and retail or whether they were assisted by other companies to facilitate reimbursement. I was able to find that WHI was sold in 2011. Later than this date, I could find no information about Walgreens participating in the home respiratory therapy DME market. After learning more on WHI, I was able to understand their business model better, which seems to have based its the provision of home respiratory therapy DME on their PBM business. 

BACKGROUND
Walgreens was founded on 1901 by Charles R. Walgreen. With over 100 stores, the company went public in 1927 under the name Walgreen Co. In 1946 the company acquired its first foreign property in Mexico (which was sold in 1984) and by 1950 it began implementing an innovative self-service model, which is widely used today. The company has been overly successful over the past decades and is currently the largest pharmacy group in the world. In 2014, Walgreen Company became Walgreens Boots Alliance, after buying U.K. based Alliance Boots. 

Walgreens business growth has been driven by having a widespread reach, through a consistent expansion of its locations, first on a national scale and now on a global scale. During the late 1990's and the first decade of the 21st century, Walgreens experimented, to some success, with diversifying its lines of business. In 1995, after facing tough competition from CVS and its PBM, CVS Caremark, Walgreens created its own PBM subsidiary, Walgreens Health Initiative (WHI). WHI  managed its own business lines, which included Walgreens Home Care, mail service pharmacies, and specialty pharmacy services. It was under Walgreens Home Care that Walgreens entered the DME market. 

WHEN AND HOW DID WALGREENS ENTER THE DME MARKET?
Unfortunately, there are two factors that hinder the research paths for this request. First, Walgreens Company never disclosed financial data for WHI specifically. It instead presented financial statements by product category, which includes drugstore sales, prescription sales, and general sales; making it impossible to determine through public data when Walgreens entered the DME market and whether it was profitable. 

A second challenge to the research is the time-frame in which Walgreens entered the market, and when it left. News reports indicate that, in 2001, WHI entered the "home infusion, home medical equipment services, and home respiratory services" market in six states: Arizona, Florida, Illinois, Indiana, New Mexico, and Wisconsin. Unfortunately, after searching extensively through specialized pharmacy news websites, very few articles, which could have described Walgreens strategy in this line of business, were available. Furthermore, WHI was sold in 2011 to Catalyst Health, which continues to operate the PBM until now, so most of the news articles focus on the details of the sale and the current state of WHI under Catalyst ownership. 

DID THEY ACCEPT THIRD PARTY BILLINGS?
Nonetheless, some valuable insights can be drawn from the available information. According to Walgreens SEC filings, their PBM business included "plan setup, claims adjudication with network pharmacies, formulary management, and reimbursement services." As a PBM, WHI managed reimbursement contracts and therefore engaged with the insurance companies and negotiated the services that were made available through these. WHI then provided the services and DME through Walgreens Home Care and the medical prescriptions were fulfilled (ideally) through Walgreens Pharmacy Services. 

In 2001, the VP for Walgreens Home Care stated "For all of these businesses, you have to aggressively manage your cost of providing the service. Because it is not as profitable as it was 20 years ago. Margins have come down, but it’s definitely a profitable business if it’s managed properly." Therefore, WHI leveraged its DME and home care business to its PBM business, and in order to increase revenues, a larger share of patients needed to be reached. 

On January 2003, WHI and Humana announced an agreement to incorporate WHI's home care programs to Humana's PPO and ChoiceCare Network. According to the report, at this time, WHI continued to provide home care services in the same 6 states it did in 2001. Therefore, even when it continued to grow in the number of users, it had not covered additional markets in the United States. There is no evidence that WHI succeeded in expanding its DME market, especially in the respiratory services category, beyond these areas. 

WHEN AND WHY DID THEY EXIT THE MARKET?
On March 2011, Walgreens sold Walgreens Health Initiatives to Catalyst Health Solutions for $525 million in cash. The deal was completed by June 2012 and marked the exit of Walgreens from the PBM business. According to an article from the Washington Post, Walgreens never disclosed WHI's revenues, so it was uncertain whether the subsidiary was profitable at this point in time. However, the article also mentions the sale of WHI was going to be "neutral to its profit" the following fiscal year (2012). 

