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The flu is big bucks for some, costly for others

The flu costs the US roughly $11.2 billion per year.
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· 3 min read

Wintertime means holidays, hot cocoa, and cheesy Hallmark movies (we’re looking at you, Lindsay Lohan). But between family gatherings and snowstorms lurks a seasonal threat: the flu.

The CDC estimates that there can be up to 41 million cases of the flu in the US every year and as many as 710,000 hospitalizations. A 2018 study found the flu costs the US an average of $11.2 billion annually.

Some healthcare companies like pharmacies and pharmaceutical manufacturers stand to make a nice profit during flu season. But others like insurers and patients are left footing the bill.

Flu shots “very profitable” for pharmacies

Rite Aid plans to give nearly 3 million flu shots this fiscal year, which ends in February, according to its latest earnings call. Each shot equates to $25 in gross profit for the company (that’s $75 million total if you’re not a math whiz).

“They’re a very profitable vaccination,” Rite Aid EVP and CFO Matt Schroeder said on the call.

Pharmacies also sell many over-the-counter medications and fill Tamiflu prescriptions to treat the viral infection, said Brian Tanquilut, a healthcare services analyst with Jefferies.

CVS Health President and CEO Karen Lynch told investors in the company’s latest earnings call that demand for cough, cold, and flu products is high, while Rite Aid saw “much higher” volumes of Tamiflu in early September, President and CEO Heyward Donigan said during the company’s earnings call.

Walgreens execs also warned investors of the impending flu season in its latest earnings call.

“We are seeing a pretty strong uptick already in flu shots and those types of things early in the year, which is indicative, I think, of consumers really trying to protect themselves for what could be a pretty heavy flu season this year,” said Rick Gates, Walgreens’s SVP of pharmacy and healthcare.

Flu meds drive sales growth at pharma companies

Pharmaceutical companies are also seeing an increase in business from “a stronger flu season,” McKesson EVP and CFO Britt Vitalone said in the company’s latest earnings call. The pharma distributor makes money providing flu shots as well as selling flu test kits and cough and cold meds, according to the company.

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Likewise, over-the-counter medicines were a major driver of worldwide sales for Johnson & Johnson in Q3, according to the company.

Health systems can expect patient volumes to pick up

While most people can treat the flu at home, some require more intensive care. Flu-related hospitalizations are rising earlier than expected this year, which could help hospitals—many of which are struggling financially.

“I think the hospitals could benefit,” Tanquilut said. “We’ve seen in the past, especially the more severe flu seasons, where hospital volumes pick up quite significantly.”

Insurers and patients foot the bill

Someone has to pick up the tab, and that usually falls on patients and insurers.

“In terms of potential areas where [increased flu activity] could be a negative thing, obviously insurance companies are the ones paying for this if people end up in the hospital,” Tanquilut said. “So that’s one concern.”

That’s not to say insurers won’t be ready, said David Windley, managing director in equity research at Jefferies. Flu activity declined during the pandemic as people took precautions like wearing masks to fight Covid. But insurers have been raising their prices, including premiums, in anticipation of higher costs associated with increased flu activity.

“They priced for this,” Windley said.

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