COMMUNITY PRACTICE

Independents stay the course, NCPA survey shows

Independent pharmacies sold more goods and filled more prescriptions than ever last year, but their gross profit margins continued to shrink, according to preliminary data from an annual snapshot of the industry.

Each of the nearly 1,000 independents providing detailed financial data reported total sales of more than $2.45 million last year, according to statistics released by the National Community Pharmacists Association at a New York City press briefing last month. Preliminary data from the NCPA-Pharmacia Digest found that total sales were 6.5% higher than in 2000. The independent pharmacy industry racked up total sales of $60 billion, up from $58 billion in 2000.

Most of the independents' sales growth stemmed from prescriptions, which accounted for $2.15 million of the total revenues, up 10% from 2000. Prescription sales represented 88% of all sales in the average independent pharmacy, compared with 83% the previous year. Independent pharmacies dispensed 1.32 billion scripts worth $53 billion in 2001. The average independent dispensed 53,808 prescriptions last year, up 5.5%. The average daily dispensing rate was 172 scripts.

The bad news came as no surprise. Gross profit margins continued their downward slide last year, to 22.1% of sales, compared with 23.3% in 2000. Due to volatility of the numbers, the average net profit margin was not revealed. However, NCPA's senior v.p. for strategic initiatives Todd Dankmyer said that net profit will probably end up in the 3% to 3.5% range, comparable to the 2000 margin.

Gross margin shrinkage has been a thorn in pharmacy's side for years, said Bruce Roberts, NCPA executive v.p.-CEO. "It's one of the reasons we've focused so heavily on the PBM issues," he said. "Continued downward creep of margins is causing us a lot of heartburn. We're doing everything we can to turn it around."

Providing services has given some independents traction on the slippery slope of gross profit margins. "When things have become very difficult over the past 10 years, what independents have done is become very innovative in developing a number of services that help supplement their income and move the profession forward," said Roberts.

After staging a comeback to 24,811 stores in 2000, independent pharmacy slipped back to 24,602 outlets last year. NCPA believes a pharmacy is independent if it is pharmacist-owned and privately held, which includes single pharmacies, independent chains, independent franchises, and independent pharmacist-owned supermarket pharmacies.

With 50% of owners over the age of 50, independent pharmacy has a problem. However, the need for new blood is coinciding with heightened interest in owner- ship among young pharmacists, Roberts said. After a year or two in practice, more grads are seeking ways to use their patient care knowledge and skills. "These types of services are what excite young folks and draw them to ownership," he said. "The services we've developed allow us to grow and prosper, but it's also the linchpin for getting young people to be the next owners."

In the 1990s, when up to 1,500 stores folded every year, the prognosis was grim. But the slide has stopped and nobody's poised to write independent pharmacy's obituary just yet.

"Independents continue to adapt to the changing pharmacy marketplace by developing niche specialties," Roberts said. "Technologies are also increasingly being used by independents to manage workload and boost profitability. All of these combined with increasing prescription volume help ensure that the future of independent pharmacy is a vital one."

Carol Ukens

Independents offering disease management

Independents charging disease management fee

Carol Ukens. Independents stay the course, NCPA survey shows.

Drug Topics

2002;13:20.