It is important to consider that, by this time, Walgreens strategy turned, once again, to its core pharmacy business line. In 2010 it had acquired another large pharmacy chain store, Duane Read, the most popular pharmacy brand in New York. Therefore, the sale of WHI likely responded to an overarching business strategy, and not necessarily to its performance. As WHI was sold to continue to operate under another parent company, and it was through this subsidiary that Walgreens entered the home respiratory therapy DME market, Walgreens also let go of this particular line of business; while retaining access to home medical mobility DME, through the Walgreens Pharmacy company. 

WALGREENS BOOTS ALLIANCE CURRENT OFFER OF DME
Walgreen's pharmacy business does not have a product offering for home respiratory therapy but it does sell home medical equipment and supplies through their physical and online stores. Their offering includes:

-Mobility devices (which considers wheelchairs, transport chairs, canes, crutches, walkers, rollators, and scooters)
-Bathroom safety 
-Hosiery and wound care
-Supports and braces
-Incontinence supplies 
-Diabetic shoes and fittings
-Mastectomy supplies
-Medical equipment (including strength and rehabilitation equipment, seat lifts and lift chairs)

According to their official brochure, they can bill Medicare or Medicaid for select products in these categories. The profitability of this category of products is uncertain, as Walgreens Boots Alliance reports its earnings under three segments: retail pharmacy USA, retail pharmacy international, and Pharmaceutical Wholesale. In 2016, retail pharmacy USA had $83.8 billion sales; retail pharmacy international had $13.3 billion; and pharmaceutical wholesale, $22.6 billion.  

CONCLUSION
To wrap it up, after searching extensively through news articles, industry reports, and company filings, a direct answer to your question is not publicly available because Walgreens discloses its financial information in broader business segments. Additionally, the company entered the SME market in 2001 and exited in 2011, limiting the availability of online news articles about this topic. However, I learned that Walgreens used its PBM, called WHI, to expand into the home care business in 2001, and was sold to Catalyst Health in 2011. If you’d like to continue research on any of the other topics I’ve outlined above, just let us know!

Thanks for using Wonder!  

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Please provide me a detailed look at how Target tried to make an entrance into the Durable Medical Equipment (DME) Market.

Hi! Thanks for your question about Target's entry and activities in the DME market. Here's the short answer: Target likely entered this market at some point in the 1990s and sold off and rebranded their DME segment (and all pharmacy business) to CVS in 2015. During that time, they offered DME products including CPM devices, blood glucose monitoring supplies, electric hospital beds, wheelchairs, prostheses of several kinds, and more. Read on for my deep dive!

OVERVIEW

I examined Target's annual reports and company history to get timeline information. I wasn't able to find a set start date for their entry into the market (I've estimated one based on their company history), but I did find a hard exit date with their sale and rebranding of all in-store pharmacies to CVS. I found a few articles that addressed reasons for their decision to exit the market and some sources covering their DME offerings in the interim.

MARKET ENTRY

Target's company history on their website gives the best evidence I could find of their entry into this market. When they launched Super Target in 1990, their offerings included "expanded pharmacies." Their DME products were sold through Target Pharmacy and Target Clinic, so it seems likely that the Super Target expansion at least marked a bigger presence in the DME market if not an entry into the market.

TARGET'S DME PRODUCTS

While they were in the market, Target offered DME products including blood glucose monitoring supplies, electric hospital beds, lifts, wheelchairs, prostheses of various kinds, and more. They currently sell some of these products online and have others in-store.

THIRD-PARTY BILLING

Information surrounding Target Pharmacy's sale to CVS indicates that they did accept third-party insurance plans, including Medicare. Their 2015 SEC 10-Q form also suggests that they accepted insurance and third-party payments for DME products. I wasn't able to find specific names of any third parties they used to handle payments or reimbursements.

