And the reality vote goes to ... independent pharmacy
There's something consumers can't get enough of. Some outfits offer it. Community pharmacy delivers.
I think it's time for a pep talk ... For more than a generation now, we've heard all about the challenges facing the drugstore business. Declining reimbursements from third-party payers, erosion of our professionalism by the faceless corporate bureaucrat, ever-growing mounds of red tape to slash through just to get a significant and seemingly growing percentage of prescriptions out the door - I could go on all year, and many others will. The Gloomy Gus talk was epitomized by an article recently published by this very magazine, headlined “Is community pharmacy a dying profession?” [Truman Lastinger, DT Blog, December 2014].
Let me give you my answer, followed by a big piece of evidence: No, and $6.7 billion.
That's the amount of money the “Big Three” drugstore operators made last year by ... running drugstores. Yes, CVS also made a chunk of its profit by having one of the country's largest pharmacy benefit managers, but that's not an argument you can make about Walgreens and the $1.9 billion it earned, at roughly $225,000 profit per store. Even perennial laggard Rite Aid has found its way back to profitability.
And how is this giant pot of cash being earned? By buying things and selling them for more than they paid for them. Just as the community pharmacist does.
What’s really being promoted?
So how do the big boys in our industry manage to be so competitive and profitable in a perpetually challenging business climate?
Give any of their executives a shot of truth serum, and they'll freely admit they don't plan to compete on price. Loyalty cards and advertised specials aside, any customer who is primarily price-sensitive will most likely end up at a big-box retailer.
The “Big Three” sell themselves to the consumer with convenience. Scouting out the best locations in town so everyone will see their drive-through window on the way home from work. Having a product mix so that customers who do get out of their cars to get prescriptions will be able to “pick up a few things” while they're there. And if someone does notice they're paying more for those few things than at the Target across town, picking locations that will make it awful inconvenient to get back in their car and drive all the way there.
But there’s a glitch. While convenience is the value promoted by the big chains, we all know that it is not what they deliver to many of their customers. Take a good look at those drive-throughs and you'll see them backed up with vehicles. Inside, one check-out lane is open, with 10 people in line. The pace is frenzied behind the Rx counter. And the store is so understaffed that the employees - from the manager on duty to the part-time stock clerk - are all trying to do three things at once.
It won't take you long to see that the modus operandi of the industry is to lure people in with the appearance of convenience, while in actuality it is gauging how much aggravation they will take, once inside, and still hand over their money.
This is why I am optimistic. The independent community pharmacy can deliver what the giant chains only pretend to offer.
Perception vs. reality
Under the chains’ definition of convenience, you may have to wait on hold for 40 minutes to talk to a pharmacist, but I can usually solve your problem and get you off the line in less time than it takes to listen to their opening robo-announcement advertising flu shots. Heck, I can give you a flu shot in less time than it usually takes to conduct a routine business transaction at the corner of Happy and Healthy.
The fact that so many people are willing to spend so much money chasing after the idea of a convenient shopping experience gives me hope, because my pharmacy - and almost every independent drugstore in the country - can make it happen far better than the chains can.
If you don't believe me, just go look up the latest pharmacy rankings in Consumer Reports, which rate independent drugstores far and away above the “Big Three.”
So the only question that stands between the independent community pharmacy and its share of that giant pot of money spent by pharmacy customers every year is whether the perception of convenience is greater than the reality.
As long as I'm on the side of reality, I like my chances. So should you.
