Independent Pharmacy Gives Main Street American Service
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In the last independent pharmacy in Lexington, Massachusetts, the pharmacists know most customers by name.
“We know our customers by face rather quickly and by name soon after that,” said Chris Venier, 64, owner of Theatre Pharmacy in Lexington, MA.
“In this new era of chain pharmacies and mail order prescriptions, Theatre Pharmacy is still a place where personal service is a way of life. The sign in the window say it all ‘Traditional Service and Low Prices,’” Venier said.
This pharmacy is Main Street America where Ted Williams frequented the soda fountain or came in for a quart of vanilla ice cream.
Theatre is a family pharmacy. In 1935, Venier’s father, Ettore P. Venier, R. Ph. opened his own pharmacy when he couldn’t find a full time job. “Throughout the Depression years, the store prospered, even in competition with seven other pharmacies in town,” said Venier. “And we are the last one standing.”
After World War II many of Lexington’s young adults came back to their hometown to start families. They returned to Theatre Pharmacy with their own children and introduced the third generation of customers. Today many of those children are adults raising families in Lexington and returning to the pharmacy of their childhood.
The store has had three locations within the same block of Massachusetts Avenue. With each move it added floor space. In the second location, where the current stationary store is, Venier remembers the soda fountain of his youth. In 1952, at age of 12, he started working after school, wearing a white coat, scraping gum off the stools and serving up sodas. The store then represented its time with a tobacco counter, candy counter with jars of candy purchased by weight, and the pharmacy counter as well.
In 1962 Chris Venier graduated from Massachusetts College of Pharmacy and went into business with his dad. Venier said he had the ideal situation with his dad at the helm until Chris turned 28, and in 1968 he took over the business.
“He was a tremendous mentor. He really believed in service and did a great job of teaching me. I was very lucky to get to work with him,” said Venier. The elder Venier worked part time with his son until he retired completely in 1975. Older customers might remember both father and son working together.
Now Theatre competes with two chain pharmacies in town: CVS and Walgreen’s.
The chains sell some drugs at a discount, others at higher prices than Theatre according to Venier. The two chains negotiate complex reimbursement deals with the pharmaceutical and insurance companies that the independents cannot broker. However, the independents are fighting to equal the playing field with legislation that would allow them to “to negotiate terms and conditions of insurance contracts collectively” thus improving their bargaining power for price breaks equal to those the chains receive.
The customer gets a different feel from each store. Walgreen’s is the largest in square feet and has its own parking lot. The automatic doors open into ten, double length aisles of non-drug items with everything from laundry baskets, to sneakers, to hair coloring and makeup to canned food and fake houseplants. The pharmacy counter lines the back wall of the store and is not visible from the entrance.
CVS is the second largest in floor space of the three. Automatic doors open into eight long aisles with one devoted to over-the-counter medicines and the rest to makeup, hair products, seasonal items (like Easter candy or beach buckets), food, clothing, and photography. The pharmacy counter is at the back of the store, and many customers come in and out from the back parking lot without ever passing through the front aisles.
Theatre is the smallest of the stores by at least half. When the customer pushes open the front door, she sees six short aisles that are five feet high. The pharmacists are visible as well. The back wall of the pharmacy counter is actually visible from the sidewalk. The front of the store is completely windows which makes it the lightest of the three stores. It carries specialty items like English soap and hairbrushes, bath salts and tortoise shell hair clips but no makeup. Half of the aisles are devoted to over-the-counter medication, and there are no clothes, grocery items or lawn chairs.
Massachusetts has 180 independent pharmacies as compared to 862 chain pharmacies.
“This number has held steady for the past few years,” said Todd Brown of Northeastern University and the Executive Director of the Massachusetts Independent Pharmacist Association. Across the country there was a loss of 1001 independent pharmacies and a gain of 3,376 chains between 1999 and 2003. Thinking ofLexington as a typical small town, there were eight pharmacies between 1942 and 1970. All were independent. Today there is one independent and two chains.
Venier said the crossroads for Theatre Pharmacy’s survival came in 1970 when the first discount chain stores began. CVS came first to Lexington in 1975; there are now 322 in Massachusetts and close to 5,375 nationwide. Walgreen’s started in Lexington (starting as MediMart and changing to Walgreen’s) around 1980 and has 100 stores in Massachusetts and almost 4,500 nationwide.
In 1971 Venier and his best friend and pharmacist, Dick Davidson owner of nearby Bedford Pharmacy, discussed the impact of these new stores. “We agreed to cut prices by 15% to become competitive. Most independents didn’t change their pricing structure at that point,” said Venier who feels that contributed to those stores eventually closing. Venier and Davidson knew they gave better customer service, but they also knew they had to compete on price.
