More independently owned drugstores closing in Iowa, nation

Competition from chains, changes in Medicare making times hard

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The closing of Sorg Sample Pharmacy, the oldest independently owned drugstore in Marion, on Dec. 27 is an all-too-often scenario in Iowa rural and urban communities.

The state had 234 rural independently owned pharmacies at the end of 2011. Ninety-four rural Iowa communities had only one pharmacy that was independently owned.

Sixty-six rural communities had a single independently owned drugstore that was 10 miles from any other pharmacy, according to a study by the RUPRI Center for Rural Health Policy Analysis at the University of Iowa College of Public Health.

The number of independently owned rural pharmacies in the United States was relatively constant from 2003 to 2006, peaking around May 2006, according to the UI study, authored by Kaitlin Boyle, Keith Mueller and Fred Ullrich.

When a rural independently owned pharmacy closes, research by the University of Minnesota Center for Rural Policy found that doctors and other health care providers often leave the community, said Kate Gainer, executive vice president and chief executive officer of the Iowa Pharmacy Association.

“We have tools and resources to help pharmacists plan for an orderly transition of their business to new ownership,” Gainer said. “If possible, we would like to see an independently owned pharmacy remain in operation in a community.”

New kind of pharmacy

Gainer said telepharmacy operations, where a licensed pharmacist supervises a pharmacy technician at a remote site through the use of videoconferencing technology, may be an alternative for rural Iowa communities.

“North Dakota is the leader in telepharmacy operations,” Gainer said. “Health care delivery continues to change and telepharmacy will use state-of-the-art technology to deliver pharmaceutical services to rural communities.”

Todd Thompson and his brother, Jon, both of Kalona, opened Iowa’s first telepharmacy in Victor on Sept. 26. The Iowa Board of Pharmacy in November 2011 approved a three-year waiver to let the Thompsons open a telepharmacy.

If Iowa Board of Pharmacy officials agree at the end of three years that the initial telepharmacy has been a success, Iowa law could be changed to permit others to establish a telepharmacy without the need for a waiver.

Declining numbers

From May 2006 through September 2008, there was a rapid decline in the number of rural independently owned pharmacies nationally, from 7,395 to 6,799. The 8.1 percent drop took place after the introduction of the Medicare Part D program.

Gainer said gross margins on prescriptions covered by Medicare Part D tend to be lower than those covered by Medicaid, commercial health insurers or cash customers. While prescription volume among Medicare beneficiaries has increased under Medicare Part D, the size of the increase at some pharmacies has been less than projected.

Gainer said there also has been a shift of customers from paying cash for their prescriptions before they became eligible for Medicare Part D, which has reduced cash flow for independent community pharmacies.

“Very few of our older customers pay all cash for their prescriptions,” Gainer said. “Most have some form of either insurance or Medicare Part D.”

While agreeing that the transition to Medicare Part D was difficult, Douglas Hoey, chief executive officer of the National Community Pharmacists Association, said the single biggest challenge to independent community drugstores is pharmacy benefit managers.

Pharmacy benefit managers, which administer prescription-drug insurance coverage for employers and insurers, determine reimbursement terms and cash flow for small pharmacies, Hoey said.

Joey Musick, co-owner of Medical Pharmacy, 1030 Fifth Ave. SE in Cedar Rapids, said pharmacy benefit managers play a pivotal, but little-known role between patients and their doctors and pharmacists.

“Drugstore chains are merging with pharmacy benefit managers like United Health to drive customers to their stores,” Musick said. “Hy-Vee has merged with Medco to drive their 50,000 customers to their locations. They also have buying power that we do not have as independent pharmacies.”

Vanessa Miller of The Gazette contributed to this story.

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