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Survivor: The Corner Drugstore Outback
How independent pharmacists have used wits and wiles to remain competitive against chain giants
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Business New Haven
3/5/2001
By: Susan Cornell
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During the 1990s edition of retail Survivor, the corner drugstores disappeared from civilization one by one because of aggressive predatory forces. The new season, set in the new Millennium, stars independents that have successfully outwitted, outplayed and outlasted last season's competitors. But, like any new game show, the next challengers are new contestants who bring with them an entirely new set of opportunities and dangers.
During the previous decade, viewers watched the independent community drugstores being voted off Main Street. This tribe competed against a number of other tribes: chain-owned drugstores, the Internet, the surging clout of managed care. During 1998 and 1999, the industry was especially hard-hit as 600 stores were voted out nationwide.
The independent pharmacy is healthy again, though, and the tribe is now dubbed “The Comeback Kids” by the National Community Pharmacists Association's executive vice president, Calvin Anthony.
“The serious decline in the number of independent pharmacies has essentially subsided,” Anthony says. His organization reports that overall sales by independents are up 37 percent over the past three years, and that overall prescription sales have risen by 43 percent over the same period.
But what prescription worked to help nurse these successful competitors back to youthful vigor? NCPA President Robert Black explains: “Taking the time to provide customers good services does make a difference. Independents are continuing to lead the profession in providing pharmacist care and other valuable patient care services.”
Consumer Reports rated independents as a group “tops in personal attention as well as speed and efficiency of dispensing quality of medication information provided.” The 2000 Ortho-Biotech Retail Pharmacy Digest consumer survey rated the independents “tops in customer satisfaction.”
Another competitive advantage is the certification many independents have sought in order to provide disease-management services. Successful independents are the ones who triumph over the managed-care tribe by lowering operating expenses and purchasing smarter. And, these survivors faced the Internet team by using technology to “build and maintain bigger, better, and more effective networks,” notes Anthony.
The independents also played the if-you-can't-beat-'em-join-'em game with the dot.comers by launching their own cyber network, cornerdrugstore.com, which allows every pharmacy to maintain a presence on the Internet. With cornerdrugstore.com, the community pharmacies create a nationwide network where they can offer same-day or next-day delivery.
Having a virtual presence allows the independents to overcome some of the advantages of other e-pharmacies such as the Farmington-based familymeds.com, an online retailer of specialty pharmaceuticals, prescription medicines and other health-care products. Some of the competitive advantages enjoyed by such e-companies included both convenience and privacy – but the independents are now able to provide these features as well.
And, of course, the independents will continue to face the growth of the chains such as Wal-Mart, which will spend nearly $1.5 billion to develop some 500 stores nationwide and a new infrastructure in a race to capture an ever-expanding share of the nation's exploding drug market, company officials say. Additionally, there are the giants such as CVS, which is expanding both physically and virtually.
The independent pharmacists enter the new Millennium competing in an entirely new contest. In Survivor terms, the immunity challenge will include demonstrating the ability to fill an incredible number of prescriptions; the projection is that the number of to-be-filled prescriptions will nearly double in five years, and many of these will be new to the pharmacists as a result of faster FDA drug approvals.
Further, the independents will need to recognize other pressures which accompany the Greying of America challenge: Not only will there be a surge in prescription volume but also a greater need for patient counseling as the complexities of medical therapies grow. Additionally, the tribe will face an incredibly fast-moving business environment in which nearly every player has the technology to improve both service and efficiency as well as to provide instant access to information.
To win, the independents will need to be on the cutting edge of technological advancements. Finally, the independents will need to engage in political action to continue the fight to maintain control of the profession.
Carson says the NCPA's position on the Medicare outpatient pharmacy benefit is that its support for any legislation is contingent upon “payment for the pharmacist's professional services and preserving the right of seniors to select the pharmacy of their choice.”
According to the Hayes Independent Druggist Directory, Connecticut has more than two nationally owned pharmacies (such as CVS, Rite-Aid and Arrow) for every one independently owned store. The official 2000 tally is 392 to 184, respectively. The ratio is similar on a national level, with roughly 52,600 chain-owned stores to 25,000 independents.
According to the NCPA, Connecticut lost 166 independent pharmacies in the second half of the 1990s and gained 80 chain-owned stores during the same period. The Connecticut consumer faces a net loss of 86 stores, which clearly has made obtaining prescriptions a more formidable task for many.
