The Promise of Retail Health

Presented by Brad Fluegel at the CEO Roundtable on August 12, 2015

Walgreens reviews the trends driving retail health and shares its evolving strategic role within the health care ecosystem. Its approach focuses on the customer and considers the drivers of the retail health care market, with a particular focus on enabling personalized and customized health-related experiences through the use of digital channels.

Transcript

1. Brad Fluegel, Walgreens Strategy & Business Development
2. The Promise of Retail Health 2
3. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 3
4. As a global company, Walgreens Boots Alliance is the largest health and daily living destination in the USA and Europe • A presence in more than 25* countries • Employs over 370,000* people and is the largest retail pharmacy, health and daily living destination in the USA and Europe, and (including equity method investments): • Has over 13,200* stores in 11* countries • Includes over 350* distribution centers delivering to more than 200,000† pharmacies, doctors, health centers and hospitals each year in 19* countries • Is one of the world’s largest purchaser of prescription drugs and many other health and wellbeing products • Has local and global partnerships that extend our reach: Amerisource Bergen, WebMD, United Healthcare 4 Fully consolidated businesses Equity method investments Branded products, franchises and other investments • * As at 31 May 2015 including equity method investments on a pro-forma basis • † For year ended 31 May 2015 including equity method investments on a pro-forma basis
5. We have aligned our strategy against delivering the ultimate customer experience and focusing on select "right to win" areas
6. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 6
7. ©2015 Walgreen Co. All rights reserved. Confidential and proprietary information. There continues to be a growing demand for convenient and cost- effective access to healthcare services, providers, and information… 7 TECHNOLOGY • New care models are being enabled via continued investments in data interoperability • To support patient care, there is an Increased use of aggregated data and predictive analytics • Proliferation of mHealth and telemedicine tools is enabling healthcare to be more predictive, personalized, participatory and preventative PAYMENT REFORM • Reform continuing to drive decreases in reimbursement rates, total cost of care and inpatient demand while improving quality • ~14% of the US population is being managed by an ACO with this expected to grow to 22% by 2018 • Increased use of narrow- networks will remove high- cost providers PROVIDERS/CARE DELIVERY • Doctors are becoming more comfortable with extenders, potentially capable of managing up to 50% of encounters • Dramatic increase in non- change-of-control affiliations • Health systems are demanding greater access to patients and building out urgent care and retail footprints • Patients becoming more and more comfortable with alternative delivery channels CONSUMERISM/PATIENTS • >50% of patients are willing to share Rx info, medical test, and doctor’s notes to improve care coordination • ~ 70% of organizations that are transitioning toward value-based contracts report an increase in consumerism and retail strategies • 9 out of 10 patients want to be in control of medical decisions with 64% take steps to learn about their conditions • Aging population presenting greater demand for healthcare services Market Trends
8. …which is further validated by customer demands and industry shifts underway Customer Demands Personalization 8 Wellness Fulfillment Demographics Behavior Industry Shifts We’re better informed and more demanding When we go to a store we want it to be an experience not a chore We’re looking for more local solutions particularly for healthcare We’re comfortable combining the digital and physical world without thinking about it We have personal relationships with shops and brands we trust We want it NOW!
9. Additionally, the role of the pharmacy is expanding to be more involved in the delivery and management of patient care Medication Management • Consultations • Drug Interactions • MTM • Patient Education Omni-Channel Care Delivery • Immunizations • Health Testing • Pharmacy Chat • Disease Management New Care Models • Telehealth • Care Coordination • Acute Care • Remote Monitoring Expanding Role of the Pharmacy
10. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 10
11. What is Retail Health? Retail Health combines the convenience, access, and price transparency of retail with the quality and the trust of traditional medicine 11 Meeting Consumers in the Market Providing High-Quality Care at the Lowest Effective Cost Convenient Effective
12. Walgreens’ incredible reach positions us well to take on a more integrated and connected role within the US Health System 12 0-1 2-4 8-12 20-60 hundreds Inpatient Outpatient Acute Patient Chronic Patient Loyal WAG Customer Balance Rewards, disease programs, mobile health tools, etc. Walgreens Healthcare Reach -- # of Patient Interactions Per Year Typical reach of Health Systems Walgreens In-Store Reach Home and Virtual Reach Community based population health will on average account for 80% or more of total patient engagement For ever 0-1 inpatient visit and/or 2-4 outpatient visits at a system, Walgreens can touch that patient hundreds of times
