March 31, 2021
It’s no secret that the business of pharmacy is not what it once was. Although the average independent pharmacy still makes 94 percent of its profit from prescription sales, those sales aren’t as reliably profitable as they used to be. Last year, gross profit per pharmacy location fell by an average of $10,975, according to the most recent NCPA Digest. Community pharmacies consistently report not only comically low reimbursements but even significant losses when dispensing prescription medications.
As the old fuel of pharmacy business sputters, many pharmacies have started to look to new sources to energize their business. They’ve embarked on unexpected endeavors to power their profits and help their patients, and now they’re sharing their successes with you. Here are five ways independent pharmacies are making money beyond traditional prescription sales.
Eric Abramowitz, owner of Eric’s Rx Shoppe in Horsham, Pennsylvania, is no stranger to the challenges plaguing the pharmacy industry. ″We’re trying to stay relevant in this super competitive pharmacy space. Decreasing reimbursement, mail order, online pharmacies, DIR fees—all these things are killers,″ he said. ″So it forces us to try to differentiate ourselves and find another avenue for income within filling prescriptions.″
One of these avenues for income has been especially successful for Abramowitz, even amid the increasing pressures of the industry and the pandemic. A few years ago he started serving long-term care facilities in his area and was immediately astonished by the results. ″Why we didn’t do it years ago?″ he asked himself. ″We were just worried about that whole ‘if it sounds too good to be true it must be too good to be true.’″
What exactly sounds too good to be true? For starters, no DIR fees. This benefit alone makes long-term care a reliable way to stay competitive. ″When you start seeing those DIR fees go away, it makes it all worthwhile,″ Abramowitz said.
LTC business not only provides great margins but also increases prescription volume substantially. Between all of his facilities, Abramowitz serves more than a thousand patients. And this volume is reliably consistent, even during difficult times like a pandemic. ″This is business that is always coming in,″ he said. ″So in a time when people aren’t going to doctors, people aren’t taking care of themselves, and we aren’t getting a lot of new business, this is recurring business.″
For a long time Abramowitz was hesitant to get involved with LTC because he thought he would have to become a closed-door pharmacy with a separate building. But once he realized he could serve his retail patients and long-term care patients without changing his business structure, he took the plunge, and now he enjoys benefits from both parts of the pharmacy without all the restrictions and red tape of a closed-door. ″Becoming a combo pharmacy gives us the advantage of being classified as a long-term care pharmacy and reaping some of those benefits of increased reimbursements and no DIR fees, while still being able to continue to service the public as an independent pharmacy.″
Abramowitz has won the business of the local LTC facilities by consistently getting his name, and face, in front of them. ″This doesn’t happen overnight,″ he said. ″It’s a process, it takes time. We have a relationship with quite a few assisted living facilities, but it took a lot of time and a lot of energy.″
Every month he advertises free drug disposal and brings a bin with him to the facility. He shows up with soft pretzels and caramel creams, which the residents love. While he’s there, he answers any questions they have about their medications, even if they aren’t his patients. ″These people look forward to knowing that I’m coming every first Tuesday of every month with pretzels and candy, and people want to come down and just talk,″ he said. ″They’re in assisted living. This has become a social event. We found that going once a month increases our visibility, and visibility is everything.″
He also offers vaccine clinics, with shingles being in top demand. He writes an article once a month in the facility’s newsletter called ″Notes from Eric’s Rx Shoppe.″ He does speaking engagements. He brings sample blister packs to demonstrate how they work, which typically increases enrollment. All of this engagement results in patients who appreciate Abramowitz’s services and tell other residents about his pharmacy, which keeps his business growing. ″Word of mouth is the best and cheapest form of advertising,″ he said.
One of the other advantages of LTC and the assisted living environment is less competition. The chains can’t provide the level of service that an independent can. While the chains are involved within the skilled nursing setting, they are less involved in the assisted living arena. Blister packing of daily meds and a close relationship with the nursing staff separates independents from any competitor, Abramowitz said. ″The chains just cannot compete there.″
LTC facilities require more from the pharmacy than a typical retail customer. You have to be able to provide a range of services and sometimes be available during non-traditional hours. Some services include medication synchronization, medication reconciliation, blister packaging, and medication reviews. Perhaps the biggest strain on pharmacy operations is deliveries. Abramowitz will sometimes make his final delivery on his way home, often late in the evening. ″You can’t put a price tag on how valuable somebody will think of you when you go out of your way to get them their antibiotic at seven or eight at night,″ he said.
