Walgreens 'Wakeup Call'?

Published in CSP Daily News

Consumer group's study, AG's lawsuit raise questions about drug store chain's pricing

By  Greg Lindenberg, Online Editor

NEW YORK -- Walgreens shoppers could be paying too much depending on which location of the chain they choose, with stores in the same market offering the same products for up to 55% more. A new study of several markets throughout the country finds that price variation across Walgreens locations was up to five times higher than at Rite Aid and two-and-a-half times higher than CVS.

The report, released by Change to Win (CtW) Retail Initiatives in partnership with the National Consumers League (NCL), compiled data on a basket of 25 items at 485 CVS, Walgreens and Rite Aid drug stores in Dallas-Fort Worth, Los Angeles, New York and Orange County, Calif.

"Certainly consumers expect different chains to offer different deals," said Sally Greenberg, executive director of NCL, a consumer advocacy organization. "But price variation within a single chain is a wakeup call for consumers, who don't tend to shop around and compare within a chain. This is a reminder that caveat emptor--let the buyer beware--applies even within the same chain, where prices may vary depending on where you're shopping."

Walgreens prices were "all over the map," said the report. Walgreens stores in a single market were up to five times more likely than a competitor to charge different prices for the same item. This price variation was not limited to one or two items; researchers encountered storewide price differences at Walgreens at a rate several times higher than the other chains in most markets.

Price differences at Walgreens often meant consumers were paying more. In every market surveyed, Walgreens had the greatest percentage of products that cost at least 10% more than the market's lowest price.

Walgreens had the biggest price differences between its stores. In all markets surveyed, Walgreens had twice the number of products with a 20% or greater price range than did CVS. Rite Aid had virtually no products with that big of a gap. Walgreens also had significantly more items with a price range of a dollar or greater.

"Price variation isn't fair to consumers, who need their dollars to stretch in a tough economy and deserve to get the best price available, regardless of which Walgreens they happen to walk into," said Nell Geiser, research director of CtW Retail Initiatives.

"Our prices reflect the costs of doing business in the neighborhoods we serve as well as any nearby retail competition. Costs can vary from one location to another, even when they are a few blocks apart in dense urban areas, based on the store's cost of real estate, its hours of operation including whether it is open 24 hours, labor costs and the number of customers it serves each day, among other factors," Walgreens spokesperson Jim Graham, told CSP Daily News. "Walgreens is known for being available when and where our customers need us most, and we operate more 24-hour stores than all other national drugstore chains combined. We strive to be price competitive with nearby competition, and we believe our pricing reflects that."

As reported in CSP Daily News last week, in a separate action, Missouri Attorney General Chris Koster filed a civil lawsuit against Walgreen Co. for engaging in false, misleading and deceptive advertising and pricing schemes to lure consumers into purchasing certain products. The complaint, a result of a two-month investigation by the AG's Office, alleges that Walgreens engaged in a pattern of advertising lower prices on display tags, but charging higher prices at the checkout.

The AG's Office made undercover visits to eight random Walgreens stores in five cities across Missouri in June and July, and investigators discovered that nearly every store visited had pricing discrepancies in which the price of merchandise at checkout was greater than the displayed price for the product. Overall, they found 43 price discrepancies out of 205 purchased products, resulting in overcharges nearly 21% of the time.

"We have a 112-year history of acting in our customers' best interests, and that will continue to be our focus. While we won't comment on the complaint itself, we were disappointed and disagree with the attorney general's comments," Graham said. "However, we are prepared to have a constructive dialogue about the issues he raised and address any appropriate concerns."

The mission of the National Consumers League, founded in 1899, is to protect and promote social and economic justice for consumers and workers in the United States and abroad. Change to Win Retail Initiatives is committed to making retailers more accountable and transparent to all stakeholders.

As the nation's largest drugstore chain with fiscal 2012 sales of $72 billion, Walgreens operates 8,105 drugstores in all 50 states, the District of Columbia and Puerto Rico. Woonsocket, R.I.-based CVS/pharmacy, the retail division of CVS Caremark Corp., is a leading retail pharmacy with more than 7,400 CVS/pharmacy and Longs Drug stores. Camp Hill, Pa.-based Rite Aid is one of the nation's leading drugstore chains with more than 4,600 stores in 31 states and the District of Columbia.