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Economix Blog: How Readers Cut the Pentagon Budget

January 29, 2012 by Leave a Comment

DAVID LEONHARDT

DAVID LEONHARDT

Thoughts on the economic scene.

More than 12,000 readers completed The New York Times’s interactive calculator on the Pentagon budget. The results are not scientific, of course. But among those readers who filled out the calculator, a few patterns emerged:

* Some of the most popular choices for budget cuts were administrative areas, including a reduction in recruiting expenses and a consolidation of retail stores on military bases. The second-most popular option over all was an audit of the Pentagon to reduce costs. Of the eight options that at least 50 percent of readers chose, five of them could plausibly be considered administrative.

* Cutting the purchase of weapons, ships and aircraft was nearly as popular as cutting administrative costs.

* Readers were more divided over cutting the number of troops. Bringing home some troops from Europe and Asia was the single most popular choice, picked by 85 percent of readers who filled out the calculator. But larger cuts to troop levels or the Pentagon civilian work force were less popular.

* The least frequently chosen set of options were those that cut pay or benefits for members of the military. The least popular option over all, selected by only 7 percent of readers, was a reduction in college tuition assistance. Options that reduced retirement benefits also tended to be unpopular.

Article source: http://feeds.nytimes.com/click.phdo?i=d4cfe9ec4154b23ff5cbb6318f220b67

Filed Under: Economy News Tagged With: , ,

Walgreen Faces Loss of Millions of Pharmacy Customers

December 21, 2011 by Leave a Comment

Express Scripts and Walgreen have been battling over payment issues for months. Walgreen said Wednesday that it has been unsuccessful at getting most of its customers who have their drug coverage managed by Express Scripts to switch to another pharmacy benefit manager, or P.B.M.

Barring a last-minute agreement, the relationship will end Jan. 1. Customers covered by an Express Scripts prescription plan will then have to switch to another pharmacy or pay higher costs for their drugs if they stay at Walgreen.

“While we remain open to any fair and competitive offer from Express Scripts, we firmly believe that accepting their proposal was not in the best interests of our shareholders,” said Walgreen’s chief executive, Gregory D. Wasson, in a statement. The company said its negotiations with health plans and employers have resulted in retaining just 11.4 percent, or about 10 million, of the 90 million prescriptions managed by Express Scripts that were filled by Walgreen in the fiscal year that ended Aug. 31.

Walgreen, based in Deerfield, Ill., is the nation’s largest pharmacy chain with more than 8,200 locations in the United States. Its retail stores operate under the Walgreens and Duane Reade names.

Walgreen said it expected a negative impact of 21 cents a share in fiscal 2012 from the loss of Express Scripts customers. The company would not release a specific estimate of the lost revenue, but analysts expect more than $4 billion could be at risk, given the retention figures released Wednesday. Walgreen generated $5.3 billion, or 7 percent of its $72 billion in fiscal 2011 revenue, from customers with drug coverage managed by Express Scripts.

Walgreen shares, which fell sharply early on Wednesday, were down about 1.5 percent in midday trading to about $33.

The contract dispute has already had a slight impact on Walgreen earnings.

On Wednesday, Walgreen said higher costs across the company contributed to a 4.5 percent decline in profits to $554 million in the company’s first quarter, ended Nov. 30. Net income rose a penny to 63 cents a share, from 62 cents, in the year-ago quarter, trailing most analysts’ estimates of 67 cents.

Walgreen said its decision not to be a part of Express Scripts pharmacy network cost 1 cent a share in comparable pharmacy sales and 1 cent a share in related expenses. Walgreen said sales rose 4.7 percent to $18.1 billion in the quarter.

Mr. Wasson would not speculate on any additional potential impact to Walgreen should Express Scripts complete its proposed $29 billion acquisition of Medco Health Solutions, another leading pharmacy benefit manager. That deal has raised antitrust concerns among some lawmakers, and the Federal Trade Commission has requested additional information from the companies before deciding whether to approve the combination.

Walgreen said it expected its total prescription volume for fiscal 2012 to dip 1 to 3 percent. That is in contrast to recent annual growth, amid favorable demographics that include an aging population of baby boomers and a rising number of Americans with chronic conditions that require taking medicines every day. Walgreen’s prescription volume rose more than 5 percent in its fiscal 2011 to 819 million prescriptions.

Walgreen has made a major push to get health plans and employers to end relationships with Express Scripts and contract directly with Walgreen. The drugstore chain said more than 100 health plans, employers and other clients have either changed benefit managers or taken steps to maintain access to Walgreens pharmacies in 2012. But some major clients, including the health insurance giant Wellpoint and the United States military’s Tricare plan, stuck with Express Scripts.

