Posts Tagged: Independent Pharmacy

Pharmacy Business on Thin Margins, Suffers More During Pandemic

pharmacy business

Is it hard to have a successful, independent pharmacy business? The answer is complicated, but pharmacies were already seeing lots of closures. Those thin margins weren’t sustainable in good times. Then the pandemic hit, so what’s the aftermath?

16% of Rural, Independent Pharmacies Closed

According to the Rural Policy Research Institute, 16% or 1,231 independent rural pharmacies closed between 2003 and 2018. These closures created pharmacy deserts, areas in the U.S. where patients have little access to get their medications. That’s one piece of the health inequity ecosystem. Without access, the challenges for population health mount.

Independent Pharmacies Dip Below 20,000

In 2020, the number of independent pharmacies operating in rural and urban areas dipped below 20,000. That’s the first time this has happened. That’s concerning, not just for the possible lack of access for patients, but it’s troubling for pharmacist-owners. Pharmacists typically own independent pharmacies. They are in the dual role of provider and businessperson. Their pharmacies are often a part of the community and are many times the connection for its citizens to health literacy. 

Prescriptions and Pharmacy Purchases Shrank in 2020

Another issue for pharmacies is that there were fewer prescriptions in 2020. Many were hesitant to go to the doctor unless it was an emergency. Further, many lost their jobs and health insurance, so they couldn’t afford their medications. With fewer visits to the pharmacy and less expendable income, pharmacies weren’t generating any additional revenue. 

PBMs Cut into Margins, Too

PBMs (pharmacy benefit managers) align mostly with chain pharmacies. That left independents at a major disadvantage. PBMs control the prescription drug reimbursements for health plans. If your pharmacy is unaffiliated, your margins take additional hits.

COVID-19 Testing and Vaccines Help Revenue Some

Pharmacies have been front and center during the pandemic. They’ve served as test sites and vaccine providers. While they are earning some revenue from this, there was no windfall. Plus, many pharmacies had to deal with costs around logistics. 

However, patients trust their local pharmacy, often more than “big” healthcare. That trust does provide a lifeline to the community around vaccines. That may be one area where they are excelling versus chains or mass inoculation sites.

What’s the Future for the Pharmacy Business?

The consequences of the pandemic will continue to impact all aspects of healthcare. Rural hospitals are struggling, too, and a disjointed healthcare system became more evident during COVID-19. The future is uncertain. Politicians, regulators, and industry stakeholders will be battling it out for some time. 

What doesn’t change is the need for the independent pharmacy. It’s a beacon for the community. Survival will depend on adaptation, using technology, and other opportunities to reduce costs. Some will falter, and that’s a loss for the business owner and those they serve. It’s a stark reminder that healthcare in the U.S. is not equitable. Until we fix that, it will remain an unhealthy ecosystem. 

What Happens After Pharmacy Bankruptcy?

pharmacy bankruptcy

In the realm of healthcare, bankruptcies seem unlikely and rare. After all, healthcare is a for-profit business in the U.S., and every consumer needs it. Unfortunately, pharmacy bankruptcy is rather common. When this occurs, there are many different scenarios as to what happens next. In this post, we’ll explore those options and offer commentary on the rising trend.

Independent Pharmacies Are Closing at High Rates

According to an article in JAMA Internal Medicine, one in eight pharmacies closed from 2009 to 2015. The overall number of pharmacies increased, but the study revealed independent pharmacies to be the most at risk. They were three times more likely to close than chains. Those most vulnerable include rural and urban, in low-income areas, pharmacies.  

Chains Not Immune

Chains aren’t immune to closures. One of the hardest-hit areas is grocery store pharmacies. Grocery stores once found pharmacies to be revenue drivers, but major declines began in 2017. The expected returns kept dipping, while the pharmacy department’s payroll remained the highest of all others.

Grocery store chains found it too hard to compete with new alternatives like digital pharmacies. Many also found they didn’t have any negotiation prowess to receive more competitive reimbursements.

Further, the top chain pharmacies in the U.S. have also closed low performing stores or consolidated after acquisitions. 

Consequences of Closures

pharmacy closed

There are some unfortunate side effects of pharmacy bankruptcy. Another study published to the JAMA Network Open included an analysis of over 3 million consumers over age 50 who take a cardiovascular medication. Approximately 3% of those patients used a pharmacy that had subsequently closed. 

For the first three months post-closure, medication adherence plunged by 5.9%, 5.71%, and 5.63%, respectively. The research concluded this continued for one year after closure. Medication nonadherence is an epidemic in the U.S. It costs the health system billions every year and causes deaths, hospitalizations, and worsening chronic diseases. 

If a pharmacy goes bankrupt and no acquisition occurs, this creates pharmacy deserts. This term describes areas in the country where consumers have limited access to prescriptions. They aren’t just in rural areas. Metro areas like Chicago, Philadelphia, and Detroit have them as well.

The consequences of pharmacy bankruptcy or closure is a ripple effect. Independent pharmacy advocate groups like NCPA (National Community Pharmacy Association) are trying to minimize closures to ensure care continuity, but the COVID-19 pandemic made it harder. It’s been an economic disruption, unlike any other, and created a host of new challenges for all pharmacies. 

Pharmacy Bankruptcy or Closures: What Happens?

Several scenarios can play out when a pharmacy files bankruptcy or closes. 

Acquisition of Patients

Another organization can acquire the pharmacy’s patients. They still close the location but “buy” the patient records and become the custodian. The new pharmacy of record then sends communications to the patients, advising them of the change. Acquiring pharmacies use patient data sets to create target outreach for groups, especially the most vulnerable. 

Store Takeover

Acquisitions of bankrupt pharmacy can also include a full store takeover. The acquirer purchases all assets of the pharmacy. They can then rebrand and reopen under a new name and hopefully retain loyal customers. They’ll also need to communicate with patients to let them know what’s happening. Data conversions and archiving are often part of this process as well. 

Records Go to Archive

In some cases, there is no acquisition of patients. However, the pharmacy must still legally retain patient records for a set amount of time. They can archive these records in a secure, web-based platform that leaves them accessible to auditors or patients. 

Supporting Pharmacy Transitions of Any Kind

As a partner to the pharmacy industry, we’ve helped bankrupt and closing pharmacies transition with data management solutions. From easy archiving to the most complex data conversions to rebranding and communications, we are pharmacy transition specialists. Contact us today to learn about our pharmacy transition services. 

The Community Pharmacist: Real Stories

community pharmacist

The community pharmacist has been an integral part of the healthcare system for decades. However, they are disappearing because, like any small business, it is hard to compete. Additionally, there are many areas of “red tape” that impact an independent pharmacy’s operations.

At InfoWerks, we are passionate about supporting independent pharmacies and proudly share a story from a pharmacist, Dr. Opeyemi Adeweso, about her experience.

Opeyemi’s Journey

Opeyemi earned a bachelor’s degree in pharmacy from her native country, Nigeria. In 2002, she came to the U.S. and became licensed as a pharmacist after meeting all requirements. To be competitive, she attended Howard University, earning a doctorate in pharmacy in 2018.

Early in her career, while working long shifts for one of the large pharmacy chains, she decided she wanted a better work-life balance, as her growing family needed her attention. Her positive experience with independent pharmacies in her home country, the potential flexibility with her hours, and the opportunity to serve her community made it easy to start Severance Pharmacy in 2012.

Initially, a building with several medical offices was the site for the new pharmacy. The intention was to network and liaise with physicians, meeting their needs, and serving patients with the convenience of an on-site pharmacy. The pharmacy offered a variety of services, including home delivery, Medication Therapy Management (MTM), and one-on-one consulting. 

However, as attempts were made to network with physicians to increase customer patronage, she found many providers with offices in the building were actually non-existent. This led to a situation that no business wants to be in, one in which the returns did not justify the high overhead costs.

Other challenges, such as mechanical issues with her medication packaging equipment, were additional concerns, but Opeyemi cites insurance reimbursements and copay issues as the key reasons for lack of profitability. According to her, “With non-preferred pharmacies, the patient’s copay can be much higher. So often, patients can’t pay that extra amount since many are on a fixed income. Plus, the reimbursements from insurance companies are just too low for one to make a decent profit.”

The Reality of Surviving as an Independent

To improve cash flow and reduce overhead, she decided to move her location based on a Howard colleague’s advice. She said, “He told me to consider working with a small grocery store. We’d only be paying the rent for the space, so the overhead was much less.”

In 2017, the pharmacy moved into a local grocery store. The move helped reduce overhead costs but still presented some unique challenges with getting the best suppliers and pricing mechanisms to ensure profitability and competitiveness. 

Competition is fierce in metro areas, where chains and community pharmacies have a tight market. In addition, pharmacist-owners must deal with Direct and Indirect Remuneration (DIR) fees and other hidden fees that affect a pharmacy’s profitability. These challenges contributed to making the difficult decision to close the doors to Severance Pharmacy in August of 2019, after seven years in business. 

Expectedly, many of her customers were unhappy because of the abrupt closure. She had relationships with them—a beautiful aspect of running an independent pharmacy. For Opeyemi, though, the closure was not a story of failure but of knowledge gained through many years of hard work. The years that taught her about the reality of surviving as an independent pharmacy owner. 

Independent Pharmacists Are Business Owners and Valued Members of the Healthcare Ecosystem

community pharmacist 2

Pharmacists, who are also business owners, wear multiple hats. In addition to their clinical duties, they are also responsible for business operations, logistics, sales, marketing, administration, and valid licensure maintenance. 

It suggests that pharmacists should participate in classes on how to run a business while in school. There is support for the community pharmacist on topics like these, through organizations like NCPA. Still, it doesn’t get the exposure it deserves. Frequent exposure to this information, especially early in one’s career, is valuable for the entrepreneurial pharmacist.

Although a vital part of the healthcare ecosystem, pharmacists often do not get the credit they deserve. According to Opeyemi, “Pharmacists are the most underutilized members of the healthcare community, and we should all work to improve that.” 

That’s a sentiment, we completely agree with because pharmacists should have a role in the bigger picture. After all, they’ve been on the front lines of COVID and many other public health issues over the years. 

The community pharmacy will continue to be a huge part of the evolution of healthcare in this country and beyond. As one of the most trusted and accessible members of the healthcare team, the community pharmacist should be a central part of the ever-evolving healthcare system.