13. We have developed a portfolio of healthcare offerings to improve outcomes for providers, payers, and patients 13 Walgreens Healthcare Network Highlights: Walgreens Healthcare Impact • Walgreens Pharmacist vaccinate over 9.5M customers per year • 30% of immunizations were during “off-clinic” hours • Annual adherence rates to cystic fibrosis medications was 22%-24% higher among Connected Care patients compared to a published external benchmark • Face to face adherence counseling improved MPR by 4.9% adherence to target Rx by 33% and adherence to non-target Rx by 12% • Well Transitions reduced readmission rates from 28% to 13.7% for Two Valley Baptist Health • Healthcare Clinic patients have 7 fewer ER visits per 100 patients with the average patient saving more than $300 in out-of-pocket expenses • Healthcare Clinic ranked in top 10 percent of Gallup Consulting’s consumer database and consistently outperforms HEDIS benchmarks 8,200+ retail pharmacies 400+ healthcare clinics 200+ hospital pharmacies 850+ community specialty pharmacies 450 worksite health centers 8M customers a day Walgreens Approach to Healthcare Services Adherence Medicare STARs Well Transitions Connected Care Core Pharmacy Dispensing Immunizations Healthcare Clinics Diagnostic Testing Pharmacy Services RPh-Led Clinical Services Adjacent Healthcare Services
14. And, our offerings allow us to offer partnerships that deliver value to both our partners and our patients Delivering value across the continuum Value to our Partners • Increased patient access • Increased efficiencies • Increased patient satisfaction • Improved patient engagement • Minimized gaps in care Value to our Patients • Value-added solutions • Convenience • Incentives to maintain healthy choices • Improved patient satisfaction • Personalized experience Health Plans Providers Health Systems PBMs
15. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 15
16. Segmenting customers provides the ability to understand their behavior and drive customer-centric decision making 16 Customer segments allow Walgreens to…  Build an understanding of who our customers are and what they need at Walgreens  Identify our loyal and valuable customers  Develop a common customer “language” across the enterprise and with vendors  Align customer strategies at the category, division, and enterprise Customer Insights & Segmentation
17. Walgreens has the unique capability to analyze a 360° view of the patient/customer 17 Retail & OTC purchase behavior Patient Rx behavior (concomitant therapies, time on drug, adherence) Payment & prescriber information (insurance, Medicare/ Medicaid, geography) Traditional patient view Non-Rx behaviors complete the patient picture Walgreens Customer Data Assets Customer Insights & Segmentation
18. Insights derived from our 360° view of the patient and customer allow us to continuously improve our offering to best meet customer needs 18 Patient Insights • Insights derived from patient pharmacy purchase behavior • e.g. physician, geography, dosage, form, adherence, payment • Brand health vs. competition • Geographies, payers for focus • Payment, co-pay impact Rx/OTC insights • 360 view of patient and customer behavior • Rx/OTC interaction • Patient profiling based on total retail purchase behavior • Quantify switching between Rx and OTC products • Evaluate prevalence of side effects among Rx brands • Rx to OTC launch (plan/track) Behavior based Research Panel (late 2015 launch) • Link patient attitudes to actual purchase behavior to understand why analyzed behavior occurs • Qualitative/quantitative research • Why are patients less adherent? • What are drivers behind OTC switching? Product Description 1 2 3 Insights Customer Insights & Segmentation
19. Utilizing the right channel mix, targeting capabilities, formats and interaction frequencies allows us to engage customers intelligently 19 Customer Engagement FORMAT CHANNEL FREQUENCY TARGETING Intelligent Engagement
20. Customers who engage with us across multiple channels are 3.5x-6x more valuable than store only customers 20 1x 3.5x 6x Multichannel customers spend 3.5-6x more than store-only customers store only customer store + online customer store + mobile + online customer Customer Value from Omni-Channel Customer Engagement
21. Walgreens is re-inventing our customer experience model to be even more personalized in delivering expert care 21 Customer Engagement Right customer Right place Right time 1:1M TV, stores, print Weeks, months 1:1,000 Digital media, e-mail Hours, some immediate 1:1 (+ two way) Social, mobile In the moment Wearables, cars, etc. In the moment Mass Digital Social Omni 1:1 (ecosystem) Personalized Marketing Personalized Experience Pharmacy Example Right channel Appointment Booking E-Stock Management Auto Rx Refill Text Reminders Refill By Scan Pharmacist Chat
22. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 22
23. The digital channel plays a critical role in enabling retail health 23 RBS, QP In-Store-Mode Clip2Card Simplify Reinvent Unify Walgreens Digital Strategy
