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Independent pharmacies struggle

0811_Pharmacies_01Independent neighborhood pharmacies are shrinking, battered by big-chain competition, changing laws and consumer defection.

 

By Linda Baker

0811_Pharmacies_01Bob Coulter, an independent pharmacist in La Grande, is bucking industry trends. Between 2009 and May 2011, the number of independently owned pharmacies in Oregon dropped from 161 to 97. During that same period, Coulter, who already owned two drugstores in La Grande, decided to open another one, the Olive Branch in Enterprise.

Collectively, the three stores are on track to gross $6 million this year, up 20% from the year before. “There are potential rocky roads ahead,” says Coulter, referring to uncertainty over health care reform legislation. “But with the baby boomers, it’s a good time in history to be in the pharmacy business,” he says. “As independents, we can compete.”

In 2011, those are fighting words, not just in Oregon, but around the country, where many independent pharmacies are struggling to stay afloat. Nationwide, there were 22,728 independent pharmacies in 2009, down from 24,345 in 2005. Although the number of independents nationally did increase by a few hundred last year, market share for community pharmacists continued to decline. According to an analysis by Adam Fein, a Philadelphia-based pharmaceutical consultant, independents filled 6.3 million fewer prescriptions in 2010, making them the only pharmacy format to shrink last year. In Oregon that format been shrinking for quite some time. In 2006, there were 221 independents in Oregon, more than twice as many as exist today.

“The neighborhood pharmacy is not so different from the neighborhood hardware store, which became Lowe’s and Home Depot,” says Gary Schnabel, executive director of the Oregon Board of Pharmacy. “Our business model promotes bigger ones eating the little ones.”

The plight of the independent drugstore is a reflection of larger retail trends. But as health care providers, independents are also subject to larger political and market forces. Fifty years ago, consumers paid for about 90% of all prescription drugs. Today only 20% of all prescriptions are paid out of pocket, with the balance paid for by private insurance plans or government programs such as Medicare or Medicaid. At the mercy of third-party reimbursement rates and payment schedules, independents also face growing competition from mail order pharmacies — dispensing facilities that are owned by pharmacy benefit managers (PBMs), huge corporations that manage more than 90% of prescription drug plans in this country.

 


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