Time and again, independent community pharmacists have proven themselves to be resilient and savvy businesspeople who can modify and reinvent their practices to adapt to economic challenges. They provide vital healthcare services and have the ability to differentiate themselves from mega chains by offering a personal touch and patient-care services, including adherence and synchronization programs. An example of resilience is evident in the way pharmacies have begun providing niche services, such as same-day delivery, weight-loss and smoking-cessation programs, transitions of care and more. As small business owners, they are embracing new innovations in technology to increase operational efficiencies and engaging in social media to communicate with patients and providers.
B. Douglas Hoey, R.Ph., MBA, chief executive officer of the National Community Pharmacists Association (NCPA), has spent more than 20 years working in and representing community pharmacies. “Independent community pharmacies are the safety net for the millions of patients whose health doesn’t conform into a healthcare assembly line,” he said. “…So-called experts have been predicting the demise of independent pharmacies for over a century, and those so-called experts have been proven wrong over and over again.”
Since 1932, the Digest has provided a yearly overview of the independent community pharmacy market. The 2016 NCPA Digest, sponsored by Cardinal Health, is the latest installment, presenting data reported from 2015 and focusing on financial health, marketplace, patient-care services, technology trends and third-party prescriptions. Data was provided by independent community pharmacies that have been in business at least a year. The NCPA represents the nation’s 22,160 community pharmacies.
Hoey said he is encouraged by several aspects of the Digest, including the increase in top-line revenue from 2014, the continued expansion of adherence and synchronization programs and the rise in the number of pharmacies utilizing new technology to improve workflow. He expressed concern, however, over pharmacy profitability as gross margins fell from 22.9 to 22.3 percent. “There are no doubt problems in the current environment, mostly related to the one-sided business relationship between pharmacy benefit management (PBM) services and pharmacies, but there are also opportunities because of the changing ways pharmacy’s value to the overall healthcare system is finally being recognized.”
Independent community pharmacies include single and multiple-store operations, regional chains and franchises, and they represent a significant portion – 36 percent – of pharmacies in the United States. In 2015, 27 percent of independent community pharmacy owners had ownership in two or more pharmacies. They employed 220,000 full-time equivalent employees, and the average location dispensed 60,493 prescriptions – 194 per location (Digest 5, 9). Average sales were $3.7 million, and payroll expenses accounted for 12.8 percent of sales. Gross margins remained relatively stable at 22.3 percent (Digest 6).
When it comes to engaging patients, independent community pharmacies have an edge over large chains because of the personal relationships they form with customers. In communities of all sizes, pharmacists often live in and give back to the communities where they work (Digest 7). In 2015, 32 percent of independent community pharmacies were located in areas with populations of less than 20,000; 50 percent with populations between 20,000 and 50,000 and more than 80 percent served areas with populations of less than 50,000 (Digest 12).
According to the Digest, independent community pharmacies continue to focus on improving the lives and health of their patients and communities by offering medication therapy management (MTM) programs, dispensing specialty medications, such as those for rheumatoid arthritis and multiple sclerosis, and managing chronic diseases, which can reduce overall healthcare costs in patients with diabetes, heart disease, asthma and other conditions.
In 2015, medication non-adherence cost $290 billion. MTM programs are designed to help patients get the most out of their medications by educating them and therefore reducing the risks of adverse drug events and interactions and increasing adherence to prescribed regimens. Pharmacists also help their communities by promoting public health initiatives, including lipid monitoring, immunizations, osteoporosis services and asthma. According to the Digest, the majority of pharmacies offer the following services:
- MTM Services – 81 percent
- Adherence Services – 82 percent
- Prescription Synchronization Services – 70 percent
- Specialty Medications – 39 percent
- Compounding – 61 percent
At 67 percent, immunizations were the number one service offered by independent community pharmacies, and more states are in the process of expanding the authority to administer them. Fifty-seven percent offered blood pressure monitoring; 35 percent offered diabetes training; 39 percent dispensed specialty medications; 61 percent offered compounding services; 61 percent made durable medical equipment available; 38 percent offered elderly services; 31 percent had a drug therapy agreement with a physician and 23 percent had access to electronic medical records (Digest 14).
In order to be competitive, independent community pharmacists have embraced technology to enhance efficiency, reduce costs and improve patient care. Many have also ventured into social media as a means of communicating with patients and healthcare providers. In 2015, 84 percent had a point-of-sale system; 51 percent used an automated dispensing counter; 48 percent offered mobile commerce/signature capture; 42 percent had an interactive voice response system; 30 percent had an automated dispensing system; 87 percent had a Facebook™ page; 28 percent were on Twitter; 62 percent offered their patients a mobile app and seven percent had a YouTube channel (Digest 18).
According to the Digest, the most significant external pressure on independent community pharmacies is the relationship with third-party payors. Of the $81.5 billion in revenue generated by community pharmacies, 92 percent of sales came from prescription drugs, and profits continued to be slim due to third-party payor and government contracts. Pharmacies sought to increase revenue by maximizing efficiency and offering additional services and products to their patients (Digest 5).
For independent pharmacies, public and private third-party payors dictate prescription drug reimbursement payments and introduce additional operational and financial challenges (Digest 19). In 2015, 91 percent of Rxs were covered by third-party contracts, and 52 percent of those were covered by government programs. With over half of the prescriptions filled by independents being paid for by a government program, the reimbursement strategies of government programs continued to affect the financial viability of independent community pharmacies. The remaining nine percent of prescriptions were cash sales.
The New Administration
When asked how he thinks President Trump and his administration will affect the independent community pharmacy industry, Hoey said he is cautiously optimistic. “It’s still early to see how President Trump and his administration will handle policy changes like the Affordable Care Act (ACA),” Hoey said. “If the ACA is completely repealed, it would strip provisions related to pharmacy Medicaid payments and patient choice not to use mail order that the NCPA lobbied hard to have included. However, there would certainly be ways to repeal most of the ACA in a way that does not impact these important provisions. The President has also been vocal about the rising costs of drugs. We wrote a letter to him saying that community pharmacies are part of the solution in lowering overall healthcare costs — and that PBMs, contrary to their self-billing, contribute to the rising costs of drugs.”
The Best Care
Independent community pharmacies are set to face obstacles in these unstable times. The industry faces challenges that are some of the toughest it’s ever contended with, Hoey said. However, “There will always be opportunities for entrepreneurs to buy existing pharmacies or start new pharmacies. There are more pharmacy school graduates than ever, and they have a desire to practice pharmacy in a way that more closely aligns with why they went into pharmacy in the first place.”
Plus, independent community pharmacies will thrive as long as consumers won’t settle for anything but the best care.
Leon Michos, Ph.D., and Donna West-Strum, Ph.D., eds. The 2016 NCPA Digest, sponsored by Cardinal Health (2016): NCPA. NCPA and Cardinal Health. Web. 7 Feb. 2017.