End of Days for Independent Pharmacies?

When patients arrive at Woods Pharmacy & Prescription in Mountain View, Ark., pharmacist Dana Woods greets them by name. In a town of 3,000, where Woods has owned the $2 million pharmacy and soda fountain for 26 years, he usually also knows their parents, their children, and their medications.

Brett Barker, a pharmacist and director of clinical services at NuCara Pharmacy in Nevada, Iowa, says his personal relationships with patients help him catch dosing errors and recommend low-cost generics over expensive drugs whenever possible. NuCara, a $30 million business with a dozen locations and 175 employees, sorts medications into daily-dose packages for seniors and hand-delivers them every Friday.

Barker, Woods, and other pharmacists say independent pharmacies that frequently anchor traditional downtowns around the country could vanish if a merger of two mammoth corporations wins approval from the Federal Trade Commission. They and their counterparts have banded together to wage a ferocious battle against what they insist would be a death knell for community pharmacies.

What has them up in arms is Express Scripts’ (ESRX)$29.1 billion acquisition of Medco Health Solutions (MHS). The deal was announced last July, but is pending FTC scrutiny. Pharmacists and advocacy groups expect the FTC to make a decision by the end of this month, although FTC public affairs specialist Mitch Katz won’t speculate on any timetable for action. The corporations combined would become the country’s largest pharmacy benefit manager (PBM), which is a third-party administrator that manages drug benefits for employer-sponsored health plans and insurers.

If the deal goes through, Express Scripts’ patient roster is expected to rise 50 percent, to 135 million individuals.CVS Caremark (CVS), which would become the second-largest PBM in the U.S., currently serves 85 million people. Having one company gain such a large market share could put an unacceptable squeeze on reimbursement rates for independent pharmacists and encourage PBMs to shift patients into preferred-provider pharmacy networks and their own mail-order drug dispensaries, says pharmacist Douglas Hoey.

Hoey is the chief executive officer of the National Community Pharmacists Association, a trade and lobbying group of 23,000 independent pharmacies who together represent $93 billion in U.S. annual health-care spending and dispense nearly 40 percent of all retail prescriptions. Both the community pharmacy group and the National Association of Chain Drug Stores oppose the Express Scripts-Medco merger.

Hoey says independent pharmacies have held their own over the past decade, after many were driven out of business when big-box and chain retail pharmacies proliferated in the 1980s. About half of independent pharmacies are located in cities with populations of 20,000 or fewer. Today, “the single biggest challenge to our financial success is the pharmacy benefit managers, multibillion-dollar Wall Street companies that have wedged themselves in as middlemen between employers and pharmacies,” Hoey says. Although most Americans might be hard-pressed to identify which PBM processes their prescriptions, he says, they exert enormous influence over the pharmaceutical industry.

PBMs “dictate reimbursement terms and cash flow” to small pharmacies on a take-it-or-leave-it basis, he says: “The PBM is a competitor that can poach and cherry-pick the most profitable prescriptions, and they have made the [pharmaceutical insurance] payment system so convoluted it’s hard to pinpoint how they make their money.”

Express Scripts was founded 25 years ago, when PBMs were a new concept. Government studies have shown that PBMs reduce prescription costs, particularly when patients use PBM-owned mail-order dispensaries for 90-day supplies of regular medications.

Express Scripts’ spokesman Brian Henry disputes the doomsday fears around the proposed merger and says his company provides cost-effective benefits, works to drive down costs and medication errors, and values the role of small, independent pharmacies. The $45 billion corporation employs 14,000 in the U.S. and Canada.

“One-quarter of the 750 million prescriptions we managed in 2011 went through independent pharmacies, and we’re very proud of the relationship we have with them,” Henry says. “We understand that they provide critical care in certain rural communities, and we are accelerating what we can do to help them.” Mail-order accounts for a very small segment—about 8 percent—of Express Scripts’ overall volume, he says.

Independent pharmacy owners like Woods and Barker worry nonetheless. Although, like many independents, both pharmacists offer such medical services as respiratory therapy and prosthetics fittings, neither sell enough over-the-counter items to make up for a major loss in prescription revenue.

“I’m a pharmacy first; I’m not a retail giant. If I don’t profit on prescriptions, I go out of business,” Woods says. It also hurts when their education, skills, and patient relationships are devalued in favor of computers and mail-order: “People call me all hours of the day and night. They know where I live, and they come to my house if they need me,” says Woods, who employs seven full-time workers and for decades has trained pharmacy interns from Arkansas universities. “I cannot handle the competition from the pharmacy benefit managers who set rates I cannot control. I can complain, but it does no good whatsoever. And in a town of 3,000, I cannot make it up on volume.”

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

This entry was posted in juniper hills home insurance, palmdale insurance. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s