MARKET EXIT/REBRANDING TIMING & REASONS

Target proper exited the pharmacy business entirely in December 2015, when their pharmacy segment was acquired by CVS for $1.9 billion. The pharmacies all still exist inside of Target stores but are CVS-branded and -operated. 

Target's 2015 annual report does mention that they used $200 million of the purchase price to settle "retained pharmacy and clinic net liabilities," though they don't give any additional information about whether these liabilities are bad debts from third-party billing. In their official statement, Target said the move would let them "sharpen [their] focus on elevating the way we deliver wellness products and experiences to our guests." Realistically, that meant a higher focus on grocery and letting CVS handle the pharmacy segment in a symbiotic relationship.

USA Today speculated at the time of the deal, though, that Target had some additional reasons to go through with the sale: they weren't equipped to deal with the regulatory complexities of the healthcare industry (this challenge was mentioned as far back as their 2013 annual report), the pharmacy segment was losing money, and the CVS brand could offer bigger scale and increased foot traffic.

CONCLUSION

Target likely entered the DME market in 1990, when they expanded their pharmacy business with the launch of Super Target stores. They exited the market in 2015, when they sold their pharmacy business to CVS for $1.9 billion. They did use $200 million of that money to settle outstanding liabilities, but there's no strong indication that they had bad debts due to third-party payers. The move seems more motivated by a stronger focus on grocery and a desire to wash their hands of healthcare's regulatory complexity.

While they operated, Target pharmacies did accept third-party and insurance payments and sold DME products including lifts, beds, wheelchairs, and prostheses, some in-store and some online.

Thanks for using Wonder! Please let us know if there's anything else we can do to help.

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Who are the top 5-10 US retailers that have tried to enter the Durable Medical Equipment market?

Hello, and thanks for your question asking for a list of the top 5-10 US retailers that have tried to enter the Durable Medical Equipment market.  I have found this list of 5: Home Depot, Costco, Dollar General, Sears and Kohl's.  Below you will find a deep dive into my research, along with all the details as to how I came to this conclusion.

OVERVIEW
The US durable medical equipment market was valued at $39.5 billion in 2015 and over the next decade will grow to around $70.7 billion.  There are a number of large national retailers who are trying to mark out their territory within this lucrative market.  As you mentioned, Walmart, Walgreens, and Target have all made their moves.  In order to find out who is also making a move in this market I searched for articles and news reports, as well as checking this list of biggest US retailers and to see if any had begun to sell DME products.  I then listed them in order of their overall revenue, as the breakdown of sales income for the DME products was not available.

TOP 5 US RETAILERS WHO HAVE ENTERED THE DURABLE MEDICAL EQUIPMENT MARKET
1. Home Depot 
Products sold: Respiratory equipment, canes, monitors and trackers, walkers, crutches
Revenue: $96.3 billion 

2. Costco 
Products sold: Monitors, walkers and wheelchairs 
Revenue: $88.8 billion 

3. Dollar General 
Products sold: Enteral nutrients, specialty pharmaceutical
Revenue: $21.66 billion

4. Sears 
Products sold: Wheelchairs and scooters, daily living aids, monitors, internal nutrients
Revenue: $21 billion 

5. Kohl's 
Products sold: Walkers, canes and crutches, daily living aids
Revenue: $3.84 billion

ADDITIONAL INFO
Just to compare these retailers to the largest players within this market I have found a report which lists these along with their revenues:
1. Invacare $1,142 million 
2. Drive $700 million 
3. Braun Ability $400 million
4. Sunrise medical €350 million
5. Permobil $350 million
6. Medline $200 million
7. Roscoe $175 million

CONCLUSION
Overall I have found that Home Depot, Costco, Dollar General, Sears and Kohl's are all large US retailers who are moving in on the Durable Medical Equipment space. 

Thanks for using Wonder, please let us know if there's anything else that we can help out with!