RX Megamergers: A Threat to the Neighborhood Pharmacy?

April 09, 2019

For the pharmacy industry, the past few years have been quite a ride, to say the least. If you run a small neighborhood pharmacy, nobody would blame you for feeling like the lions are at the door.

Mega-mergers between insurance carriers and pharmacy benefit managers (PBMs) continue to shake up the industry and the healthcare system in a big way. The Justice Department recently green-lighted the $69 billion merger between the insurance giant Aetna and the pharmacy chain CVS, which also owns Caremark, one of the three largest PBMs. Cigna has a $52 billion deal in the works to acquire Express Scripts. Even Amazon has joined the club with its acquisition of online pharmacy PillPack and its securing of drug-wholesaler licenses in 14 states.

Bigger is better – at least in theory.

So what’s behind these mega mergers besides the obvious financial incentives? According to these companies, combining forces will allow them to think more holistically about patient health, expand their portfolio of health services, deliver more choice for consumers, keep drug prices down, and provide overall cost savings to patients and health plan sponsors.

But many industry experts aren’t convinced.

According to Frederick Mayer, RPh, CEO of Pharmacy Planning Services Inc., similar large mergers between insurance carriers, PBMs, and managed care organizations over the past 10 years have had the opposite effect, driving prescription drug prices and insurance premiums higher, while producing no measurable improvement in quality of care.

The National Community Pharmacists Association (NCPA) and many independent pharmacists have been vocal about their concerns too. They claim these mega mergers negatively impact competition, pharmacy patients, payers, and locally owned pharmacies, ultimately leaving American consumers with less control over their medical care and prescription drugs.

What does the future hold for small independent pharmacy?

Here are five tips to help your small neighborhood pharmacy thrive in this era of mega giants:

  1. Tap new revenue streams. Are there other markets you can create partnerships with? For example, one pharmacy owner brokered a deal to handle medications for a local retirement community, with daily refill pickups and medication deliveries. Tap into your ingenuity and cultivate new business.
  2. Carve out your niche. Small mom-and-pop pharmacies offer conveniences many of the big chain pharmacies and retail giants don’t such as patient charge accounts, immunizations, compounding, medication delivery, and sale of durable medical goods. By offering specialized services, your independent pharmacy can become a destination stop for customers who need those services.
  3. Provide convenience. Customers want things easy and convenient. Some small pharmacies even offer a drive-through pickup window. Anything you can do to offer more convenient service is a plus, and as a small shop, you have more flexibility to try new things.
  4. Provide education. Consumers want healthcare information they can trust. As a small independent, you can provide a personal touch adapted to each customer that the mega giants simply can’t offer.
  5. Keep it simple. Big chain pharmacies sell a lot more than prescriptions. Most also sell greeting cards, beauty products, food items, kitchen and bath supplies, and a host of other items. For small independents, keeping things simple will help you stay lean – and stay in business.

For millions of people, the local pharmacist is still the most accessible healthcare provider and a trusted neighborhood health resource. As long as you continue to adapt to this evolving market, you can continue to fill that role.

Smart risk management is also a crucial ingredient in that success. At Heffernan Insurance Brokers, we have a tailored pharmacy insurance program ideal for the independent pharmacist. Contact Steve Boone today.