Sponsored by Cardinal Health

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1 Sponsored by

2 Sponsored by Cardinal Health Project Editor Donna West-Strum, RPh, PhD Associate Professor, Department of Pharmacy Administration The University of Mississippi Oxford, Mississippi Project Director and Financial Editor Leon Michos, PhD NCPA Health Care Economist Creative Robert Lewis NCPA Associate Director, Design Sarah Diab NCPA Senior Designer Marianela Guinand NCPA Junior Designer Contributors Chris Linville NCPA Director and Managing Editor America s Pharmacist Copyright 2012 National Community Pharmacists Association, Alexandria, Virginia, USA. All rights reserved. No right of reproduction without the prior written consent of the National Community Pharmacists Association.

3 Dear Reader The National Community Pharmacists Association (NCPA) and Cardinal Health are proud to celebrate the 80th anniversary of the NCPA Digest. Over the past eight decades, information provided in the Digest has helped shape public policy, while arming independent community pharmacy with the information necessary to make sound business decisions. From galvanizing support for the Robinson- Patman Anti-Discrimination bill of the 1930s to adapting to the implementation of Medicare Part D, the Digest has been the trusted source of information for independent community pharmacy. While the challenges facing independent community pharmacy have been many and varied, the strong relationship between community pharmacists and their patients has remained steadfast. Year after year, community pharmacists rate as being number one or two as the most trusted health care provider. This undeniable bond, combined with information provided in the Digest, will pave the road for a bright and prosperous future. Looking toward the future, community pharmacy must expand beyond the role of dispensing medications and take on a more proactive role in the total health care of their patients. Offering specialized services tailored to patients and serving key niche markets will allow community pharmacy to diversify its revenue stream and grow as small businesses, while having a positive impact on health care. As an example, pharmacists are uniquely positioned to improve adherence to life-saving medications that will ultimately limit the more costly expenditures of unnecessary physician visits and hospitalizations. Cardinal Health values its relationship with independent community pharmacy, realizing that community pharmacists play a critical role in helping improve our nation s health care system. To support this role, NCPA and Cardinal Health continue to provide new services and resources that can help independent community pharmacies thrive into today s competitive market. NCPA, with the support of Cardinal Health, is pleased to continue the Digest tradition of providing meaningful information and insight into the independent community pharmacy marketplace. We are confident that you will find the 2012 NCPA Digest, sponsored by Cardinal Health, to be an excellent resource on the industry, providing you value throughout the year. Sincerely, B. Douglas Hoey, Pharmacist, MBA Mike Kaufmann Chief Executive Officer Chief Executive Officer, National Community Pharmacists Association Pharmaceutical Segment Cardinal Health 2012 NCPA Digest, Sponsored by Cardinal Health 1

4 Foreword...4 Executive Summary...5 Methodology...8 The Independent Community Pharmacy Marketplace...9 Pharmacy practice settings Pharmacy staff positions Retail pharmacies by state Average hourly wages Generic prescriptions dispensed Patient Care Services...13 Medication therapy management Medication adherence Patient care services offered Disease state management Interactions with other health care professionals Long-term care services Technology Trends...19 Workflow technology Technological capabilities Third-Party Prescriptions...20 Five-year trend summary Pharmacy Profiles Hartig Drug Company, Dick Hartig Dubuque, IA Katterman s Sand Point Pharmacy, Beverly Schaefer, and Steve Cone Seattle, WA Western Maine Pharmacy, Audrey Parks Kingfield, ME Diamondback Drugs, Michael Blaire Phoenix, AZ Remedies Pharmacies, Justin & Keri VanCampen Lakeside, MT Sullivan s Pharmacy and Medical Supply, Greg Laham Roslindale, MA NCPA Digest Sponsored by Cardinal Health

5 Figures 1. Average annual sales (in thousands) per pharmacy location Pharmacy practice settings Retail pharmacies by state Average hourly wages Percentage of generic prescriptions dispensed Summary of patient care services offered Summary of disease state management services Frequency of services offered in pharmacies that offer at least one disease state management service Pharmacist interactions with other health care professionals Discussion with physician or other health care professional regarding patient s drug therapy Pharmacist interactions with other health care professionals Percentage of pharmacists offering recommendation for brand to generic drug change Pharmacist interactions with other health care professionals Percentage of pharmacists offering recommendation for therapeutic interchange Percentage of long-term care services offered (by type of facility) Percentage of pharmacies utilizing workflow technology Summary of third-party prescription activity...20 Tables 1. Independent pharmacy at a glance Averages of pharmacy operations Pharmacy staff positions Medication therapy management Medication adherence Long-term care beds served per facility Technological capabilities...19 Table of Contents 3

6 Foreword This year s NCPA Digest, sponsored by Cardinal Health, provides an exhaustive look at independent community pharmacy as health care reform is implemented. Independent community pharmacies continue to capitalize on the opportunity to improve medication use, through providing a wide range of specialized services tailored to their patients. This comprehensive report describes some of the steps being taken by independents to strengthen their position and adequately adjust to the market. The Digest continues to grow as a resource not only for independent community pharmacists, but for a diverse audience of interested parties such as media, government, and lawmakers who wish to view this continuously evolving marketplace. + Patient care services. Charts that provide information about the services offered by independent community pharmacies, including medication adherence services. + Technology trends. This section provides information about trends in technology resulting from independent community pharmacies trying to find new and innovative ways to increase their productivity and differentiate themselves from competition. + Third-party prescriptions. This section has information about third-party prescription activity including Medicare Part D. The NCPA Digest, sponsored by Cardinal Health, could not be published without the cooperation of hundreds of independent community pharmacists across the United States who confidentially completed the Digest survey. NCPA and Cardinal Health would like to thank the pharmacists who provided financial data to make this year s Digest possible. Data for the NCPA Digest, sponsored by Cardinal Health, are obtained via fax and through electronic surveys sent to independent community pharmacies across the United States. Survey data are compiled and analyzed by NCPA, and the results are assessed for accuracy by the researchers at The University of Mississippi. The Digest is provided through the financial support of Cardinal Health. This year s Digest provides an in-depth look into the $88.5 billion marketplace that independent community pharmacy represents. For 80 years the Digest has provided an inside look to measure industry trends and provide benchmarking information. This year s publication follows an easy-to-use format that includes information regarding: + The marketplace. This section includes information on employment trends among pharmacists and technicians, the number of retail pharmacies nationally, as well as pharmacist interactions with physicians NCPA Digest Sponsored by Cardinal Health

