FRED
#Yes, Andy.
The reimbursement pressures are one part of that.
I would not consider that the major part of that.
The major part is driving that script volume.
That's where we've put a lot of our initiatives and that's where a lot comes from.
But, so much is tied to that, especially in the cost to fill.
The second area is our cost to fill and that's where we're also taking the greatest action.
The gross margin ---+ there are initiatives that we will do in terms of marketing to our third parties, the PBMs, the advantages that Fred's brings to them.
And, so, it is a factor.
But the two major ones are the script volume and turning that negative script volume positive as other ---+ as most chains have seen, coupled with controlling our labor costs and other costs in the retail pharmacy to reduce that cost to fill.
No, Andy, the $20 million to $25 million reduction in EBITDA, $9 million of it occurred in the first half of the year and the remainder is really the ramp-up in that script volume.
That's not something that's going to turn immediately, and it is going to require changes to be made.
So, it's more the fact that the initiatives will be rolling in, in the third quarter.
And we do expect our run rate at the end of the year to be at the run rate that we had in our original plan.
But the ramp-up is where the EBITDA is going.
As well as continued ---+ although it's not an adjusted EBITDA, but in EBITDA it's in the LIFO.
And, Andy, this is Rick.
All I would add is, as we look ---+ you mentioned the Medicare Part D preferred networks, and in the earlier question we cited a bigger presence, or participation, in those in 2015.
If you look at that back-half impact that you referenced of around $30 million adjustment down in EBITDA, around $4 million of that's coming from that cost associated with Medicare Part D networks and being preferred status around the DIR fees.
And, as Jerry said, it gets back to a new patient or a new customer opportunity for us because it is being driven by the volume, but the reimbursements are a challenge.
In Jerry's earlier comments ---+ in his prepared comments, the Cardinal benefit has really offset a lot of the reimbursement pressures that I think you're maybe referring to.
And then it moves over to more of a volume issue on the scripts side and the lack of new patients, which we're going to attack aggressively with our targeted marketing and all the different opportunities that we have from that angle.
Yes, and Craig Barnes is here, as well.
Yes, I think I said ---+ what was it ---+ 35 to 65 basis points, something like that.
And we're at 4.5 versus 5.8.
So, roughly that could be in the neighborhood of 40%, 50% reduction in 2016.
And, of course, we'll continue to drive costs out of supply chain and anticipate maybe 2017 we would work to be more in line with that 4.5%.
I would tell you I don't see any reason why we can't be in line with that 4.5% over time.
The LIFO is $2.9 million.
The stock-based is around $700,000.
So $3.5 million, $3.6 million in total, Andy.
$6.5 million on LIFO and $2.5 million on stock-based.
The majority of that would come in the fourth quarter.
If we look at where we are the first three weeks of August and through this week, adjusted for 90-day fills, we're running around a positive 1 comp with just a few days left in this month.
And that is a total reversal of what we have seen over the last six months and even going back into 2014.
The fact that we've got positive traction going on that, we're excited and see the opportunity to go after those new patients.
Because the work that we did with our consultant partners has shown that we're not ---+ once we get the patient, we're not losing the patient.
But it's the lack of that new patient coming in on that line above it.
It's been declining and that's been the problem for us.
So, again, the marketing as we go after that is ---+ early signs are positive that we're seeing movement in the right direction.
<UNK>, that was part of the comments about being happy about the quick turn and changing.
Our forecast does still have negative in Q3 and we are pleased to see what's happening in August.
But not ready to jump out and say for the quarter, positive script.
<UNK>, yes, we are in range on the specialty side.
We have lowered that in terms of sales because of the hepatitis C changes that are taking place.
Again, Rick can comment more on that.
But the operating profit, the gross margins, are up in that area and so, accordingly, we are still planning on overall earnings.
Top line, we did reduce those.
Yes, we did reduce the top line.
But the margin, when we removed those hep C sales at a lower margin, we're seeing a better margin rate come in, which is driving the profitability very close to flat, either at or where we were in terms of current expectations and previous projections overall.
Yes, sure.
I'm going to ask Bryan <UNK> who's here to talk about our holiday season.
We feel pretty good about it.
Hi, <UNK>.
It's Mike.
So, I mentioned ---+ we've got that prototype.
It'll be ---+ the first store will be up and running 1st of November.
Like I said, we'll evaluate it.
We're looking at 20 to 50 stores next year, assuming no issues with it and we see the returns that we like out of it.
And, you know what.
At the end of the day, I mentioned the remerchandising, I mentioned relocations, so those numbers could shift more into prototype remodels and less into remerchandising.
It all depends on what we see out of this model.
And <UNK>, Mike commented on this earlier, we are ---+ and I did, as well.
We are evaluating our alternatives in terms of relocations, remodels, and new locations.
So, I don't want to yet put specifics on how many we'll do in a certain period because we are looking at some strong alternatives.
<UNK>, this is Rick.
On the Medicare Part D, today we're going to be in a similar number of plans.
There will be some in-and-out changes on who we're ---+ which networks we're in.
One of the ---+ the one that is fairly big in our area is one of the Caremark plans, and we will not be in that plan next year.
That's one of the ones that we saw the biggest impact from in terms of the DIR fees.
And part of the reason is we're seeing a shift, particularly in this particular plan, away from preferred status.
And it's a more open access network.
That being said, the reimbursement rates will be similarly aggressive to what you would have seen in a preferred network.
But going back to what we've been referencing in terms of cost to fill, another way to get your cost to fill down is fill more scripts.
Not stating the obvious.
I guess I am stating the obvious.
But that's the goal we have to attack first, with patients and scripts, in order to drive or leverage that existing capacity that we have with that fixed labor that we have to have because we have to have a pharmacist there the number of hours the store's open.
So, it would not make sense to move away totally from that strategy because we need the scripts.
And they were still profitable scripts ---+ I don't want to mislead anyone ---+ they were just less profitable year over year because of the DIR fees.
And, <UNK>, I think as we're looking at data and gathering more data and changing how we're analyzing our decisions and progress, the most compelling factor, as I mentioned earlier, is really getting that script volume up in our stores.
That's the success of pharmacies, general merchandise, all the way through our business, is getting that positive script comp back.
That's one slice of the data that we're obviously working with outside consultants who work with some of the larger chains.
It's proprietary and we have to be real careful on what they share with us and we share with them, obviously.
When you look at the payer side across the board, it's not been in Medicare Part D per se because we're not in enough preferred plans, it's not in commercial.
It's been fairly consistent as we've looked across the board on that.
It's not one certain age demographic, male, female.
I think it just goes back to what Mike <UNK> commented earlier on, the renewed focus on pharmacy marketing.
It was so small of a portion of our marketing budget for so long, in a time period when everybody else was increasing that marketing effort on pharmacy.
Thank you very much to everyone for joining us.
We do look forward to talking to you in the third quarter.
Have a good rest of the week and we will talk to you soon.
Thank you.
