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TWST: Moving onto another topic, Deborah, what happens to the food retailers as the economy slows? Are you concerned?

Ms. Weinswig: No, not at all. What they have seen thus far is greater sales in private label, which have higher margins. The result is slower top-line growth, but faster growth in gross profit. The effect is similar to selling generics in a pharmacy, where the top line is lower, but the margins are higher. And at the end of the day, gross profit is what matters. Also, in a tough economic environment, I think you may see consumers trading down from restaurants to supermarkets. It has been said that we have a whole generation now of people, the 30 - 40 years olds, who have not necessarily grown up cooking. This, combined with a lack of adequate time for cooking, has offered supermarkets a real opportunity to capitalize on the growing market for home meal replacement, such as rotisserie chickens, which are higher margin.

TWST: And these stocks are generally thought of as defensive anyway, aren’t they?

Ms. Weinswig: Yes. People are uncertain which way this market is going, and supermarkets are pretty safe. People have to eat and fill their prescriptions, and the supermarkets are all adding pharmacy counters. The addition of pharmacy counters helps to drive traffic but also increases sales in the higher margin health and beauty area by an average of 25%, since people are more comfortable buying these products at the same place that they buy their pharmaceuticals.

TWST: If there is a Medicare drug benefit, and most people seem to believe that there will be, how will that affect the drug chains?

Ms. Weinswig: Currently, approximately 16% of prescription sales are paid for with cash. In my opinion, probably half of those are from cash paying seniors. So 6% of the pharmacy sales, which you have been enjoying 30% margins on, will now go to 18% or 19% margins. That is not a huge impact. On the other hand, the decrease in cost for these customers will likely prompt more frequent trips to the store.

TWST: What are you telling investors who are looking at the drugstores, Deborah? At current valuations, are these stocks that investors should be moving into?

Ms. Weinswig: Walgreen (NYSE:WAG) is a great company, but the stock is expensive. I think CVS (NYSE:CVS) is a phenomenal opportunity with a very innovative management team. They are working hard on the private label side and have just rolled out their ExtraCare loyalty card program, which will stimulate sales in the front-end. In their test markets, the average loyalty card customer’s average ticket was 11% higher in the front of the store. Also, CVS has introduced a new specialty pharmacy concept, ProCare. There are currently 46 ProCare locations, which are very small apothecaries with roughly 2000-3000 square feet. The real opportunity is that these facilities focus purely on HIV, AIDS, organ transplant, cancer, hemophiliac and other specialty pharmacy patients. This is a $14 billion market growing at 20%, faster than the traditional pharmacy market, which is growing at 16%. Until ProCare’s entry and their subsequent acquisition of Stadtlander, the specialty pharmacy market was completely fragmented with no one dominant player.

TWST: Does ProCare deliver the medications to the patient’s home?

Ms. Weinswig: Yes, ProCare has a huge mail order facility since the majority of their patient treatments are recurring. In some instances, a ProCare representative will visit the patient at the hospital and provide their discharge medications, basically insuring that they become a ProCare customer. And the level of customer service that pharmacists give at ProCare is amazing. It’s really a win-win for everyone. ProCare will also help process insurance reimbursements and check to see that customers are taking their medications when they are supposed to by following up via phone to remind customers when a prescription is about to run out and needs to be refilled; they will then mail the prescription directly to the customer. Finally, as specialists in these disease states, ProCare representatives understand and can counsel customers through a lot of the issues that a customer might be going through. We believe that ProCare will be 7%-10% of sales in 2003.