7 Executive Summary The NCPA Digest, sponsored by Cardinal Health, provides an annual overview of independent community pharmacy, including a comprehensive review of the financial operations of the nation s independent community pharmacies for In 2011 independent community pharmacy represented a $88.5 billion marketplace, with 92.2 percent of sales for independents derived from prescription drugs. Although most independents continue to face slim margins from private third-party contracts and government reimbursement programs, they have strived to reduce their overhead costs through running a more efficient business. They are using labor-saving technologies to control payroll expenses. The number of employees per pharmacy location decreased in 2011, and the wages paid to pharmacists and technicians remained relatively the same. In 2011, the number of independent community pharmacies increased to 23,106 independent community pharmacies employing over 300,000 workers helping to stimulate local economies, paying state and local taxes, and providing high quality services that are greatly valued by patients. An overview of the average independent community pharmacy is provided in Table 1. In general, the average independent community pharmacy location dispensed 62,969 prescriptions (201 per day) in 2011, which is a slight decrease from last year s prescription volume of 64,169. Total Independent Pharmacy, At-a-Glance Table Average number of pharmacies in which each independent owner 1.76 has ownership Average number of prescriptions dispensed per pharmacy location New prescriptions 28,881 46% Renewed prescriptions 34,088 54% Total prescriptions 62, % Average prescription charge $56.09 Number of hours and days per week per location Hours open per week 55 Days open per week 6 Inventory Prescription Inventory $240, % Other Inventory $38,000 1% Total Inventory $278, % Annual Rate of Inventory Turnover 10.6 Annual Rate of Prescription Inventory Turnover 11.3 Percentage of total prescriptions covered by Government programs (Medicaid or Medicare Part D) 49% Other third-party programs 38% 1936: The average prescription charge was 34 cents sales slightly decreased this year due to the flat prescription volume, increased use of lower-cost generic medications, and the increased emphasis on 90-day refill prescriptions. These numbers may also reflect the reality that some payers have forced their beneficiaries to use mail-order for refill prescriptions. Many independents continue to operate multiple pharmacies. Twenty-four percent of independent community pharmacy owners have ownership in two or more pharmacies and the average number of pharmacies in which each independent owner has ownership is Executive Summary 5

8 Average Annual Sales (in Thousands) Per Pharmacy Location FIGURE $3,831 $4, $0 $1,000 $2,000 $3,000 $4,000 Data for the Digest have been collected for 80 years, providing the opportunity to look at long-term trends for independent community pharmacies. Since 2002, gross margins as a percentage of sales have remained relatively flat at 22 to 24 percent. Figure 1 and Table 2 show these trends: + Average sales per location for 2011 was $3,831,481, which is less than in $2,855 $3,244 $3,604 $3,612 $3,745 $3,580 $4,026 $3, : Average annual sales per pharmacy location was $47,000 + Through attempts by independents to control operating expenses, the average net operating income remained similar to last year at 2.9 percent. Since sales decreased, the net operating income dollars before tax decreased slightly. + The average monthly prescription drug inventory was $240,000, and the annual turnover rate of prescription inventory was (See Table 1.) In 2011, independent community pharmacies faced many challenges both old and new. However, even in the most challenging times, independent community pharmacies continue to lead the way in innovations that define the future of pharmacy practice. The industry has responded by expanding and diversifying its businesses to include enhanced patient care services, including medication adherence. Community pharmacists are leaders in counseling their patients about the importance of purchasing the initial prescription and continuing to take it for chronic conditions. For years, independent community pharmacies have been the nation s leaders in tying together medication management with disease management services to patients with chronic health conditions such as diabetes, asthma, hypertension, and hyperlipidemia. They promote public health initiatives, such as immunizations and smoking cessation programs. Independent community pharmacies are embracing the concept of medication therapy management (MTM) services and integrating these services into their practices. Other pertinent information about the independent community pharmacist s professional interactions includes the following: + Gross margin decreased slightly from 24 percent in 2010 to 22.9 percent in 2011, but remained in the percent range seen over the last 10 years. + Payroll expenses, as a percentage of sales, decreased by 1.1 percentage points in 2011 to 13.4 percent. Payroll expenses decreased by reducing the number of full-time employees and not increasing wages. With a lower gross margin, payroll, and operating expenses had to be carefully monitored. It is important to note that this year s Digest data reflect the marketplace in 2011, the seventh year for the Medicare Part D prescription drug benefit. Similar to 2010, 32 percent of prescriptions in independent community pharmacies were covered by Medicare Part D. Government programs such as Medicare Part D and Medicaid continue to purchase 49 percent of prescriptions sold in independent community pharmacies. (See Table 1.) + Similar to 2010, 74 percent of independent community pharmacies indicate that they provide MTM, and 61 percent have received some level of reimbursement for their MTM services under Medicare Part D. (See Table 4.) + Fifty percent of independent community pharmacies have a formal program to increase medication adherence. (See Table 5.) Improving medication adherence has been shown to improve clinical outcomes for patients NCPA Digest Sponsored by Cardinal Health