Mr. Wasson said Walgreen continued to negotiate with employers and health plans and said the company would gradually win back business over the course of next year as employer and health plan contracts with Express Scripts expired.

“These results, and what we’re seeing in the marketplace, confirm our confidence as next year’s P.B.M. selling season begins,” said Mr. Wasson in a statement. “We’re already working with many health plans and P.B.M.’s who value the role Walgreens and community pharmacies play in lowering overall health care and prescription costs.”

Meanwhile, Walgreen rivals like CVS Caremark and Wal-Mart have been marketing aggressively, including running radio ads, to woo its customers. A CVS spokeswoman said the pharmacy chain expected to pick up 20 million prescriptions managed by Express Scripts in 2012 that were previously filled by Walgreen.

“We have significant overlap with Walgreens stores,” said Carolyn Castel, the CVS Caremark spokeswoman, in an interview. “Forty-three percent of our stores are within one mile of a Walgreens store; 78 percent are within three miles; and 85 percent are within five miles. We think many customers are more likely to move to another major chain due to convenience, pharmacies with drive-throughs, 24-hour locations and service reputation versus any other channel.”

Article source: http://feeds.nytimes.com/click.phdo?i=45d5e9585c4dde39929e3f4fe7204778

Filed Under: Business News Tagged With: , ,

You’re the Boss: The (Pipe) Dream of Opening our Own Retail Stores

August 4, 2011 by Leave a Comment

TerraCycle's now-closed retail outlet in the Port Authority building.Courtesy of TerraCycle.TerraCycle’s now-closed retail outlet in the Port Authority building.

Sustainable Profits

The challenges of a waste-recycling business.

Since the inception of TerraCycle, I have dreamed of having our own chain of retail stores. Instead, we have always relied on stores like Wal-Mart and Whole Foods to sell our products. In the last decade, even as we shifted from selling home-and-garden products to selling a wide range of consumer products, and even as we shifted from manufacturing all our products to licensing them to assorted manufacturers, we’ve continued to sell most of our stuff through big-box retailers.

But throughout this time, I have continued to believe that we could create a profitable model of a TerraCycle retail store that would be unique and highly scalable. Ideally, consumers could bring their waste to the store (as if it were a recycling center), get paid for it with cash or store credit, and buy products made from waste. We now have more than 1,000 recycled and upcycled products: fertilizer, fire logs, backpacks, kites. No other retailer out there does anything like this. If we could create a successful model, I’m confident we could franchise it and develop it quickly.

So far, however, we have made three attempts at retail, and we have failed three times. The first attempt came from a friend of mine, who runs a chain of restaurants in New York called Rice. He took a lease on a shop in the Red Hook neighborhood in Brooklyn and dedicated the space exclusively to TerraCycle merchandise. Unfortunately, the sales failed to cover his costs, and the store folded after a little more than six months.

Our second attempt was a pop-up store that the Port Authority of New York and New Jersey gave us for three months in 2010. It was in the Port Authority building on Eighth Avenue. Even though the store was large and in a well-trafficked location, and even though the rent was free, we barely made a profit.

The third attempt was our most successful. We were allowed rent-free access to a storefront in Princeton, N.J., which had a high-end retail environment with furniture boutiques, jewelry stores and restaurants. Once again, even though the rent was free, we produced only a modest profit. The store was open for almost a year and a half but we recently closed it.

In none of the three cases were we able to create a business unit that could stand on it’s own. Perhaps the locations were not ideal. Maybe this was a time when we should have tried advertising or approached retail consultants to develop a strategy in line with our larger business model — two steps I have long been disinclined to take. Red Hook is hip, but it doesn’t have a lot of foot traffic yet. Port Authority has plenty of foot traffic, but its clientele may be more interested in getting on a bus than in looking to shop. And Princeton has people who are ready to shop, but perhaps they are looking for high-end items and not low-cost products made from waste. The other major problem, I suspect, is that our products don’t fit neatly into a retail niche. They just may be better suited for big box retail: high volume at low prices.

Given these experiences, my next idea for a retail play is to combine three models, encouraging people to bring in their waste (to generate foot traffic), giving them the opportunity to buy the random assortment of low price TerraCycle products, and also focusing more on bringing in an array of designers and vendors to sell products made from waste on consignment. Perhaps that third element will allow us to develop a model that works. All we need now is someone to give us free space to test this experiment.

What do you think? Any suggestions?

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton.

Article source: http://feeds.nytimes.com/click.phdo?i=31b3cf401080e9437bc6741036363620

Filed Under: Small Business Tagged With: , ,