The pharmacy already provides these personal touches and enhanced services, so offering them to the assisted living facilities is just an extension of its community retail business. Abramowitz said, ″We pride ourselves on giving good service and taking care of them. We answer the phone when you call. We do the little things you don’t always get at our competitors.″
These are some long-term care facilities pharmacies can partner with to add a profitable revenue stream.
When it comes to expanding his pharmacy business, Chris Watts faces a special challenge. His store, Valley Pharmacy in Kearney, Nebraska, is only 660 square feet. That means several potential avenues of revenue aren’t available to him. Like other entrepreneurial pharmacists, he set out in search of ways to make money outside of traditional prescription sales, but he needed something that didn’t require the use of new space.
Eventually his search led him to a program called CPESN USA—a clinically integrated network of community pharmacies that provide enhanced services and engage with payers to get paid for those services. This program would enable Watt to start counting on revenue from a new type of payment model for several services he already offered in his practice.
At first, Watts didn’t see any financial gains, but after about a year and a half as a CPESN member, his group finally secured a contract with a payer. ″First it was this pipe dream of, ‘We’re going to get paid for clinical services outside of billing prescriptions,’″ he said. ″But now, we’re starting to see all that work come to fruition.″
Through both CPESN USA and regional affiliate Nebraska Enhanced Services Pharmacies (NESP), Watts is now in group contracts with three different payers. With these contracts, Watts’s revenue from services has increased sevenfold in just two years.
The first pays him to conduct medication therapy management with its patients. He meets with each patient twice per year and receives a flat rate for each meeting—at a significantly higher rate than he receives for MTM with his traditional patients.
The second payer pays a flat rate per member every month. Rather than requiring a specific service for all patients, the payer will request different tasks for different patients throughout the year. For instance, they might want a pharmacist to speak with a patient who has started a new medication to answer any questions and make sure they are aware of side effects. Or they may request an immunization screening or medication reconciliation. There isn’t a routine or recurring requirement, so the amount of work varies from month to month. The amount paid depends on how many tasks the pharmacy completes. With 65 patients, the fee-per-member model provides a steady and lucrative stream of income for the pharmacy.
The third contract is also based on fee-per-member but requires some specific services, such as medication synchronization, adherence packaging, and delivery services. This contract is relatively new, so Watts is waiting to see what is entailed and how many patients will be included. For all the contracts, the payers send their patients to the pharmacy, so Watts doesn’t have to do any legwork to recruit them.
Although Watts participated in CPESN and NESP for almost two years before seeing any money, pharmacies that join the network now may not have to endure the wait. For CPESN pharmacies in his state, contracts have already been established through NESP, and national contracts are available with Humana. ″I guarantee you it will give you a return on investment,″ he said. ″People have already spent the time, now the contracts are here. If you join now, your return on investment is almost immediate.″
And the payout comes with hardly any investment. CPESN charges a small monthly fee and requires pharmacies to provide a certain number of services, most of which pharmacies already offer. And many of the services, like medication synchronization, provide benefits to the business even if they don’t earn payment.
The pharmacy also doesn’t have to do anything to find and negotiate the contracts with payers. CPESN has dedicated ″luminaries″—pharmacist owners and leaders of the regional affiliates—who put in the work to get the contracts. ″We kind of ride on their coattails,″ he said. ″They get the contracts lined up and we just have to perform.″
For Watts, CPESN has been the perfect solution for his small pharmacy. He’s able to perform all of his tasks for payers without having to make any major additions. ″For people with limited space, this is something great they can do because you don’t have to add this product line or something else,″ he said. ″It’s just doing their job in a different way.″
CPESN pharmacies get paid from the medical side of healthcare, directly from the payers. Payment methods vary for each agreement and can take these different forms:
Alex Berce, president of Good Value Pharmacy with four locations in Wisconsin, has been routinely gaining new patients since he began offering a rare pharmacy service: long-acting injectable medications. Most of the drugs in this class are antipsychotics, such as Invega, Abilify, Aristada, and Risperdal, and patients must receive them at a healthcare provider.
A few years ago, Wisconsin authorized pharmacists to administer injectables, which opened the door for new business. Prescribers, who are typically psychiatrists, were relieved to get the injections off their plates, and Berce was eager to take them on. Now the pharmacy administers more than 20 injections every month.
Berce didn’t have to do much to start generating interest. The first thing he did was track down all the psychiatry offices in the area and give each of them a ring. After that, word spread on its own, and since then referrals have continued to provide a steady stream of new clients without the need for additional marketing. He is one of the only providers of injectables in his area, so patients naturally funnel to his pharmacy. And his reports to the prescribers serve as free advertising, keeping his pharmacy top of mind.
″Word spreads pretty quick, especially when you’re routinely sending doctors the confirmation of the injection,” Berce said. ″After giving the injection every month it’s a reminder that Good Value just did this again for this patient.″
In terms of revenue, some manufacturers will pay a fee for administering the injection, but generally the injections are not a great source of income on their own. Most of the drugs are brand name, and payment runs through third parties, so they suffer from low reimbursement and DIR fees just like any other prescription.
The payoff of the service is the substantial boost in prescription volume. Berce hooks patients with the antipsychotics but nets their entire medication profile for the long term. Most prescribers don’t want to administer these drugs, so Good Value has almost total exclusivity on these patients. They don’t have to worry about competing with a chain pharmacy or big box store, either. And these patients, Berce said, are typically on several other medications, which they often end up transferring to his pharmacy.
To get those prescription transfers, Berce said it’s important to start building the relationship with the patient right away. ″I think part of the solution to making it work from an overall financial standpoint is talking to the patients after you’ve given the shot, developing a rapport,″ he said. And by the second or third injection, go ahead and ask them directly if they’d like to transfer the rest of their prescriptions.
In addition to antipsychotic injectables, Good Value offers Vivitrol, a drug that prevents relapse in patients recovering from opioid addiction. The general upshot for this drug is the same as the antipsychotics except that it takes a bit more work—patients need to submit a urine sample before they get the shot to prove they’ve been opioid-free.
Not every state allows pharmacists to administer injectables. At least 11 states do not, and 7 require a collaborative practice agreement. Pharmacists interested in offering injections should check with their state board of pharmacy.
The landscape of immunizations has shifted considerably over the last decade. When Bill Drilling, owner of Drilling Pharmacy in Sioux City, Iowa, started offering Zostavax, there was still a stigma associated with pharmacy-based immunizations. The greatest challenge was convincing patients that he was more than qualified to administer the vaccine. Since then, a lot has changed. Now it has become as normal to get a shot at a drug store as it is to pick up a prescription—about one-third of immunizations in the United States are administered by pharmacists, and this has provided another reliable avenue for revenue.
Drilling has approached immunizations gradually, adding them one at a time as opportunity allows. After Zostavax, he added the flu, then shingles (this time Shingrix), then pneumonia. Next up are TDaP and HPV. That is one of the attractive aspects of an immunization program—you can go at your own pace, and the growth opportunity is massive. For example, Katterman’s Sand Point Pharmacy, in Seattle, Washington, started with only the flu vaccine but now offers 28 vaccines year-round. Vaccines account for nearly 20 percent of its business and 30 percent of its profit.
But even with a modest offering of vaccines, the money starts to add up quickly. The pharmacy gets paid twice for immunizations: a dispensing fee and an administration fee. Among all the vaccines, Drilling estimates he earns an average of $20 per immunization. Multiply that by the 700 patients he immunized for shingles and flu last year, and from those two alone he was looking at an estimated $14,000 in additional revenue.
What you can offer depends on the laws of your state. Although every state allows pharmacists to administer vaccines, the scope of authority varies widely. You may not have any options to administer certain vaccines, you may need a standing protocol, or you may need a collaborative practice agreement.
Drilling Pharmacy uses the administration of one vaccine as an opportunity to offer other vaccinations to improve the overall health of the patient. Whenever patients get a flu shot, for example, he suggests a shingles or pneumonia vaccine if they need one. And studies support this approach: According to a 2018 study in Psychological Science in the Public Interest, patients who get the flu shot have already shown an openness to vaccinations, which means they’ll be much more inclined to accept further vaccines.
Another tactic that has worked well is advertising immunizations on prescription bags. During flu season, every bag gets a sticker telling patients they can get their shot at the pharmacy. He also does various in-store marketing like flyers and signage. And he makes sure to market the immunizations on social media. ″Getting the word out to the public about what the local pharmacist can offer to the individual is just a start in improving the health of each individual,″ Drilling said.
When patients come in for their prescriptions, the pharmacy software system will alert staff if they are eligible candidates. The staff will let the patient know they qualify for the vaccine and ask if they’re interested in getting it.