Combine the decline in total pharmacies with a second problem - the druggist deficit - and an even greater challenge is placed on Connecticut pharmacies and patients alike. While the problem of the pharmacist shortage is national in scope, Connecticut is particularly hard hit because of the decision of the University of Connecticut School of Pharmacy to lengthen certification requirements from five years to six years. As a result, 90 to 100 potential additions to the labor pool did not graduate last year.
The reason for this decision, according to the Michael Gerald, dean of the pharmacy school, was that “UConn was caught in a changeover, as Husky hoop fans might say, from a five-year to a six-year pharmacy program, to keep up with national accreditation standards.”
The labor shortage, according to Pat Lirot, the owner of Circle Pharmacy, an independent in North Madison, is one of the two top problems faced by the industry in Connecticut. “UConn was the biggest supplier of pharmacists for the independents,” Lirot says. “Without the class, we struggle.”
Lirot also notes, “Even with a graduating class it's tough, because these job-seekers can look for employment anywhere from hospitals to retail to the drug companies.”
Bob Jemesius, owner of Jolly's Drug of Madison, concurs with Lirot that the labor shortage is a critical issue. “I've even discouraged my own daughter from joining the business as there are better things to do for the same amount of money,” he says.
Jemesius believes that graduates are better off working for the chains that offer more money and more vacation time. The labor shortage and the attractiveness of the chains, Jemesius says, also impacts the ability of independent owners to retire. “There's no one to buy the business if you want to retire,” he says. “I can't imagine why the chain pharmacist would want to work for himself.”
With fewer pharmacies, fewer pharmacists, an aging population, an increase in prescriptions, and new drugs on the market, the independents (and the chains, for that matter) will really need to focus on beefing up their survival skills. And, the patients will really need to be patient, and may well be inconvenienced by the shortage of pharmacists and disappearance of some of the old pharmacies.
The druggist dearth can potentially escalate from inconvenience to public-health issue as Connecticut's state law mandates that pharmacies close when no registered help is on duty. While the law has good intentions (for example, would you want a 16-year-old explaining the dos and don'ts of a certain medication to your grandmother?), the consumer sometimes cannot obtain a needed prescription. And, with 86 fewer stores in state, there may not be a second choice store left on Main Street.
The prescription for Connecticut's druggist deficit is particularly complex since, even when UConn releases graduates into the wild, there is no guarantee that these young people will solve the state's problem. In fact, perhaps even half of them will opt not to join any store team.
Gerald acknowledges that graduates have a number of options from academia to government to careers in the biotech and pharmaceutical industries. Part of the cure, he says, includes a “committee of industry, state and academic people working on ideas to keep what is essentially an inconvenience from becoming a serious problem.”
The General Assembly may have a number of Rxs in the spring. NCPA's Carson's remedy includes “standardization of prescription drug cards, and the more effective use of pharmacy technicians and automation technologies to ensure that the pharmacy is positioned to handle the growing demand for prescription medicines.”
The second of the two top issues facing the independents, says Lirot, is the insurance companies. The insurance industry, she says, “is asking us to put out a product below our costs. So, we are asking customers to make up for it by [purchasing] the [non-pharmaceutical] products up in the front of the store. And, many just can't make a business anymore when you factor in high rents.” Lirot adds that, “because of insurance interventions, there just is not as much time anymore; the pharmacists have to spend time doing interventions with both the doctors and the insurance companies.” Finally, she adds, “this is frustrating for the patient, for the doctor, and for the pharmacist.”
Jemesius also finds that insurance and reimbursement rates are a top concern. “We just can't do what we want,” Jemesius says. Plus, “The money doesn't go to the people who provide the service any more.”
The winners in the Corner Drugstore Outback game will be those who continue to provide personal attention, medication information, and speed and efficiency in dispensing their wares. They will also stay on the cutting edge of technology and form alliances such as networks to enable them to purchase smarter.
The NCPA provides another alliance and, as such, assists the independents in engaging in political action. The organization also endorses cornerdrugstore.com in which 1,500 pharmacies are already participating and another 2,000 are contracted to do so.
Finally, Lirot says, “the independents strive to be more customer-oriented than the chains. They take the time to answer questions and will get back to the customer when they don't have the answers.” Fortunately, the independents, she says, also have the advantage of very “loyal clientele who often choose not to patronize the chains.”
The independent community pharmacy has had tougher obstacles to navigate and steeper mountains to climb. They have overcome some of the hurdles of the '90s, faced the tribal council, and survived to face yet another council. Will the independents remain healthy? Stay tuned.
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