9 + Independent community pharmacists consult with physicians 7.9 times daily on prescription drug therapy. This includes generic product recommendations and therapeutic interchange recommendations. Physicians in turn accept pharmacists generic product recommendations 83 percent of the time and 71 percent of the time for other therapeutic recommendations, thereby providing evidence of the important role pharmacists are playing as part of the health care team. (See Figures 8 10.) Independent community pharmacists have proven throughout the last 80 years that they are resilient and will modify and reinvent their practices to adapt to economic challenges. They will continue to define the future of pharmacy by timely innovation and exceptional customer service. Most important, they continue to be vital health care providers to patients and dynamic leaders in communities of every shape and size, including key locations in rural and underserved areas. Averages of Pharmacy Operations Table Sales 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Cost of goods sold 76.5% 76% 77.9% 76.4% 77.2% 76.8% 76.8% 76.2% 76.0% 77.1% Gross profit 23.5% 24% 22.1% 23.6% 22.8% 23.2% 23.2% 23.8% 24.0% 22.9% Payroll expenses 13.1% 13.2% 12.2% 13.4% 13.6% 13.7% 13.5% 14.1% 14.5% 13.4% Other operating expenses 6.6% 6.8% 6.3% 6.5% 6.4% 6.5% 6.5% 6.4% 6.5% 6.6% Total expenses 19.7% 20% 18.5% 19.9% 20% 20.2% 20.0% 20.5% 21.0% 20.0% Net operating income 3.8% 4% 3.6% 3.7% 2.8% 3.0% 3.2% 3.3% 3.0% 2.9% 1945: The average cost of goods sold was 31,020 or 66% of total sales Executive Summary 7

10 Methodology Independent community pharmacy owners, having completed at least one entire year of operations, were invited to participate in this study. Pharmacy owners or their designees were asked to complete the surveys. We have exercised the utmost professional care compiling the information received. While we have tested the information for clerical accuracy, the data supplied were not necessarily based on audited financial statements. NCPA does not make any assurances, representations, or warranties with respect to the data upon which the contents of this report were based. The information upon which the 2011 portion of the study is based was from fiscal years of Jan. 1, 2011 through May 30, 2012, with 94 percent of the responses reporting for the year ending Dec. 31, Results from prior issues of the Digest have been incorporated with the 2011 results to facilitate assessing industry trends. Note to NCPA members: The financial data of the Digest, including all benchmarking tables stratified by sales volume, geographic area, population size, and third-party utilization, are available online for members only at NCPA Digest Sponsored by Cardinal Health

11 The Independent Community Pharmacy Marketplace Independent community pharmacies are all privately held small businesses but they vary in practice setting. They include single-store operations and other independent pharmacist-owned operations such as regional chains, franchise, compounding, long-term care (LTC), specialty, and supermarket pharmacies. At the end of 2011, there were 23,106 independent community pharmacies, which is slightly up from 23,064 in Independent community pharmacy represents a significant portion of pharmacies in the United States. (See Figure 2.) Pharmacy Practice Settings FIGURE 2 25,000 20,000 10,000 23,318 23,117 23,064 22,728 19,202 8,949 7,721 20,230 8,505 20,705 20,804 8,392 8,351 8,086 8,163 8,248 23,106 21,020 8,274 8,240 It is important to note that this independent community pharmacy industry represents 38 percent of all retail pharmacies in the U.S. and a $88.5 billion marketplace Independents Traditional Chain Supermarket Mass Merchant 2011 Other notable characteristics about independent community pharmacies: + Over 55 percent of independent community pharmacies are located in an area with a population of less than 20, In 2011, 13.8 percent of independent community pharmacies had total sales over $6.5 million, 30 percent with sales between $3.5 and $6.5 million, 19.2 percent with sales between $2.5 and $3.5 million, and 37 percent with sales under $2.5 million. Pharmacy Staff Positions Table Non-owner pharmacists Technicians Drivers n/a.75 n/a Other positions Total non-owner employees Working owners pharmacists and other positions Total workforce 10.7 FTE Employees 10.6 FTE Employees 1955: There were 67,000 full-time pharmacists 10.3 FTE Employees + The majority (60 percent) of independent community pharmacies are orga- The Independent Community Pharmacy Marketplace 9

12 2011 Retail Pharmacies by State Legend c Traditional Chain S Supermarket M Mass Merchant I Independent Hawaii c 61 S 8 M 26 I 98 California c 2141 S 636 M 573 I 2137 Washington c 331 S 249 M 196 I 352 Oregon c 137 S 132 M 185 I 153 Nevada c 176 S 104 M 80 I 78 Idaho c 52 S 48 M 49 I 124 Utah c 66 S 78 M 86 I 207 Montana c 29 S 40 M 40 I 120 Wyoming c 10 S 27 M 31 I 47 Colorado c 185 S 265 M 149 I 169 North Dakota c 29 S 0 M 0 I 124 South Dakota c 26 S 13 M 32 I 106 Nebraska c 97 S 30 M 67 I 236 Alaska c 5 S 22 M 28 I 40 Arizona c 386 S 263 M 186 I 163 New Mexico c 77 S 52 M 66 I 101 Texas c 1308 S 740 M 611 I 1574 Puerto Rico c 165 S 0 M 56 I 802 Virgin Islands c 0 S 0 M 2 I 17 Northern Mariana Islands c 0 S 0 M 0 I 4 Guam c 0 S 0 M 1 I NCPA Digest Sponsored by Cardinal Health

13 Figure 3 Vermont c 59 S 20 M 5 I 41 Maine c 115 S 63 M 29 I 71 Kansas c 128 S 66 M 106 I 292 Oklahoma c 171 S 38 M 136 I 452 Minnesota c 258 S 117 M 193 I 356 Iowa c 213 S 19 M 119 I 341 Missouri c 290 S 154 M 201 I 541 Wisconsin c 316 S 57 M 172 I 410 Arkansas c 60 S 65 M 158 I 427 Louisiana c 315 S 103 M 157 I 517 Illinois c 1015 S 181 M 357 I 700 Mississippi c 143 S 48 M 170 I 395 Michigan c 774 S 171 M 361 I 976 Indiana c 506 S 162 M 211 I 239 Tennessee c 428 S 226 M 251 I 553 Kentucky c 276 S 110 M 143 I 507 Alabama c 345 S 122 M 183 I 587 Ohio c 871 S 328 M 374 I 558 West Virginia c 183 S 52 M 63 I 214 Georgia c 702 S 428 M 274 I 725 New York c 1633 S 304 M 224 I 2215 Pennsylvania c 1100 S 368 M 281 I 1012 Virginia c 568 S 294 M 225 I 371 North Carolina c 800 S 162 M 261 I 698 South Carolina c 393 S 153 M 143 I 349 Florida c 1551 S 932 M 502 I 1309 New Jersey c 736 S 284 M 133 I 709 Maryland c 379 S 224 M 119 I 369 Massachusetts c 656 S 128 M 94 I 212 Connecticut c 313 S 90 M 61 I 161 Washington, D.C. c 63 S 19 M 1 I 38 New Hampshire c 130 S 42 M 39 I 41 Rhode Island c 129 S 19 M 13 I 29 Delaware c 120 S 18 M 17 I 20 Source: NCPA analysis of NCPDP data and NCPA research The Independent Community Pharmacy Marketplace 11

14 nized as a small corporation, followed by 20 percent that are a C corporation. Fifteen percent are organized as a limited liability corporation (LLC). + The average independent community pharmacy is open six days a week and 55 hours per week. (See Table 1.) Average Hourly Wages FIGURE 4 + Independent community pharmacies are attempting to control payroll costs in a myriad of ways. In 2011, independent pharmacy owners on average employed 10.3 full time equivalents (FTE) per location, similar to (See Table 3.) $49.60 $50.45 $52.43 $53.39 $ Hourly wages for staff pharmacists and technicians continued to decrease in Staff pharmacist wages decreased to $52.89 and pharmacy technician wages decreased to $ Clerk/cashier wages increased by 19 cents per hour to $9.93. (See Figure 4.) + The 2012 Digest pharmacy s cost of dispensing for all pharmacies is $12.19, down from $12.44 last year. + During these difficult economic times, independent community pharmacists continue to help patients lower their costs through encouraging the appropriate use of generic drug products, which are less expensive than their brand counterparts. As shown in Figure 5, generic dispensing increased again in 2011 to 76 percent of total prescriptions. A majority of prescriptions are for chronic conditions, indicating the importance of medication adherence $12.88 $13.24 $13.47 $13.70 $8.95 $9.05 $9.97 $ Pharmacist Technician Clerk 2010 $13.62 $ Percentage of Generic Prescriptions Dispensed FIGURE % 65% 69% 72% 76% 0% 20% 40% 60% 80% NCPA Digest Sponsored by Cardinal Health

15 Patient Care Services Independent community pharmacies are an easily accessible health care provider specializing in high quality patientcentered care. One of the hallmarks of independent community pharmacy has long been the services to which patients have access and receive in the pharmacy. As Medicare Part D continues to be a factor, community pharmacists are positioned best to provide medication therapy management services to patients, and the data indicate that 61 percent of independent community pharmacies are reimbursed for MTM services under Medicare Part D. (See Table 4.) As shown on the following pages, independent community pharmacists continue to offer patient care services and find niches to serve their communities. Medication Therapy Management Table 4 Percentage of pharmacies receiving MTM reimbursement under Medicare Part D % 60% 61% Medication Adherence Table 5 Offer an adherence program 50% Counseling 39% Phone-call or text reminder 22% Compliance packaging 38% Motivational interviewing 15% Synchronized or coordinated refills 36% Other 4% Medication Therapy Management and Medication Adherence Medication therapy management (MTM) programs are designed to optimize the benefits of prescribed drugs, improve medication use, reduce the risk of adverse drug events and drug interactions, and increase patient adherence to prescribed regimens. Pharmacists the most accessible health care professional are ideally positioned to administer MTM programs for their patients in the community pharmacy. The Medicare Part D prescription drug benefit requires participating insurers to develop MTM programs for certain high risk beneficiaries. These programs may or may not involve community pharmacists. The number of independent Patient Care Services 13

16 Summary of Patient Care Services Offered FIGURE 6 Delivery 82% 76% 76% Highlights + The most offered service in 2011 was delivery, followed by compounding and durable medical equipment. These services have been in high demand among patients for the past three years. Additionally, these services provide a competitive advantage for independent community pharmacy. + Fifty percent of independent community pharmacists offer a medication adherence program. (See Table 5.) Over a third of the pharmacists provide synchronization of medication refills. Compounding Durable Medical Goods Patient Charge Accounts Assisted Living Schedule Patient Appointments Hospice 35% 37% 29% 34% 33% 35% 52% 48% 43% 66% 66% 67% 65% 69% 71% 64% 69% 68% + The percentage of pharmacies providing compounding services has remained almost constant at nearly 66 percent over the past three years. Long-term Care Conduct Patient Education Programs 28% 34% 36% 27% 33% 29% + As independents provide more prescriptions to Medicare beneficiaries, they are also offering more services to the elderly. Compared to 2010, more community pharmacists are providing services to assisted living facilities and hospice. community pharmacies offering MTM services as well as the percentage of independent community pharmacies receiving reimbursement for their services from Medicare Part D providers remains stable compared to last year. Ostomy Health Screenings Pain Management Home Infusion 0% 3% 4% 3% 11% 13% 14% 19% 23% 25% 20% 24% 22% 22% 40% 60% 80% Independent community pharmacists are promoting medication adherence. Improving medication adherence is critical in today s health care system NCPA Digest Sponsored by Cardinal Health