Although immunizations have been good for business, for Drilling they are ultimately about his patients, not the profit. ″Our real motivation is to take care of people,″ he said. ″It’s about helping people improve their health in a convenient manner.″ He recalled an encounter with a patient a few years ago that has stuck with him. The patient couldn’t afford to get the flu vaccine at his physician’s office, but at Drilling Pharmacy he didn’t have a copay. ″He thanked me and said, ‘If it wasn’t for you, I wouldn’t be able to get a flu shot,’″ Drilling said. ″That made it all worthwhile.″
When the local Skippack Pharmacy in Pennsylvania was bought by mega-chain CVS, Mayank Amin decided to take matters into his own hands. The community pharmacy had been around for more than 50 years in a ″mom-and-pop town″ where Amin was born and raised. When he got word of the sale, Amin decided to purchase the pharmacy himself to keep it independent even though he had never intended to be an owner. ″I didn’t know anything about the independent pharmacy world,″ he said, ″but I decided that we’re bringing this place back to life and we’re going to give people an experience they’ve never had in their entire life at a pharmacy.″
And he did just that. But it wasn’t long until the harsh realities of the independent pharmacy world became apparent. As a former pharmacist for Walgreens, what shocked Amin most about independent pharmacy was the fact that he could get reimbursed less than what he paid for a product. ″I never knew that a pharmacy could lose money filling a prescription,″ he said. ″In what world is that okay or does that make sense?″
This reality stifled his profit, and if he hadn’t found alternative ways to make money he may not have been able to keep Skippack afloat. One addition that rescued him was an over-the-counter product that is cash only, comes with a nice margin, and genuinely helps patients with their health: cannabidiol, commonly known as CBD.
″I can say that our pharmacy stayed alive in these last few years because of CBD,″ Amin said. ″It’s been a gateway for us to just stay open.″
Amin sells hundreds of CBD products every month, ranging from $20 to $140. Each product comes with a 30 percent markup—all cash sales. And his sales have been high even though Amin will never pressure a patient into a sale, and sometimes will even discourage them if the product isn’t helping. ″I don’t want to sell a product that could have no benefit to the patient and just make money off them,″ he said. ″We’re healthcare professionals, not salespeople.″
On top of the profit it provides, CBD also creates opportunities to attract more patients. Amin has found that taking time to work with patients on a CBD regimen—getting to know their whole health profile, educating them, and then following up with them—cultivates a trust that cannot be matched anywhere else. ″When they have that kind of trust, even if they don’t look at the product now, they just walked out thinking, ‘This pharmacy genuinely cares about me as a person. I’ve never had that experience before at another pharmacy.’″ Next, they are asking if Amin accepts their insurance plan and if they can get their prescriptions transferred from CVS. ″Now you have that trust from the patient, and they’ll switch their prescription medications. They not only come in to get counseling on CBD, but they purchase over-the-counter items as well.″
For Amin, educating yourself on CBD and investing time with the patient are the most important factors to make a CBD offering a success. Everything else flows from that. Patients trust you, they discover that the products work, and then they spread the word. This is how his offering took off so quickly. ″Word just spread as they realized the knowledge we have about the product. And once they saw how well it worked for them, they would tell their neighbors and their friends, and they would come to us,″ he said. ″Now, we have people as far as a half-hour away driving here to get a consultation with us.″
At Skippack, selling CBD always starts with counseling and always continues with follow up. While building trust, the feedback also helps the pharmacy learn more about CBD and its effectiveness, which they can then use to educate more patients. Amin said, ″The whole aspect of us following up with the patient, having them give us a call and let us know how it’s going, has really helped us continue our CBD sales.″
When patients are in the pharmacy, Amin and his staff will ask them about their pain or about why they are taking a certain medication, which opens the door for CBD. He has found that many patients don’t know the damage Motrin wreaks on their kidneys or Tylenol on their liver, for example. ″And now there you go, we have a counseling point,″ Amin said. ″By the way, did you know that if you’re using this for pain, there are other alternatives? Natural therapies. If you’re interested, I’d be happy to talk to you about how CBD works in your body, and you don’t have to buy a bottle, you can take a free sample.″
Amin makes CBD presentations at various community events and facilities. He will stick around afterward to talk, share success stories from his patients on CBD, and hand out some samples. After a single speaking engagement at a senior living center last year, 50 residents showed up at Skippack Pharmacy within a week.
The sales have been good for business, and more importantly, the product fits exactly the type of practice Amin wants to offer to patients in his hometown. ″I like a customized approach to medication,″ he said. ″I grew up in that kind of background where a lot of natural therapies were used in our own household, and I wanted to be able to incorporate some of that into my own pharmacy.″
This article was published in our quarterly print magazine, which covers relevant topics in greater depth featuring leading experts in the industry. Subscribe to receive the quarterly print issue in your mailbox. All registered independent pharmacies in the U.S. are eligible to receive a free subscription.
More articles from the March 2021 issue:
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