Venier said he frequently has offers that would pay him handsomely to sell his store to a chain. It has given him pause to think about what he wants to do, but he has other plans than selling to a chain. He can’t discuss them, but they keep the pharmacy in the same format after he retires. He also has no plans for immediate retirement. He said clearly that he did not encourage his two daughters to go into the business.
There is a difference in the services offered and products sold in the chain and the independent store, but they all have prescription drugs in common. For the independent store 80% of its profit is in the prescriptions and only 50 to 60% in chains. Reimbursement for prescriptions is the key, and insurance reimbursement is wide ranging. Traditionally American workers receives health insurance from their employer. In 1966 started the MediCARE Program for citizens over 65. MedicAID is federal insurance for the poorest citizens. Insurance payouts for prescription drugs are primarily through these two insurance methods private and public. Private insurance rates are determined by many factors and are regulated by each state’s insurance division. Federal insurance rates are determined by several federal agencies.
Health care costs have soared in the last thirty years. America paid more than 40% of the worlds $550 billion pharmaceutical earnings in 2004. The retail pharmacy in 1970 earned about a 17% profit on the prescriptions it filled; they now earn about 1-2% profit according to Chris Decker, Assistant Professor at University of Wisconsin School of Pharmacy.
As both private and government health insurance programs seek to control costs, the prescription cost has been targeted. There are several methods:
• Limiting which drugs can be prescribed (called a formulary of acceptable drugs)
• Requiring generic instead of name brands whenever possible
• Requiring mail order prescriptions or specific pharmacies where drug pricing has been negotiated
• Requiring higher co-pays for each prescription
• Using Pharmacy Benefits Managers (PBM’s) to negotiate prices of drugs.
PBM’s are now a “middle man” in the pricing war and are little understood by the politicians or the consumers. But this is where all retail stores, independent and chains, find a common threat.
The drug pricing structure is complex. There are several switch-and-bait schemes. The chain stores advertise lower prices, but in reality some are lower and some are higher according to Venier and other analysts of the industry. The larger threat to all retail stores is mail order. The PBM’s, said Venier, prefer mail order so they can control which drugs are used as well as receive huge rebates and discounts from the pharmaceutical companies because they can buy in volume. The PBM is a bidder for lower drug prices by making one purchaser out of all its customers, that is to say, insurance companies and employers. The major PBM’s are: Medco, Caremark Rx, Express Scripts. They all promote mail order business where they get their largest profit. With each purchase they also screen the customer eligibility and make electronic payments to pharmaceutical companies and to the stores. They also charge less for brand name drugs and more for generics, and none of the pricing is transparent to the customer.
Then they receive a fee factored into the price the manufacturer is charged, the store is charged and the customer is charged. General Motors uses this approach. The company allows their workers to fill prescriptions no more than twice a year at a retail outlet. The rest must be bought through designated mail order in order to receive reimbursement. United Teachers Federation in New York changed its rules in spring 2004 requiring its members to receive all chronic care medications from mail order. This change takes both the business from the pharmacies where these prescriptions have previously been filled and the customer’s freedom of choice.
Jane Franks, RN, 52, Head of School Health in Lexington MA, said “I think the best thing that ever happened to me as an individual was when mail order prescriptions came into being. I use the Blue Cross/Blue Shield mail plan for everything that can be planned ahead [chronic medications]. It is so efficient and cost saving that it kills me to have to go to a regular pharmacy for a prescription refill. Of course the co-pays have increased to $20 for a three month supply, but that is three times less than if filled monthly with a co-pay at a regular pharmacy. Everyone I know who has used this is thrilled,” said Franks.
Independent pharmacies have banded together in creative ways to form buying power that can compete with discount pricing only given to the largest buyers. IRxPlus a website supporting the independents and National Community Pharmacists Association is a national coalition of independents providing support, counter-lobbying efforts against the insurance companies and the pharmaceutical pricing structure and press work to keep the issues in the public eye. Venier said, “No one can see what is going on with pricing. The politicians don’t see it, AARP is trying to see it but cost is their man focus and the consumer is overwhelmed with details, which make the process impossible. The reason the PBM’s can get away with it is there is no light of day shining. The process is underhanded and slimy.”
Congress has a bill that would shed light on the prescription drug costs. It is the Community Pharmacy Preservation Act proposing three things:
• Reform antitrust laws to allow independent pharmacists” to negotiate terms purchasing terms at a collective price;
• Require that PBM’s be transparent in their contract negotiations to force them to disclose the true costs when arranging for drugs to be transferred from manufacturer to health care providers and others;
• Ensure recipients of the new Medicare prescription drug program have access to community pharmacists through established standards.
