Sponsored by Oregon Business

Independent pharmacies struggle

| Print |  Email
Articles - August 2011
Wednesday, July 20, 2011
0811_Pharmacies_04
Paulsen’s soda fountain, which sells root beer floats for $2.75, attracts local business people as well as students from nearby Grant High School. // Photo by Eric Näslund

Like many independent pharmacists, Balo belongs to a wholesale provider group, in his case the Good Neighbor Pharmacy, a brand that gives members access to private-label purchasing, marketing materials and managed care networks. The store’s niche products and services include free home delivery, specialized “bubble packing” that allows seniors to keep track of medications in their homes, and customized drug preparations that range from cancer medications to veterinary antibiotics. Hard-to-find skin care creams, Medicare-approved “durable medical supplies,” and an old-time soda fountain featuring $2.75 root beer floats add to the offerings.

Like most independents, the bulk of Paulsen’s annual pharmacy sales, about 85%, come from prescription drugs — the national average is around 94%. Chain stores, by contrast, rely more on “front end” merchandise such as food and toiletries that can be marked up to compensate for flat rate drug reimbursement or dispensing fees.

Market diversification gives the Rite Aids of the world an edge. Nevertheless, in the David vs. Goliath tale community pharmacists like to spin about themselves, the giant is not so much the chains — or the government — as the pharmacy benefit managers. Most independents have contracts with the three biggest PBMs — Medco Health Solutions, Caremark and Express Scripts —but typically have little control over the terms. “The medicine might cost $200 and the contract pays us $202,” says Ann Murray, who, with her husband, John, owns two Murray’s Drugs, one in Condon and another in Heppner. “Most businesses have to make 20% to cover overhead,” Murray says. “You can’t expect pharmacies to survive by giving it away.”

The biggest problem with PBMs is they push consumers toward their own mail-order pharmacies, says John Murray. When the PBMs sell direct, they are able to negotiate better rates with drug manufacturers, and offer deals such as a three-month supply of medication for the cost of one. In the last few years, Murray estimates he’s lost about 20%-50% of his prescription business to mail order.

Aimed at reducing costs, mail order actually increases waste, Murray and other pharmacists contend, because patients change prescriptions before 90 days or because people take the medicine improperly. PBMs counter with their own studies saying that people are more likely to take medicines when by ordered by mail  — and that mail order saves consumers and health plan sponsors money. “Independents always argue that we’re squeezing them out of business,” says Thom Gross, a spokesperson for Express Scripts, adding that independents are actually more profitable than other drug channels, including PBMs.

The National Community Pharmacists Association is engaged in an ongoing battle with the PBMs, an effort that includes lawsuits related to deceptive practices and unfair competition. Pennsylvania and New York are also considering legislation prohibiting PBMs from mandating their customers use mail order.

 



 

Comments   

 
James
0 #1 Oregon bought into an invalid method to calculate Acquisition costJames 2011-09-23 09:53:28
Myers & Stauffer conducts a survey approach to determine pharmacist acquisition cost which is invalid by the time the information is collected, compiled and reported. It is skewed in the direction of the chain pharmacies because they report 2/3 of the data. Why not use a real-time system that costs the state almost nothing. Just go to www.pharmabayonline.com
Quote | Report to administrator
 

More Articles

Power Players

April 2015
Friday, March 27, 2015
BY ROBERT MULLIN

A new energy-sharing agreement sparks concerns about independence and collaboration in the region's utility industry.


Read more...

4 winners and losers in the Kitzhaber scandal

The Latest
Thursday, February 12, 2015
021315-govorno-thumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

Examining the governor's rapid fall from grace in a "bizarre" and "unprecedented" saga.


Read more...

4 highlights of the MLS labor deal

The Latest
Wednesday, March 04, 2015
timbersthumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

On Wednesday night, a couple days ahead of the 2015 season kickoff, Major League Soccer and the Players Union reached an agreement.


Read more...

Finding a Balance

Contributed Blogs
Thursday, January 29, 2015
012915-passinvst-thumbBY JASON NORRIS | OB GUEST BLOGGER

Active vs. passive investing: what you need to know.


Read more...

10 Oregon companies positioning themselves for growth

The Latest
Friday, March 13, 2015
vcthumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

Ten startups have secured venture capital, angel or seed funding in 2015.


Read more...

Photos from the 100 Best Companies to Work For in Oregon awards celebration

The Latest
Friday, February 27, 2015
IMG 9975cneditPHOTOS BY JASON E. KAPLAN

Images from the 2015 celebration of Oregon's great workplaces.


Read more...

Green Rush: Cashing in on legal marijuana

March 2015
Friday, February 20, 2015
BY COURTNEY SHERWOOD | OB CONTRIBUTOR

Marijuana is big business in Oregon, and it’s about to get bigger.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS