Chapter 31. Applications in Independent Community Pharmacy

Dr. Bonnarens is currently associate dean for student affairs and associate professor in pharmaceutical science and pharmacy administration at Manchester College School of Pharmacy in Fort Wayne, Indiana. He received a B.S. in general science and a B.S. in pharmacy from Oregon State University in 1990. He worked as a pharmacist in several practice settings, including independent, chain, and hospital pharmacies. In 1992, he completed the American Society of Health-System Pharmacists Executive Residency, followed by his employment with the National Community Pharmacists Association in Alexandria, Virginia, until 1996. Dr. Bonnarens pursued graduate education, earning an M.S. in 1999 and a Ph.D. in 2003 in pharmacy administration from the University of Mississippi. Dr. Bonnarens began his academic career as at the University of Wisconsin School of Pharmacy, where we worked from 2003 to 2007. In 2007, Dr. Bonnarens joined Pacific University School of Pharmacy, serving as assistant dean for student and alumni affairs prior to joining Manchester College in 2011. His research interests include leadership, entrepreneurship, patient care service development, workforce issues, and management issues facing pharmacy practitioners in various practice settings.

After completing this chapter, readers should be able to

1. Identify evolutionary changes leading to current independent community pharmacy practice.

2. Identify the characteristics of entrepreneurship and describe the opportunities that exist within independent community pharmacy practice.

3. Compare and contrast starting up a new independent community pharmacy versus purchasing an established pharmacy.

4. List and describe the steps necessary for starting an independent community pharmacy.

5. Identify methods of purchasing an established pharmacy.

6. List and discuss various issues facing independent community pharmacy practice.

As Sue Franklin was completing her last Advanced Pharmacy Practice Experience (APPE) rotation during her final year of pharmacy school, she began to think about where she wanted to work after graduation. As part of her required and elective APPE rotations, Sue gained experience in a number of practice settings. She really enjoyed the critical care rotation at University Medical Center. However, she knew that a residency probably would be required to land a clinical position there. Sue had completed a rotation with the Indian Health Service and had thoroughly enjoyed her experience caring for a Native American population in New Mexico. She also had gained experience working at a chain pharmacy and then a supermarket pharmacy during holidays and vacations throughout pharmacy school. “What am I going to do?” thought Sue. She had so many great experiences and in some ways too many employment options. She had already received job offers from the chain and supermarket pharmacies, each paying a very good salary. She also had received an offer from Professional Pharmacy, a local independent community pharmacy in which she completed two rotations, community and administrative. Sue was surprised by the offer, because she had spent only 10 weeks in the pharmacy. Prior to her rotations, Sue had never considered working in an independent community pharmacy. One of her favorite APPE projects was the development of an immunization program for Professional Pharmacy. Sue loved the ability to create new programs and offer specialty services to patients in need. Darrel Burke, the owner of Professional Pharmacy, was very enthusiastic about the ideas Sue had shared with him regarding the development of other patient care specialty services. As Sue thought back about her experience, she was also impressed with Mr. Burke's management style. She remembered that the workflow was very organized and that the employees enjoyed taking care of patients and took pride in their jobs. Mr. Burke took great care of the entire staff. He was the only manager that Sue had worked with to hold brief staff meetings every couple of weeks to find out how things were going and to take action on issues raised during the meetings. Sue was also amazed at how much the patients cared for Mr. Burke and the staff, and vice versa. She could not remember receiving cookies from a patient whom she had helped on any other rotation. While the salary offered by Professional Pharmacy was slightly lower than those offered by other prospective employers, Sue realized how unique Professional Pharmacy is and began to see the value of working in a place that accepted and even encouraged its employees to seek creative strategies for enhancing customer service.

1. What is independent community pharmacy? From a practitioner's perspective? From a patient's perspective?

2. Historically, independent community pharmacies and the pharmacists owning them have been criticized as being “only in it for the money.” How would you dispel this myth?

3. How can an independent community pharmacy owner of 15 years keep the entrepreneurial spirit alive in the pharmacy?

4. What are the advantages and disadvantages of starting a new pharmacy versus purchasing an existing one?

As stated in Chapter 1, “The managerial sciences of accounting, finance, economics, human resources management, marketing, and operations management are indispensable tools for today's practitioner.” Each of the tools referred to is critical to all pharmacy practitioners in varying degrees. This statement could not be more accurate when discussing independent community pharmacists. An independent community pharmacist works in an environment that demands a unique level of understanding of the proper use of each tool in providing patient care, in addition to running a respected business in a community. While a discussion of managing an independent community pharmacy practice could incorporate most of the concepts from this book, the goal here is to provide a cursory overview and discuss the application of management tools critical to this environment.