17 Summary of Disease State Management Services FIGURE 7 Immunizations 60% 58% 55% Blood Pressure Monitoring 50% 46% 58% Diabetes Training 44% 48% 49% Smoking Cessation 12% 22% 18% Asthma Management 11% 14% 12% Lipid Monitoring 9% 13% 11% Weight Management Cancer Awareness Monitoring Osteoporosis HIV/AIDS Services Anticoagulation Monitoring 7% 8% 6% 5% 8% 9% 5% 5% 5% 4% 5% 5% 9% 12% 11% 0% 10% 20% 30% 40% : Immunizations 21% 50% 80% as the majority of prescriptions are for chronic conditions. Studies have shown that patients who are adherent to their medication therapies are more likely to have better outcomes. Fifty percent of independent community pharmacists offer a medication adherence program. These pharmacists are counseling patients, sending text reminders, calling patients, and providing other tools to improve medication adherence among their patients. (See Table 5.) Disease State Management As pharmacists adopt practice models that include patient care services, they also provide disease state management services. Many independent community pharmacists offer generalized MTM services as well as specific patient care services for patients with certain disease states. Numerous studies have documented that pharmacist intervention can significantly reduce overall health care costs in patients with diabetes, heart Patient Care Services 15

18 Pharmacist Interactions with Other Health Care Professionals Discussion with Physician or Other Health Care Professional Regarding Patient s Drug Therapy FIGURE Highlights + The top three disease state management services offered are immunizations (60%), blood pressure monitoring (58%), and diabetes training (44%). (See Figure 7.) These reflect the increased prevalence of diabetes and cardiovascular disease and the emphasis on wellness and public health. + To provide these services, a pharmacist is often required to use sophisticated medical equipment to measure and monitor the patient condition. Thus, a majority of pharmacists bill separately for lipid monitoring, immunizations, osteoporosis services, MTM, and asthma management. Pharmacists bill both patients and third-party providers, charging based on service provided, time needed to perform the intervention, and value of service Times per Day Pharmacist Interactions with Other Health Care Professionals Percentage of Pharmacists Offering Recommendation for Brand to Generic Drug Change % % 83% 80% % 81% FIGURE 9 0% 20% 40% 60% 80% 100% Pharmacists Recommending to Health Care Provider Recommendation Accepted + It is important to note that the number one service offered is immunizations, highlighting the public health role of pharmacists. disease, asthma, and other chronic conditions. Moreover, pharmacists can play a significant role in improving public health by promoting cancer awareness, educating patients about the dangers of smoking, and promoting immunizations. Independent community pharmacists continue to lead the industry by providing these valuable services regularly and nationwide, as shown in Figure 7. Interactions with Other Health Care Professionals The independent community pharmacist is a vital link between the patient and the entire health care system. Pharmacists fulfill a major need in most communities because of the unique accessibility and the knowledge about medications that these professionals possess and share with their patients. As pharmacists are engaged in providing patient care services and helping patients obtain needed medications at an affordable price, it is important that they communicate with physicians and other health care professionals. Often the pharmacist is the health care provider that is helping the patient understand their prescription benefit design and facilitating compliance with its requirements. Additionally, it is the pharmacist who is often seeing the entire medication profile of a patient and using his/her expertise to determine safety and appropriateness of each prescription. Thus, it is important that pharmacists, physicians, and patients interact. Fortunately, physicians and NCPA Digest Sponsored by Cardinal Health

19 Highlights + Independent community pharmacists consult with physicians or other health care professionals about eight times daily regarding prescription drug therapy. (See Figure 8.) Pharmacists continue to intervene and contact prescribers to make recommendations and improve medication therapy for their patients. + Approximately 94 percent of independent community pharmacists recommend brand to generic drug changes when appropriate to other health care professionals. (See Figure 9.) Eighty-three percent of these recommendations were accepted by other health care providers and a change to a less expensive generic medication was made. + When independent community pharmacists recommend therapeutic changes to prescribers, 71 percent of the recommendations are accepted. (See Figure 10.) + The consistent trend of therapeutic recommendations being accepted by physicians and other health care professionals demonstrates that pharmacist recommendations are highly valuable and trusted by other health care professionals. other health care providers continue to trust and value the recommendations offered by independent community pharmacists. Pharmacists fulfill a major need in most communities because of the unique accessibility and the knowledge about medications that these professionals possess and share with their patients. Patient Care Services 17

20 Pharmacist Interactions with Other Health Care Professionals Percentage of Pharmacists Offering Recommendation for Therapeutic Interchange FIGURE 10 Long-Term Care Services Independent community pharmacists play an important role in caring for the nation s 40.2 million seniors. They provide pharmacist care for seniors in nursing homes, assisted living facilities, hospice, and home-based care. They also provide many specialty services for seniors such as nutrition assessment and support, intravenous therapy, durable medical equipment, ostomy, and pain management. By thinking innovatively, independent community pharmacists provide needed services and improve their business financially % 71% % 73% % 71% 0% 20% 40% 60% 80% 100% Pharmacists Recommending to Health Care Provider Recommendation Accepted Highlights + In 2011, the number of pharmacies that service at least one type of long-term facility remained similar to 2010 at 52 percent. Long-Term Care Beds Served Per Facility Table 6 Type of Facility Avg. # of Beds in 2011 LTC facility 90 Assisted living Assisted daily living is the most offered long-term care service offered by independent community pharmacies. A pharmacy services on average 120 assisted living beds. (See Table 6.) + Twenty-eight percent of independents service a long-term care facility, occupying on average 90 beds. (See Figure 11 and Table 6.) Percentage of Long-Term Care Services Offered (By Type of Facility) Assisted Daily Living Hospice 34% 33% 31% FIGURE 11 52% 48% 43% LTC Facility 28% 34% 36% NCPA Digest Sponsored by Cardinal Health

