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Drugstores popping up everywhere in valley

A CVS pharmacy going up near McHenry Village in Modesto is a sign of things to come: Drugstores are proliferating in the Northern San Joaquin Valley and beyond to serve an aging population.

As CVS builds stores and prepares to rebrand the Longs Drugs outlets it bought last year, Walgreens and Rite Aid are adding and rebuilding stores. And supermarkets and big-box retailers such as Wal-Mart increasingly are getting into the pharmacy business.

They all are preparing to meet the needs of about 78 million aging baby boomers nationwide.

Baby boomers are "entering their peak prescription-use years," and that's driving chains to add stores, said Walgreen Co. spokesman Robert Elfinger.

Chain drugstores make 65 percent to 70 percent of their revenue from prescription drugs, according to companies' financial reports. The average U.S. resident fills 10 prescriptions a year, according to the National Association of Chain Drug Stores.

That number rises as people age.

When they have serious illnesses that require expensive medications, each customer can bring thousands of dollars into a pharmacy between out-of-pocket and insurance payments, said Bill Rice, a marketing professor at California State University, Fresno.

"It's a gold mine," Rice said.

CVS opened its first store in Modesto a little more than a year ago in the Sills Plaza shopping center at Orangeburg and Briggsmore avenues, replacing the Krispy Kreme shop there.

Its second Modesto outlet is going up in McHenry Village now that Mallard's restaurant has been torn down. That CVS store will be across the street from a Rite Aid that's nearing completion.

Both of them are near a longtime Longs Drugs, all in the same two blocks of McHenry. CVS, which purchased Longs last year, plans to close the old store and transfer workers to the new outlet in the village.

Rhode Island-based CVS, which has 18 outlets in the region, is switching Longs Drugs stores in the valley to its brand, remodeling them this summer and fall so the work can be done by October.

There are 24 Walgreens stores in the region, including a new one at 3019 Floyd Ave. in northeast Modesto.

Rite Aid, with 20 branches in the valley, recently opened one in Turlock on Monte Vista Avenue, across the street from California State University, Stanislaus.

Drugstores are increasingly competing with retailers such as Target and Wal-Mart that offer low-priced medication. In a bid for greater market share, Wal-Mart and Target sell many common prescription drugs for $4.

The growing ranks of the unemployed are heightening competition among drugstores, said John Klimek, who has more than 30 years of experience in the industry and is the National Council for Prescription Drug Programs' senior vice president of industry information technology.

When customers have insurance, their out-of-pocket expense for a prescription will be the same at any store, he said. But when customers are laid off and lose their insurance, they'll shop for the most inexpensive medications.

That's when the "competitive nature of the beast" kicks in, Klimek said. "Who can supply that for the cheapest?"

Rice expects CVS to significantly play up low prices: "They would like to be a cost-conscious Walgreens."

Independent stores hold on

Despite the growth of drugstore chains, many locally owned pharmacies also are doing well, said Paul Rohrer, chief executive of the Professional Pharmacy Alliance, which represents independent Central California pharmacies.

They tend to a focus on a different niche than drugstores -- providing home delivery, serving people who require intensive customer service or locating in rural areas that chain drugstores avoid, Roh-rer and other experts said.

Most don't deal in retail goods that aren't medically related.

But the chain stores increasingly are competing on the other products they carry, everything from mascara to greeting cards, Klimek said.

"That is becoming more of a fight ... to compete with some of the big-box stores like Wal-Mart," he said.

Although drugstores don't have the buying power of Wal-Mart or Target, they do compete on convenience, he said.

If a customer is in the store to pick up a prescription, additional purchases such as shampoo will add to their profit, Rice said.

That may be one reason CVS plans to offer more health and beauty products when it transitions Longs stores into CVS. When that happens this year, expect CVS to make a big splash, Rice said.

"They'll be fairly aggressive in how they begin to target (customers)," he said.

Modesto Bee city editor David W. Hill can be reached at dhill@modbee.com or 578-2336.

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