In November of 2015, Quest Diagnostics Inc. and Safeway Inc. joined to do something new and unusual: offer lab services like blood tests in Safeway pharmacy locations.
By now, the companies have opened 65 such locations, and they’re aiming for 200 by the end of this year.
Consumers can already fill prescription drugs at pharmacies and even get diagnoses at increasingly widespread pharmacy clinics. Why not lab work, too?
The concept, which is fairly new, has taken on a new urgency. Expanding pharmacy services has become a more immediate priority for the industry on the heels of Amazon’s
Amazon reportedly has plans to get into pharmacy, which sparked pharmaceutical stocks to lose about $10 billion in combined market cap on June 16.
An Amazon pharmacy entry isn’t a sure thing — the company told MarketWatch it has “a practice of declining to comment on rumors and speculation” — and some on Wall Street are skeptical about the retail giant’s interest in pharmacy or ability to break into the highly regulated industry.
The threat should “accelerate CVS’s and Walgreens’ diversification into health-care delivery, with lab services a natural extension,” said Morgan Stanley analyst Ricky Goldwasser.
and Safeway pioneered this type of collaboration, Quest wants to work with other companies too, with a goal of about 1,150 more such locations, Goldwasser said.
(Quest was involved with a pilot program with CVS and Walmart, according to company commentary in September 2016.)
Another major lab services company, privately held Lab Corp., has also said it’s interested in partnerships.
This type of partnership offers big benefits for both pharmacy chains and lab service providers.
Lab services can give pharmacies an edge up in a competitive market and get more people in their stores, Goldwasser said.
Those with in-house clinics would especially benefit from lab services being available, he noted.
“CVS is well positioned with 1,081 MinuteClinics,” he said. “Walgreens, with 374 clinics, can still catch up,” but will need to partner with more health care providers to do it. Meanwhile, Rite Aid has just under 100 clinics in a handful of states, he said.
Courtesy of Morgan Stanley’s Ricky Goldwasser
Having lab services located conveniently should also mean more tests get done, a boon for lab services companies.
Quest labs in Safeway pharmacies can do routine blood tests and more complex gene-based and molecular testing, for example.
Working with pharmacies also makes more sense than striking out on their own, since “pharmacies already have an established premier retail footprint and sharing overhead expense could yield incremental savings,” Goldwasser said.
Quest shares have risen 19.9% over the past three months, compared with a 4% rise in the S&P 500
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