21 Technology Trends In order to remain competitive in today s marketplace, the use of technology in independent community pharmacy practice continues to increase. More and more, independents are taking advantage of emerging technologies to enhance pharmacy efficiency, reduce costs, improve patient care, and facilitate communications with health care providers and patients. Percentage of Pharmacies Utilizing Workflow Technology FIGURE 12 Point of Sale Telephone IVR 41% 39% 47% 72% 73% 81% Highlights + The number of Digest pharmacies with a store website increased to 78 percent. Seventy-two percent of those with websites allow for patients to submit refill requests via the site. Automated Dispensing Counter Automated Dispensing System 22% 24% 23% 30% 31% 38% + Independent community pharmacies indicate that they are connected for electronic prescribing, with 24 percent of their prescriptions received electronically. In 2010, 15 percent of prescriptions were received electronically. This trend in community pharmacy reflects the national trend of more physicians adopting e-prescribing practices. (See Table 7.) 0% 10% 20% 30% 40% 50% % 70% 80% + Independent community pharmacists continue to embrace workflow technology to improve their effectiveness and efficiency. Eighty-one percent of pharmacies use point-of-sale technology. (See Figure 12.) Technological Capabilities: Electronic Prescribing Table Percent of prescriptions received electronically 12.2% 15% 24% Technology Trends 19

22 Third-party Prescriptions The most significant external pressure on the business of independent community pharmacy is third-party prescription coverage and the corporations that administer drug coverage, pharmacy benefit managers (PBMs). For community pharmacies, public and private third-party payers dictate prescription drug reimbursement payments and introduce additional operational and financial challenges to the pharmacy. For example, forcing patients to use a mail-order pharmacy for their prescription refills rather than the community pharmacy hurts patient care as well as impacts the financial performance of a community pharmacy. For most community pharmacies, achieving a functional and fair working relationship with third-party payers is essential to attain long-term profitability and overall business survival. Summary of Third-Party Prescription Activity FIGURE % 20% 40% 60% 80% Non Third-Party Other Third-Party Medicare Part D Medicaid 2003: For the first time, consumer out-of-pocket expenditures on prescriptions fall below public funding on prescriptions 100% + Eighty-seven percent of prescriptions are covered by third-party contracts 49 percent are covered by government programs (Medicare and Medicaid), which is up 3 percent from last year. (See Figure 13.) + Implemented in January 2006, Medicare Part D now covers approximately 32 percent of prescriptions filled and Medicaid covers 17 percent of prescriptions filled in the average independent community pharmacy. With Highlights nearly half of the prescriptions filled by independents being paid for by a government program, the reimbursement strategies of government programs significantly affect the financial viability of independent community pharmacy. + The average gross margin percentage paid by Medicaid, Medicare, or a private third-party usually ranges from 18 to 20 percent. Independent community pharmacies must be selective in accepting or rejecting third-party contracts. + Thirteen percent of prescriptions are paid by cash customers, indicating that there is a significant portion of patients who depend on independent community pharmacists to work with them and their physician to identify the most cost-effective, affordable medication therapy. This increased number of cash prescriptions may reflect the economic situation in the United States. With the current economic status, it is not surprising that there are more cash prescriptions and fewer overall prescriptions being filled NCPA Digest Sponsored by Cardinal Health

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24 Hartig Drug Company Dick Hartig Dubuque, IA In 1904, St. Louis was host to the Olympic Games and the World s Fair. At the fair, organizers proclaimed Oct. 14 as Druggist Day. And 300 miles up the Mississippi River in Dubuque, Iowa, A.J. Hartig, 22 years old, opened his first pharmacy on the corner of 1st and Locust streets. Returning from World War II, A.J. s son Ken, a Drake pharmacy graduate led the company until his untimely death in 1973, when Dick, in his final year of pharmacy school, made the decision to return home and take the reins of Hartig Drug. Many believed that I was too young, too inexperienced and hence a long shot at continuing the legacy that had become Hartig Drug, Dick Hartig says. Looking back, I never really considered nor embraced failure. All I knew was I had some good ideas and boundless energy coupled with a passion for pharmacy. No money.just passion. Fast forward to today, as Hartig is America s second oldest continuously operated independent family drug company with 16 traditional pharmacies, a home health care store, two long-term care pharmacies and a PBM. I still get DEMOGRAPHICS Dubuque, Iowa Total Population 56,637 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 84.9 percent Bachelor s Degree or Higher 23.3 percent Graduate or Professional Degree 7.7 percent Household Income (Median 2009) $40,680 Source: city-data.com up in the morning fired up about helping people navigate toward their improved health, Hartig says. I have never shied away from adopting new ideas, specifically as it relates to pharmacy. Hartig Drug stores are full line stores offering complete neighborhood-centric services such as photo, post offices, immunizations, compliance packaging for the elderly, and a large selection of merchandise. We want our patients to stay in the neighborhood, Hartig says. So many of our most recent product offerings are convenience foods, staples like bread and milk, unique quality gift items, and niche products you won t find at the national chains. If anything, I stress to our team that being different is usually a good thing. Hartig Drug s recent successes include a Rewards program that continues to enroll thousand of customers each month. Loyalty is not something we ever take for granted. We need to continue to earn folks business every day, Hartig says. Another differentiator is Hartig s passion for volunteerism and philanthropy. He and his company have received countless awards for their sponsorships, volunteer activities, and community involvement. It s pretty much a given that you can count on Hartig Drug to step up to the plate when the door bell rings. I expect it, because that s who we are, a team player. The next chapter in Hartig s history is unwritten, but Dick and Brenda have two sons, Charlie and Wes who are currently employed in the health care and finance industries. Will the legacy continue? Only time will tell NCPA Digest Sponsored by Cardinal Health

