Independent pharmacies still outnumber chains, but say they're hurt by declining reimbursements

Independent pharmacies still outnumber chains, but say they're hurt by declining reimbursements

December 6th, 2015 by Tim Omarzu in Business Around the Region

File photo by Angela Lewis /Times Free Press.

Photo by Contributed Photo /Times Free Press.

Walgreens' proposal to take over Rite Aid next year could mean two giant chain pharmacies are left standing in Chattanooga: Walgreens and CVS.

That's a contrast to the days when the Chattanooga area was home to four chains: CVS, Walgreens, Rite Aid and Eckerd's, which Rite Aid bought in 2006.

But the pending Walgreens-Rite Aid merger doesn't worry independent pharmacist Jerry Grimmitt, co-owner of Longley Pharmacy in Rossville, Ga.

What Grimmitt says hurts his business is insurance companies, since consumers tend to go only to pharmacies that accept their health insurance, and prescription benefit managers (PBMs), the middlemen between insurers and patients who nine times out of 10 reimburse pharmacists.

"My competition is not the chains," he said. "I beat them day in and day out."

CVS, which has the biggest market share, and Walgreens, which is second, already dominate the big markets. Together they control at least half the drugstore market share in almost every major U.S. city, according to a report this summer in Business Insider. CVS also is poised to grow, since it wants to take over Target's pharmacies in a proposed deal that's under review by the Federal Trade Commission.

Still, independent pharmacies outnumber the chains — even though the number of U.S. independent pharmacies has been halved in the past 30 years.

The United States had 22,814 independent pharmacies in 2014, compared to 21,394 chain drug stores, 8,301 supermarket drug stores and 8,330 mass merchandisers, according to the National Community Pharmacists Association.

Independent pharmacies have changed hands or closed in the Chattanooga area, including East Ridge Pharmacy on Ringgold Road, which Rite Aid recently took over, and Belvoir Pharmacy and Chickamauga Drug Store, which both closed.

However, at least one new independent pharmacy has opened here: Kumar Patel launched his Stop 'n' Go Discount Pharmacy almost four years ago in East Ridge at Ringgold Road near Belvoir Avenue.

Wal-Mart, the world's biggest retailer, is also expanding its presence in the Chattanooga market with the addition of at least a half dozen Neighborhood Market grocery stores which include pharmacy departments.

Patel said that PBMs have hurt him and other independent pharmacies more than competition from chains. PBMs have dropped reimbursement rates, he said, and increased fees.

"The PBMs direct customers to certain pharmacies only," Patel said, explaining that customers may prefer the service and personal care at his pharmacy, but they'll go to a big chain or big box store because the PBM makes it cheaper there.

"It's getting tougher and tougher and tougher," Patel said.

The Pharmaceutical Care Management Association defends PBMs and says they will save consumers and insurance providers an estimated $2 trillion in prescription drug costs between 2012 and 2021.

The big drug store chains don't treat customers with the personal touch, Grimmitt said, and the corporate managers of the chains have decided it's not cost-effective for pharmacists to do simple tasks that compounding pharmacies like his can do, such as blending three medicinal liquids together.

"You can come in here, and I know who you are," he said.

Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/MeetsForBusiness or twitter.com/meetforbusiness or 423-757-6651.


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