Drug store chain Walgreen Co. (WAG) reported this morning that same-store sales for the month of March grew by 2.3% year-over-year, and 6.4% overall. An earlier Easter holiday contributed 0.7% to the chain’s growth. The company also noted that it opened 52 stores during March, to bring the total number of stores to 7,720.
CVS Caremark Corp. (CVS) and Rite Aid Corp. (RAD) are expected to report March sales later this week. Other major prescription drug sellers are Target Corp. (TGT) and Wal-Mart Stores Inc. (WMT). Wal-Mart no longer releases monthly sales figures.
Last month, CVS Caremark, Rite Aid, and Walgreen released data on the amount of money each spent on lobbying Congress. The biggest spender was CVS Caremark, which spend $2.1 million in the fourth quarter of 2009 lobbying the White House and Congress “on aspects of the health care overhaul bill and Medicare issues.” The company probably got something it wanted when Congress approved and President Obama signed the Affordable Care Act, which included a provision to close what was called the “donut hole” in Medicare prescription drug coverage.
The donut hole was the gap between what Medicare recipients paid out of their own pockets. Under the legislation enacted during the Bush administration, the first $295 of prescription drug coverage was paid by Medicare recipients, then 25% of costs up to $2,700 were paid by Medicare. From $2,700 to $6,154, Medicare recepients paid 100% of costs, i.e. the donut hole. Above $6,154, Medicare paid 95% of prescription costs. That donut hole will gradually be filled, until it is completely eliminated in 2020.
For CVS Caremark, and other drug sellers, this is certain to add to their bottom line as seniors who might have balked at paying nearly $3,400 out of pocket will now be able to use government money to purchase prescription drugs.
Walgreen paid $430,000 in lobbying during the fourth quarter, primarily to a military health benefits plan for members of the US military and their families. Rite Aid spent a paltry $5,000 on lobbying, and did not specify where the money was spent.
Over the past year, Rite Aid’s share price has risen a phenemonal 250%, but it still lingers around $1.50/share. Walgreen’s share price has risen 23%, and CVS is up more than 30%.
While it’s virtually impossible to tease out the effects of lobbying on same-store sales in a given month, the spending, especially by the big guys, helps keep those sales growing. And the new health care law will just keep these stocks ticking up.