24. For example, our Walgreens app has allowed us to simplify the prescription refill process… 24 “That was so much fun…I wish I had more prescriptions to refill.” - User review, App Store Walgreens Digital Strategy
25. …through the addition of customer service and engagement options 25 “This is the kind of application that can truly improve your quality of life.” Our new immunizations app makes recording and scheduling immunizations a seamless experience “Saves me from having to wait in line at the store to chat with a pharmacist and is way more convenient!” Pill Reminder Rx Chat Immunizations App Walgreens Digital Strategy
26. Our Balance Rewards loyalty program offers a personalized experience to our customers by rewarding their health and daily living decisions 26 Walgreens offers deliver value to our customers across four areas Customer centric insights and invisible change Retail Products rewards  Everyday points  Points on featured items  Paperless coupons  Personalized omni- channel offers for best customer Pharmacy rewards  100 points for retail & specialty scripts  100 points for immunizations Balance Rewards for healthy choices  Points for walking, weight management and more  B2B partnerships (wellness currency) Balance Rewards for payment  Balance Financial  Digital Wallet $ Balance Rewards Program
27. 125M 100 0 75 50 25 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 FY13 FY14 Balance Rewards Members Balance Rewards is the largest loyalty program in the country, with over 130M enrolled, 85M active members 27 Enrolments since launch (Sept 2012) >85M active members >70% of sales on card >500B points earned 25M customized offer mailers to best customers 70% of HV members know 5,000 points = $5 Balance Rewards Program
28. Our healthy choices program is designed to reward participants for setting goals and is accessible through both mobile and web Points act as incentives for setting goals, completing daily activities that help toward goals and achieving goals 250 points/1st goal 250 points/device or app linked 20 points/mile 20 points/daily log 20 points/daily weight log 20 points/blood pressure test 20 points/blood glucose test Points may be limited per the terms and conditions of the program. Information provided to Walgreens online is covered by the terms of our Online Privacy and Security Policy and the terms and conditions of Balance® Rewards. Personally identifiable information is not covered under HIPAA or the Walgreens Notice of Privacy Practices. For full program terms and conditions, visit Walgreens.com/healthychoices. Healthy ChoicesTM Balance Rewards Program
29. Wearable technology plays a key role in the Healthy choices program 56% believe that the average life expectancy will grow by 10 years due to wearable- enabled vital-sign monitoring 46% believe wearable technology will decrease obesity through allowing us to monitor our nutrition / exercise 42% believe the average person’s athletic ability will improve dramatically as we use wearable technology to monitor/refine athletic abilities Market Highlights Walgreens Consumers Wearable Technologies • 260,000+ devices • ~200,000+ active members • 1.5 million goals set • 110,000,000 miles logged 29 21% of Americans using some form of technology to track their health data Balance Rewards Program
30. Walgreens healthy living devices and digital offerings are improving adherence and enabling weight loss Note: (*): 90 day study of 34,604 participants who tracked their weight through Balance Rewards for Healthy ChoicesTM Device and Digital Offerings Walgreens App/Website • Pill Reminder • Pharmacy Chat • Immunizations App • Balance rewards for Healthy Choices • Points awarded for: • Fitness • Vital statistic monitoring • Healthy Choices • Tracks sleep cycle, weight, vital statistics, etc. through wearable and/or bio-metric devices Outcomes Improved adherence using bio-metric devices • Hypertensive patients are 3.9% more adherent • Diabetic patients are 10.9% more adherent Improved adherence using wearable devices: • Hypertensive patients are 7.0% more adherent • Diabetic patients are 7.0% more adherent Walgreens Activity Tracker • Tracks steps, calories, sleep, and syncs to smartphone/IPAD. Achieving weight goals using Balance Rewards program and incentives. In a study*, • All participants lost an average of 3.1lb • 25% of participants lost more than 6lb 30 Balance Rewards Program
31. Walgreens telemedicine solution is advancing our objective to “make good health easier” while further reducing barriers to care Market Adoption • By 2017, 60% of employers/carriers to offer telemedicine vs. 27% in 2014 • 50% KPMG Visits are Virtual • $6 billion/yr savings potential for employers Types of Visits • 15% of office visits • 15% of ER visits • 40% Retail Health visits Reimbursement Considerations • Only 41% of visits currently reimbursed Walgreens – MD Live Telemedicine Solution 31 Tele-medicine
32. Agenda • Walgreens Overview • Drivers of Retail Healthcare Market • Walgreens Role in Retail Health • Walgreens Approach to Retail Health – Understanding Customers • Deep Dive: Digital / Balance Rewards Program / Tele-medicine • Questions 32
33. Questions 33
34. Thank You 34