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Stop by Thrifty MedPlus Pharmacy and there's a chance owner Nick Akins is handing out gummy bears to children as their parents pick up medicine at the drive-through window.

Over at Kingwood Pharmacy, an East Ridge landmark, staffers are viewed as extended family by some longtime customers.

"A lot of large chains try to keep their overhead down by keeping a lean staff," Access Pharmacy owner and pharmacist Brad Standefer said. "But you can't provide the level of service clients need with a lean staff. You have one person trying to do three different things."

Independents are quick to point out that personal service gives them an edge in a business dominated by chains.

"They have always bent over backwards to help me," said Mac Pendley, a Kingwood customer for 55 years. "When my wife died of cancer, the owner and several staffers came to the funeral home."

That special act of caring comes in an era when the number of independents has dwindled.

According to the National Community Pharmacists Association, there were 22,728 independent pharmacies in 2009, down from 24,345 in 2005. There are 573 in Tennessee.

"When I started working here 29 years ago, there were seven independent pharmacies within a 2-mile stretch of here," said Mr. Akins, whose pharmacy is located on Hixson Pike. "Now, there are just two."John Norton with the National Community Pharmacists Association said the decline is in part due to changes in Medicare. Medicare part D caused a drop from 2005-2006 because pharmacy benefit managers were paying pharmacies more sporadically, creating cash flow issues. "A lot of pharmacies were having to take out loans and lines of credit, so if you were a pharmacy operating on dim margins, you went under," he said.

However, Mr. Norton said new provisions under legislation implemented this year under the Medicare Improvements for Patients and Providers Act of 2008 requires PBMs to pay promptly which should eliminate some financial burden for pharmacies.

Many independents say the biggest challenge is competing with the buying power of chains.

Ninety-three percent of independent pharmacies' revenue comes from prescription drugs, Mr. Norton said. So any changes to Medicare programs can have adverse effects. In contrast, chains receive only 70 percent of revenue from prescriptions and can withstand changes and make up for loss by

selling more "front end" items such as toiletries.

Joe Harper, manager at Kingwood, said independents often do not receive the same deals on non-medicine items, such as cosmetics, because chains buy in bulk for hundreds of stores.

To address this challenge, Mr. Akins said some independent pharmacies, including his own, join together and form cooperatives to boost their buying power.

Another challenge for independents comes from insurance companies and prescription benefit managers.

"People are under the illusion that pharmacies make a lot of money, but a lot of it is dictated by the insurance companies," Mr. Akins said. As insurance companies cut reimbursement rates and profit margins continue to decline, pharmacies may see as little as $3 profit on a $30 prescription, he said.

"The thing that breaks my heart is when customers come in and say they can't do business at our store anymore because their insurance company requires them to receive their prescription by mail," he added.

In an effort to increase revenue, local independent pharmacies tailor themselves to the needs of their community and explore niche markets.

Over the years, for example, Kingwood Pharmacy has added a clothing boutique, upscale gift department and Hallmark Gold Crown store. Access Pharmacy said it has tried to specialize in "hard-to-find" items such as shoes for diabetics, compounding and educational services.

Despite the challenges, local independent pharmacy representatives say difficult economic times haven't led to a drop in prescriptions.

BY THE NUMBERS

* $88 billion: Business done by independent pharmacies

* $206.3 billion: Total pharmacy marketplace

* 25 percent: Number of independent pharmacy owners with two or more stores

* 40 percent: Pharmacies that are independent

Source: 2009 National Community Pharmacists Association Digest

"We haven't been impacted by the economic downturn like other industries because people have to have their medicine," Mr. Akins said.

However, the challenges are still there. "It gets a little more difficult every year," Mr. Akins said.

Terry Forshee, owner of Cherokee Pharmacy and Medical Supply in Cleveland, Tenn., said that with a "level playing field" between pharmacy benefit managers and independent pharmacies, independents will continue to "stay alive."

"I have been told -- since the day I graduated from pharmacy school 32 years ago -- that independent pharmacies were on their way out," he said.

"The prediction of our demise is premature," he said."We're survivors."

"People are under the illusion that pharmacies make a lot of money but a lot of it is dictated by the insurance companies"

-- Nick Akins, owner of Thrifty MedPlus Pharmacy

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