25 Katterman s Sand Point Pharmacy Beverly Schaefer and Steve Cone Seattle, WA How many people can claim that their current position is truly the only pharmacy job they ever had? That is exactly what Beverly Schaefer, part-owner with Steve Cone of Katterman s Sand Point Pharmacy in Seattle, says with pride. Starting out as a delivery girl for Katterman s, Beverly worked her way through pharmacy school as an intern and was hired on full time upon graduation. Schaefer worked as a pharmacist and then store manager for 15 years. However she had little thoughts about store ownership at that time. In 1996, owner Beverley Katterman was ready to sell. Cone and Schaefer both shared a very similar career path and experience at Katterman s and they entered into a partnership. Since then, Katterman s Sand Point Pharmacy has continued to flourish and be a staple in the community. Katterman s has a long tradition of listening to its patients and providing services that are valuable for their customers in addition to filling their scripts; the journey started with immunizations. In 1996, everyone got their flu shots at their doctor s office. Washington was DEMOGRAPHICS Seattle, Washington Total Population 608,660 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 89.7 percent Bachelor s Degree or Higher 47.2 percent Graduate or Professional Degree 17.3 percent the first state in the country that promoted immunizations by pharmacists. Katterman s Pharmacy decided to venture where no pharmacy had been before. A special area was constructed in the pharmacy for administering immunizations and the goal for year one was 300 shots. In the first month alone, 1,200 shots were administered. Following the success of the flu vaccine program, Katterman s expanded its offering into other immunizations, including travel, and doctors began referring patients to the store. During the H1N1 outbreak, 7,000 immunizations were given in just five weeks. Patients have also identified additional services that would help them stay healthy. In response, activities were added to the pharmacy offerings. As a result of patient requests, Katterman s started by offering cholesterol and diabetes tests. In 1997, Katterman s invested in a bone density X-ray machine and became one of the first pharmacies in the nation to perform tests in its store. With the rapid growth of the baby boomer generation combined with a successful marketing plan, the large investment was completely paid off in only 13 months. Genomic testing and pharmacist prescriptive authority are two areas of patient care services currently being studied for possible continued pharmacist role expansion. Katterman s passion to serve the community and its drive to enhance patient care is inspiring and keeps customers coming back generation after generation. Household Income (Median 2009) $60,843 Source: city-data.com Pharmacy Profiles 23

26 Western Maine Pharmacy Audrey Parks KINGFIELD, ME There s an old saying, Good things come to those who wait. But as Audrey Parks can attest, sometimes you can skip the waiting part and go directly to the good things. In May 2011, Parks graduated, receiving her PharmD degree from the University of Rhode Island College of Pharmacy. Six months later, with some help from new husband Chris, she was the sole owner of Western Maine Pharmacy in Kingfield, Maine, about 100 miles north of Portland. For many newly minted pharma- cists, independent ownership is a goal that seems somewhere in the distant future. When Parks saw an opportunity to accelerate the process, she wasn t going to waste any time. I knew I wanted to do it someday, she says, and added, I m going to do it eventually, so I might as well do it now, when I m used to living off a student wage. I might as well do it before I adjust my lifestyle in any way. Even though Parks says, I didn t really know where I would end up when I was in school, she knew that whatever DEMOGRAPHICS (Franklin County Kingfield, Maine) Total Population 29,735 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 89.3 percent Bachelor s Degree or Higher 28.1 percent Graduate or Professional Degree 6.8 percent Household Income (Median 2009) $38,637 Source: city-data.com happened, she would be prepared. One step in that direction was attending the February 2010 NCPA Ownership Workshop in Dallas. Later that same year, she saw the Good Neighbor Pharmacy Pruitt-Schutte Student Business Plan Competition at the NCPA Annual Convention in Philadelphia as another opportunity to gain an additional skill set. Unlike other schools that entered the competition, Parks was a team of one. I couldn t get anyone else in the school to do it, so I did it by myself, she says. Despite going solo, she placed in the Top 10. Parks says that Western Maine Pharmacy is small but efficient. She says the front end covers about 200 square feet and carries health-related items. The rest of the space consists of the pharmacy section, an office, and a break room. Looking back on the past few years, Parks is glad she put in the time to learn about owning and operating a pharmacy, giving her the opportunity to practice her profession on her own terms. I like the business aspect, but at the same time I didn t go to pharmacy school because I like business, Parks says. I went to pharmacy school because I like pharmacy. The original version of this article appeared in the May 2012 issue of America s Pharmacist. NCPA members can access the article at NCPA Digest Sponsored by Cardinal Health

27 Diamondback Drugs Michael Blaire PHOENIX, AZ As a compounding pharmacist specializing strictly in veterinary medications, Michael Blaire, RPh, knows that he is treating a completely different animal. Or, to be more accurate, many different animals. The most interesting thing about the practice is that every day is a new adventure. You just never know when the phone rings what s going to be on the other end, says Blaire, owner of Diamondback Drugs in Phoenix. One morning I get a call from the San Diego Zoo asking if I can make a flavored suspension of a certain drug for an African eland. I didn t know what the heck an African eland was. So my first question was, Well what is that? (It s a type of antelope.) Assisting in the health care for all creatures big, small, (and somewhere in between) has allowed Diamondback Drugs to grow steadily since it opened in October Blaire started the pharmacy with business partner Rory Albert, RPh, and they now oversee a staff of some 50 employees. Blaire says that Diamondback is licensed in every state that requires non-residency pharmacy licensure, and has accounts in all 50 states. About 90 percent of its total prescriptions are compounded. He says he is somewhat amazed at the increasing scope of the business in the last decade, which has made him something of a Dr. Doolittle among compounding pharmacists. The whole pet demographic has changed over the last 15 years or so, Blaire says. Owners are more demanding. Pets are no longer considered property. People are not afraid to spend money on their pets. It s not unusual for us to fill a prescription from a vet oncologist that might be $ per month for the pet owner. And they don t bat an eye about it. Not surprisingly, he adds, The owner demographic is wonderful. Blaire says that working and building relationships with animal health care providers around the country and the world has solidified the pharmacy s reputation as reliable partner that can help provide solutions. We ve kind of gotten a reputation in the industry as the go to guys, Blaire says. If something is not available, call Diamondback and we ll figure out a way to make it for you. DEMOGRAPHICS Phoenix, Arizona Total Population 1,445,632 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 76.7 percent Bachelor s Degree or Higher 22.7 percent Graduate or Professional Degree 7.6 percent Household Income (Median 2009) $47,085 Source: city-data.com The original version of this article appeared in the February 2012 issue of America s Pharmacist. NCPA members can access the article at Pharmacy Profiles 25

