Black Friday Blues

Well, today is Black Friday.  Big box stores, Malls, and pharmacy chains all over the country are working hard to make their year end profits in the fourth quarter of the year.  I heard that most of the chain operations make 50% of their profits for the year in the fourth quarter.  Small business won't see that much interest during this time as we usually can't afford to offer so called deals and give away merchandise below cost, well unless you are talking drugs. If you are talking drugs then every day is Black Friday for many independent pharmacy owners.  Why do we dispense prescriptions every day that we lose money on? Because our patient's pharmacy benefit provider believes that the only service we provide is putting pills in a bottle.  Case in point, the new Express Scripts contract that has a 40 cent dispensing fee.  As those of you in pharmacy are aware the spread on what we pay for the drug and what we are paid for the drug is just about even.  In other words we get exactly what we pay for the drug from the PBM's.  Add the dispensing fee and viola we make 40 cents per prescription.  Too bad the average price for a brand drug is over 150 dollars and the average generic is over 50 dollars.  Add the fact we have to finance the drug for the patient (really their insurance company) and we have a firestorm made for negative cash flow.  Wait, we can make up the difference by filling more generics right?  That was a true statement back before 2009.  Every PBM has dropped the cost of generics to the actual acquisition price the pharmacy pays for the generic drug.  So, we have to make our profit on the front end merchandise of the store.  Well, most Black Friday Pharmacy chains make anywhere from 60 to 80 percent of their sales on their front ends sales.  You know, merchandise made in China, cigarettes, and alcohol.  Most independent pharmacies make most of their profits from their pharmacy departments with less than 10 percent of sales from the front end merchandise.  With profits declining from the pharmacy departments and small sales from the front end departments, what will independents do to remain profitable?  The old adage "if you can't beat them, join them" holds true.  Independents are selling to chain pharmacies in larger numbers than in the last several years, or we will need to start taking a page from the chain pharmacy playbook.  China products, cigarettes, beer, wine and lots and lots of snack foods.
When I graduated from pharmacy school many many years ago I never thought that as a pharmacist I would have to become a convenience store clerk in order to make enough money to pay my bills.  With Uncle Sam and most major employers being focused on just paying for product, our professional services are being overlooked.  Don't be surprised that one day your local drugstore is either no longer there or they have become the local big box clone.  I am looking for Black Friday stuff to give away today below cost.  You guessed it, most of the prescriptions I fill today.

First Blog Ever

Hey everyone, I just finished reading the Angry Pharmacist's blog this afternoon and decided that it was time to start blogging myself.  The AP puts what we are thinking into words that we all wish we could use in our pharmacy.  However, I want to give you ammo to help keep your doors open and ask those (who we think are helping us) what they are doing TODAY to help us stay in business.  I don't know about you but I believe we should be paid for what we do and that if a drug is a commodity then we should price them as commodities with a 30% markup (like everyone else in retail does).  If drugs are part of health care then let's price them according to service pricing like hospitals and doctors.  I have seen my profit margin shrink over the years due to PBM's constantly lowering reimbursement on behalf of their customers (the payers). My business is on the fence not due to mismanagement or extravagant lifestyles but by being marginalized by the PBM's.  More to come on this later.. Starting in 2012 I will see many of my patients forced to the local CVS because of the sweet heart deal they have with Atena, a Medicare D plan.  One of my customers asked me why she would have to pay 9 bucks here but nothing if she went to CVS?  I responded that our own government has allowed discrimination against freedom of choice.  CMS has allowed a violation of the health care law (in my opinion) that disadvantages independents and gives all the chains the ability to fight over the Part D plans.  This will lead to even lower reimbursements and guess what, independents being forced out of the networks whether by choice or not.  Patients (customers) will go to the place where they don't have to pay.  How do we compete with FREE, especially from the government?  Community pharmacy has always given back to our communities but now we must ask our communities to give back to us.  We must have their help in complaining to CMS and Congress about these unfair networks.  You can also help by asking NCPA, APhA and your co-op what they are doing about it!  You know those folks who complain every time they come in the door and how we dread talking to them? Well, that patient needs to be You!  We need to be the squeaky wheel and not the complacent folks we are.  Kudos to PCAN and PharmacyTruth for helping get the grassroots involved.  I don't know how many of you will become involved in our plight and fight, but if just one of you will get angry (see Angry Pharmacist) and start being squeaky maybe we can change a few things.  Stay tuned..
KA

post script:  let me see your comments and thoughts..