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PHILADELPHIA Independent pharmacies in 2009 generally were able to withstand the pummeling of a major recession, the growing influence of government healthcare programs, declining prescription drug reimbursements and an ongoing battle with pharmacy benefit managers, the National Community Pharmacists Association reported Monday.
The NCPA unveiled its 2010 NCPA Digest, sponsored by Cardinal Health, during its 112th Annual Convention and Trade Exposition here. The annual report on the owner-operated pharmacy industry found independent operators were “able to generally stabilize their business,” despite a daunting slew of challenges.
“The NCPA Digest findings demonstrate that an independent community pharmacy business model that is adaptable, yet rooted in sterling customer service and competitive pricing, has a viable place in today’s marketplace,” said Doug Hoey, NCPA acting EVP and CEO. Pharmacy owners, he added, succeeded last year “by diversifying their revenue streams through providing convenient patient services, such as immunizations, and helping patients manage their prescription costs and medication regimen in a down economy. As a result, after a sharp drop in the number of pharmacies in 2006, when Medicare Part D went into effect, the number of independents has generally stabilized and grew modestly.”
Among the significant findings produced by the annual survey, now in its 78th year:
- The number of total independent community pharmacies rose from 22,728 in the previous year to 23,117;
- Independents remain the bedrock of smaller-town America: 51% of them operate in areas of 20,000 people or less, according to the Digest, with another 21% found in areas with 20,000 to 50,000 people, and 28% in areas greater than 50,000 people;
- Owner-operated pharmacies dispensed 4% more prescription drugs in 2009 than they did the previous year;
- Generic drugs accounted for 69% of all prescriptions dispensed by independents, marking a 4% increase over the previous year and exceeding the average generic dispensing rate of the largest, PBM-owned mail-order pharmacies, according to NCPA;
- 30% of dispensed prescriptions were from the Medicare Part D program and 14% were from Medicaid;
- 76% of independent pharmacies offer immunizations –– up from 46% the previous year –– and 76% offer personalized home delivery, often at no cost. Medication therapy management in some form is now offered by 68% of independents;
- Immunizations are able to generate an average of $10,000 in additional revenue; and
- Increasingly, independent operators are utilizing technology to make their staff more productive, with 43% using at least one kind of an automated dispensing technology.
Despite those promising developments, independent drug store operators still grapple with anemic profit margins. “The average independent community pharmacy’s pretax profit margin remains at 3.2% for the second year in a row,” NCPA noted. “That, combined with a dependence on prescription drug reimbursements for more than 90% of revenue, leaves independents vulnerable to any changing dynamic in the marketplace and limits business expansion opportunities. By contrast, publicly traded chain pharmacies sell much more front-end merchandise that often yields higher profit margins, while major PBMs saw their profits increase five-fold during this decade,” the group asserted.
In a press conference Monday, NCPA’s top leaders laid out the challenges and opportunities faced by independents as healthcare reform begins to take shape, congressional elections loom and the nation continues to struggle with a halting, weak economic recovery. Among those who met with the press: newly named EVP and CEO Kathleen Jaeger; Hoey, who will return to his previous position as NCPA SVP and COO; Bob Greenwood, NCPA president-elect and pharmacy owner in Waterloo, Iowa; John Coster, SVP government affairs; and Stuart Soberman, SVP and chief legal officer.
Jaeger, who assumes her post as the group’s top executive on Nov. 1, briefly laid out her vision for the NCPA. “Our first and foremost objective must be to ensure that our patients have excellent access to quality care and pharmacy services in their community,” Jaeger said. “Second, we must continue to demonstrate the tremendous value independent pharmacists deliver to patients and the overall healthcare system. Third, we must drive economic growth at independent pharmacies. And lastly, [independent pharmacies] must be viewed as part of the reform solution."
“My vision is quite simple: To build upon the true strengths of our industry, and not be shy about letting the world know of our true value to patients and the communities we serve,” Jaeger concluded.
Greenwood, NCPA’s newly named president, said he will focus first on being “a liaison and an advocate for our members. I’m going to help the NCPA staff bring their message to Main Street about the great work they do in Washington, and spread that message to the stakeholders, state associations, buying groups and schools of pharmacy,” he told reporters. Another goal, Greenwood added, is to “elevate the understanding, utilization and practice of medication therapy management. MTM should be a core competency of pharmacy practice,” he asserted.
The NCPA, Hoey added, will support efforts to make all independent pharmacists experts in both MTM and patient adherence by 2015.