28 Remedies Pharmacies Justin & Keri VanCampen Lakeside, MT If you are looking to illustrate the phrase sparsely populated, Montana fits the bill. At more than 147,000 square miles, it is the fourth-largest state by area in the United States, but 44th in population with 998,000. The state has 6.8 residents per square mile, compared with 1,189 for New Jersey, the most densely populated state. In places such as Montana, telepharmacies serve an important health care function, says Justin VanCampen, who with wife Keri own four pharmacies in the state (all under the Remedies business name). For a lot of people it s a 120-mile round trip to the nearest pharmacy, says Justin, a 1999 University of Montana pharmacy graduate. The nearest specialist might be 100 miles away one way. Having a pharmacy presence in the community allows them to get their antibiotics or other medications right away. The telepharmacies are staffed by technicians. When patients enter they are directed to a private consulting area with a two-way video monitor and phone link. Justin says he can ask patients about any health issues or if they have any questions about their medications. DEMOGRAPHICS (Flathead County Lakeside, Montana) Total Population 89,624 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 87.4 percent Bachelor s Degree or Higher 22.4 percent Graduate or Professional Degree 7.6 percent Household Income (Median 2009) $46,435 Source: city-data.com Keri manages the business side of the pharmacies. ( I kind of keep the gears running. ) She says each of the telepharmacies have a variety of front-end offerings, targeted toward the local area. Three of the Remedies businesses owned by the VanCampens are telepharmacies. They are in the process of opening a fourth location which will be a traditional retail entity in Lakeside, in eastern Montana. The other three are spread out throughout the state in Chester, Harlowton, and Three Forks. The VanCampens bought their first pharmacy in 2008, through Live Oak Bank, a North-Carolina-based business specializing in pharmacies. Keri went online, provided some general information, and within hours was contacted by Ed Webman, RPh, senior loan officer and a former pharmacy owner. According to VanCampen, Webman said, It sounds like a great deal. Having been brushed off by so many other banks, it seemed too good to be true. She replied, Okay, but what s the catch? When is the other shoe going to drop? I m ready for it so just hit me now. Fortunately for the VanCampens there was no catch. They were able to get their loan and now concentrate on serving their communities. They say they are fortunate to have dependable people helping run their far-flung pharmacies. I think that s the benefit of the nature of our small business mindset we have trained staff that we have employed for a while and they are great about helping us operate our business remotely, Justin says. That s one of the benefits of small towns; we can employ small town people who know how it works and provide good customer service NCPA Digest Sponsored by Cardinal Health

29 Sullivan s Pharmacy and Medical Supply Greg Laham Roslindale, MA Sullivan s Pharmacy and Medical Supply in Roslindale, Mass., is celebrating its centennial anniversary in The pharmacy operated under two separate owners before being purchased by current owner Greg Laham. Prior to buying Sullivan s, Laham graduated from Massachusetts College of Pharmacy and earned the honor of being the youngest store manager for Stop & Shop Supermarket Co., where he says he gained invaluable business experience and learned how to collect money. Laham adds, One of the skills pharmacy schools don t teach well is how to run a business, especially if you are interested in independent pharmacy. Laham s business sense told him that he had to move out of its existing location for his pharmacy to grow and remain successful. In 1984, Sullivan s Pharmacy and Medical Supply moved into a 7,000-square-foot building. Originally, the space was too large for their volume and the building was split between pharmacy and physicians. As the business began to grow, the surrounding shopping district also began to flourish. Thus, the creation DEMOGRAPHICS (Sussex County Roslindale, Massachusetts) Total Population 35,547 (2010) EDUCATION (FOR POPULATION AGE 25 AND OLDER) High School Grad or Higher 78.9 percent Bachelor s Degree or Higher 35.6 percent Graduate or Professional Degree 15.3 percent Household Income (Median 2009) $55,979 Source: city-data.com of the Roslindale Village Main Street organization, focusing on economic development, design, and marketing and promotions. Leham served as president on the volunteer, non-profit organization aimed to make Roslindale Village an appealing destination and the dynamic center of the community. As Sullivan s continued to be seen as a trusted health care destination in the community, Laham anticipated a need for long-term care services for his aging parents. In the late 1980s, LTC was on the cutting edge and those positioned in the space were destined for success. Laham hired staff specifically for LTC and had to build another 3,000-square-foot pharmacy in the basement of the facility. Today, Sullivan s has amassed 7,000 square feet of pharmacy in the basement alone, another 3,500 square feet on the main floor, and employs more than 100 people in the building: 20 employees are focused on retail, 45 on LTC, seven on compounding, and 25 for DME, along with 15 delivery trucks. Laham attributes Sullivan s growth and continued success to three main areas of focus: + Family-like ties to the community and heavy involvement with local politics + An investment in people hiring students who interned with Sullivan s + A close relationship to their pharmaceutical wholesaler Cardinal Health Laham and his staff at Sullivan s have a passion for community pharmacy and they continue to push the envelope with innovative ways to serve their patients. Pharmacy Profiles 27

30 Notes NCPA Digest Sponsored by Cardinal Health

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32 100 Daingerfield Road Alexandria VA