Wielding care and service, indy pharmacy maintains presence

NEW ORLEANS In the face of a bleak economy spiraling into a crisis in consumer confidence, independent drug store operators were able to drive respectable sales increases and maintain their presence in a crowded marketplace in 2008, new research has shown.

 The 2009 NCPA Digest, released today at the 111th National Community Pharmacists Association Annual Convention here, bolstered the strong case made by independent pharmacists for personal customer service and attention. It portrays an industry beset by the external forces of recession and gross margin pressures, but surprisingly resilient in its ability to adapt and survive.

Last year, the average community pharmacy saw its total sales increase by 7.6% to $3.9 million, according to the report. And “despite the onset of an economic recession during 2008, pharmacy services were still in demand due to their value in the health care delivery system,” NCPA noted.

Independent operators faced daunting challenges in 2008, according to the 75th annual edition of the Digest. Among those hurdles, noted the organization: additional consolidation among pharmacy benefit managers, increasing their ability to dictate terms with small-scale pharmacy operators; a greater percentage of patients covered under government reimbursement programs; and reduced gross margins on non-prescription items due to the recession.

“Further PBM consolidation with little accountability or transparency further reinforced pharmacies’ lack of opportunity to negotiate fair contracts and provided PBMs with an inordinate amount of leverage,” NCPA asserted.

“Given these conditions, profit as a percentage of total sales for the third year in a row is still below the 10-year average for independent community pharmacy.”

Despite those challenges, “The Digest shows that while other businesses witnessed a precipitous drop off in revenue during these poor economic times, the determination and patient care skills of independent community pharmacies actually increased demand for their services” said NCPA EVP and CEO Bruce Roberts. “Challenges abound, from declining reimbursement, particularly in the public sector, to an uneven playing field from mail order. But community pharmacies are adapting by running more efficient business operations characterized by sterling customer service. As a result, profit levels appear to be in the process of stabilizing after the large drop that occurred with the implementation of Medicare Part D.

 “Community pharmacies have shown a remarkable resiliency, but so much of our future lies outside of our hands,” added Roberts. “We need federal and state governments to require transparency from pharmacy benefit managers, set reasonable reimbursement levels in public programs, and resist burdensome and problematic regulations.”

Over 90% of all prescriptions are now paid for by third parties, according to the report, with government being the largest payer. Patients covered under Medicare Part D, which is run by PBMs, and Medicaid prescription drug programs grew from a total of 39% to 44% of all prescriptions filled in the last year. For Part D the increase was from 13.6% to 14.5%, and for Medicaid it jumped from 25.7% to 29.5%.

“As a result the federal government is increasingly tied to community pharmacy reimbursements, while those of private, third-party payers continues to decrease,” noted NCPA.

Despite the challenges independent community pharmacies face, there are some positive developments, the report added. Independent pharmacies now represent an $88.2 billion marketplace, a rise of 5% over the previous year. In addition, noted the Digest, the overall numbers of community pharmacies were relatively steady at 22,728.

“In fact, between December 2007 and December 2008, 1,225 new community pharmacies opened their doors,” added NCPA.

The release of the 2009 NCPA Digest comes in the midst of the organization’s largest annual event, which this year has drawn more than 3,000 drug store owners and other participants to the Crescent City. In a media roundtable today with reporters, Roberts said the latest research “paints a pretty positive message” about independent pharmacy, despite very real challenges as owners cope with a slowdown in sales, declining gross margins at both the pharmacy and front end, and the challenges posed by mail order pharmacy and other competitors.

In a separate development during the annual powwow, NCPA announced the winners of the 2009 Pruitt-Schutte Student Business Plan Competition. The event, now in its sixth year, is the first national competition of its kind in the pharmacy profession and is named to honor two champions of independent community pharmacy, the late Neil Pruitt Sr. and the late H. Joseph Schutte. The competition is supported by the Pruitt and Schutte families, the NCPA Foundation, Covidien (formerly Mallinckrodt Pharmaceuticals) and Pharmacists Mutual Insurance Company.

This year's competition drew entries from 29 schools and colleges of pharmacy. A team of pharmacy students from the University of Washington took top honors in the competition, with teams from the University of Arizona and the University of Georgia finishing second and third, respectively. Other top 10 finishers included the University of Buffalo, University of California San Francisco, University of Oklahoma, University Oklahoma – Tulsa, University of Southern California, University of Wyoming, and Washington State University.