NCPA Digest Finds Independent Community Pharmacies Stable Despite Economic, Third-Party Challenges

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National Community Pharmacists Association

Oct 25, 2010, 11:00 ET

PHILADELPHIA, Oct. 25 /PRNewswire-USNewswire/ -- The National Community Pharmacists Association (NCPA) today announced the availability of the 2010 NCPA Digest, sponsored by Cardinal Health, which found that independent community pharmacy owners were able to generally stabilize their business in 2009 despite a stagnant economy, the growing influence of government health care programs, declining prescription drug reimbursements and the questionable business practices of pharmacy benefit managers (PBMs).

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"The NCPA Digest findings demonstrate that an independent community pharmacy business model that is adaptable, yet rooted in sterling customer service and competitive pricing, has a viable place in today's marketplace," said Douglas Hoey, RPh, NCPA Acting Executive Vice President and CEO. "Independents helped their patients and their businesses by diversifying their revenue streams through providing convenient patient services, such as immunizations, and helping patients manage their prescription costs and medication regimen in a down economy."

Hoey added, "As a result, after a sharp drop in the number of pharmacies in 2006 when Medicare Part D went into effect, the number of independents has generally stabilized and grew modestly."

Now in its 78th year, the NCPA Digest provides a comprehensive analysis of independent community pharmacies' financial state. Noteworthy findings include:

The number of total independent community pharmacies rose from 22,728 in the previous year to 23,117.
51% of independent community pharmacies are in areas of 20,000 people or less, 21% in areas with 20,000 to 50,000 people, and 28% in areas greater than 50,000 people.
There was a 4% increase in the number of prescription drugs dispensed from the previous year.
The generic prescription drugs dispensing rate was 69%, which represents a 4% increase and exceeds the low-60% average generic dispensing rate of the largest, PBM-owned mail order pharmacies.
30% of dispensed prescriptions were from the Medicare Part D program and 14% were from Medicaid.
76% of independent community pharmacies offer immunizations (up from 46% the previous year), 76% offer personalized home delivery (often at no cost), and 68% offer medication therapy management.
Independent community pharmacies providing immunizations are able to generate an average of $10,000 in additional revenue.
Independent community pharmacies are utilizing technology to make their staff more productive, with 43% using at least one kind of an automated dispensing technology.

The average independent community pharmacy's pretax profit margin remains at 3.2% for the second year in a row. That, combined with a dependence on prescription drug reimbursements for more than 90% of revenue, leaves independents vulnerable to any changing dynamic in the marketplace and limits business expansion opportunities. By contrast, publicly traded chain pharmacies sell much more front-end merchandise that often yields higher profit margins, while major PBMs saw their profits increase five-fold during this decade.

The government's role is likely to accelerate further with passage and implementation of the Patient Protection and Affordable Care Act. Fortunately, in that legislation NCPA garnered bipartisan support for a critical fix to mitigate draconian cuts to Medicaid generic prescription drug reimbursement; an exemption from an onerous and duplicative accreditation for the continued selling of durable medical equipment; and common-sense disclosure requirements for PBMs in the health care exchanges that will be operational in 2014.

The NCPA-endorsed PBM Audit Reform and Transparency Act (H.R. 5234) would expand to millions of additional Americans the cost savings and pharmacy choice expected to result from greater PBM transparency. Collectively, these measures support patient access to independent community pharmacies. At the same time, two trends accelerated by the economic downturn – surging Medicaid enrolment and tightening state budgets – create uncertainty for these pharmacies.

"As an independent community pharmacy owner I can attest to the impact of the government becoming our largest business partner and for the need to let our elected leaders be aware of our concerns," said Joseph H. Harmison, PD, NCPA President and pharmacy owner in Arlington, Tex. "By remaining proactive we can continue providing the caliber of patient services that earned us high marks in the most recent annual J.D. Power & Associates pharmacy satisfaction survey."

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 23,000 independent community pharmacies, pharmacy franchises, and chains. Together they represent a $93 billion health-care marketplace, have more than 315,000 employees including 62,400 pharmacists, and dispense over 41% of all retail prescriptions. To learn more go to www.ncpanet.org or read NCPA's blog, The Dose, at http://ncpanet.wordpress.com.

SOURCE National Community Pharmacists Association