Venier said, “It is all about keeping open choice. It is a freedom of choice issue. Patients know what they need from their prescription source, and they should be able to choose without penalty.”
Lexington is a town full of academics and independent thinkers. Venier attributes some of his success to this local support.
“Lexington has been good to us. People here know there is a difference [in pharmacies] and they want to support the independent store unique to this town.”
There are some third generation customers whose grandparents were some of his father’s first customers. Small communities feel strongly about such connections. According to University of Wisconsin School of Pharmacy Professor, Betty Chewing, PhD, 58, there are places where the smaller towns want to connect with the pharmacist as part of their health care team. She serves as a resource to independents that want to improve their unique community relationship. Jim Neuhauser, R.Ph., at Newhauser Pharmacy in Madison is one of her clients who owned the pharmacy started by his father in the 1930’s. Neuhauser retired and sold to a partner but talks fondly of old days, the connection to customers, the special support and education they have given over the years.
“People come to us because we are right here in their neighborhood. They can ask us questions they have about their conditions and their medications. He knows his customers well, and he has been able to prevent problems and solve others by knowing their histories.
Health care providers see pharmacies in various ways. Consumers do also. According to Eileen Kahan, MD, 60, psychiatrist in Lexington, Masschusetts, who provides medication consultation, the independent pharmacy is more likely to be in touch with her. “They will call quickly with any questions, explain any patient confusion I might have missed and generally act as a patient advocate in billing, refill timing and the like.”
Frank has a mixed view.
“I have always been amazed at the continued success of a neighborhood pharmacy right in Lexington Center and that it has not been pushed out….My mother in law lived here and always used the local family owned pharmacy, Theatre Pharmacy. They knew her by name, would call her MD when she was in need of a new prescription refill, explained everything to her personally and really functioned in what we would think as nurses was the patient friendly way. They also made sure that they submitted for reimbursement and did not expect her in her 80’s to do it.”
A number of customers at Theatre expressed similar feelings.
Venier explained the difference about his store.
“We know our customers, we know their histories and their families and their ups and downs. We deliver to their homes when they need us to. They trust us to help them and to teach them about what they are taking. They ask us to help with reimbursement confusion. We are their neighbors, and we are at their service. They feel taken care of here; and they are.”
Carole Ferguson RN, C-PNP is a pediatric nurse practitioner turned journalist and can be reached at email@example.com
The Theater Pharmacy soda fountain sometime in the 1950s.
HISTORY OF TWO CHAIN PHARMACIES
CVS History: The current mission statement of CVS is to “be the easiest pharmacy retailer for customers to use.”
The Consumer Value Store (CVS) began in 1963 in Lowell, MA, selling beauty and health products.
Four years later it added its first pharmacy.
By 1970 it had 100 stores in New England and the Northeast.
By 1980 it was the 15th largest pharmacy chain.
In 1990 it acquired 500 People’s Drug chain stores moving into the mid-Atlantic area.
In 1994 CVS started its pharmacy benefits management company (a PBM) that provides prescription drug management to large employers and insurance companies.
Moving to the Midwest and Southeast, CVS bought 2,552 Revco pharmacy stores in 1997. A year later it acquires 207 Arbor Drugs in Michigan, and Tom Ryan is named the third CEO in the history of the company. He began as a pharmacist working for CVS in 1978.
The company continued acquisitions into the West and North with 2004 bringing 1,260 Eckerd Stores and PBM/Mail-order business.
It is now the leading pharmacy retailer in the U.S with more than 5,000 retail stores.
CVS Innovation Grants are a three-year $75,000/year award to public schools to promote innovative thinking in teaching. These grants started in 1995 and are given to 12 schools each year.
In 1901 Charles R. Walgreen Sr. purchased the Chicago drugstore where he worked as a pharmacist. He was an energetic innovator whose ideas led to the expansion of his store with such ideas as manufacturing his own line of drug products to ensure quality and price control.
His store also had the customary soda fountain and credits itself with the “invention of the milkshake in the early 1920’s.”
In the 1950’s, Walgreen’s introduced the change from clerk-service to self-service.
In the 1960’s it filled more prescriptions than any other chain pharmacy and introduced child-resistant containers long before required by law.
1981 it began connecting all its pharmacies by satellite.
The 1990’s brought the drive-thru pharmacies and the expansion of the food sections for the “pick-up-a-loaf-of-bread customer”.
The one-hour photo development services were in 98% of their stores.
In 1999 they started their online pharmacy adding the Mayo Clinic Health Information for customer information.
As of January 2005 it leads the chains in sales with $39.4 billion to CVS’ $31.3 billion but came in second to CVS in number of stores (4,714 to CVS’ 5,372). Fortune Magazine ranked it as a “Most Admired Corporations in 2004” in the food and drugstores.