What comes to mind when the word pharmacy is mentioned? Depending on your age, hometown size and location, personal health history, and experiences shared by family and friends, a number of examples might appear. While the descriptions would vary regarding the name and even the practice setting, many would envision a privately owned business that not only filled prescriptions but also took care of patients and their families. This type of pharmacy has been described in many ways: a “mom and pop” shop, a drugstore, a chemist's shop, an apothecary, a prescription shop, or hundreds of brand names ranging from Abe's Drug to Zimmerman's Pharmacy. The business that is described by most is an independent community pharmacy.

A stereotypic description of an independent community pharmacy might include the existence of a small business with a prescription counter operated by the owner and located in the back of the store. The front of the store might contain a wide variety of offerings that could range from a small section of over-the-counter (OTC) medications, vitamins, and other health-related products to an expanded OTC area with additional offerings, such as greeting cards, candy, gifts, and health and beauty products. In general, one might find a relatively small but very helpful and friendly staff that know their customers by name and provide great service.

Historical Perspective

Pharmacy practice in the United States was founded on the shoulders of independent community pharmacy owners. Beginning with the earliest apothecary shops in colonial America, independent practices manufactured most medications that were provided to customers. In the early 1800s, apothecaries and drugstores became more prominent in cities and towns (Higby, 2003). Reasons surrounding this growth include the evolution of medicine and pharmacy into separate professions and the growing need for medications as the country and its population continued to expand. The drugstore became recognized as the place to purchase medicine. These practices diversified and began to offer additional products and services to their respective communities.

In the late 1800s, the pharmacy began to stock and sell more products that were being created by pharmaceutical manufacturers. With this change, pharmacies needed less space for compounding products. The prescription department moved to the back of the store, with the front opening up for salable goods and creation of the soda fountain. Since the pharmacist had a background in chemistry and experience with mixing and flavoring, the soda fountain was a perfect fit for the pharmacy. While the soda fountain attracted customers, events such as the prohibition movement greatly increased its popularity. A unique combination of prescription department, general store, and soda fountain established the drugstore as a cultural icon (Higby, 2003).

Independent community pharmacy practice evolved with the rest of the profession through the education reform of the early 1900s, increased competition from the development of chain and mass-merchandiser pharmacies, and the decreased need for practitioners compounding coinciding with the increased availability of mass-produced medications. The 1950s ushered in the “count and pour” era of pharmacy practice: a momentous surge in antibiotics and other medications coming to market, increases in the number of prescriptions dispensed, limited roles of pharmacists in patient care, and boom times for pharmacy businesses (Higby, 2003).

The 1960s witnessed a new era that dramatically changed the face of independent community pharmacy practice. Legislation created the Medicare and Medicaid programs and, with that, the birth of public pharmaceutical benefit programs (Williams, 1998). These events drastically changed the economics of independent pharmacy practice by introducing greater influence from government and private payers. Also during this time, the profession was beginning to embrace the concept of clinical pharmacy. Eugene White, an independent pharmacist, was advocating patient-oriented professional pharmacy practices, by example, with the development of a patient drug profile and an office-based practice (Ukens, 1994). The public, which had been viewed only as customers, now was recognized as patients (Higby, 2003).

Through the 1980s, community pharmacists began carving out their own niche in health care as drug information experts by expanding their scope of practice into patient care areas such as consulting, home health care, and long-term care. Independent community pharmacists began to accept this expanded role and fostered the pharmacist–patient relationship by continuing to provide high-quality, personalized service to all patients.

The dawn of clinical pharmacy provided the groundwork for the shift to the pharmaceutical care era. With significant changes in the areas of law (e.g., the Omnibus Budget Reconciliation Act of 1990 and the Health Insurance Portability and Accountability Act of 1996), health care reimbursement (e.g., the rise of managed care), and scope of practice (e.g., disease-state management programs, wellness programs, and collaborative practice agreements between pharmacists and physicians), independent practice has had to diversify and change to meet the needs of the various players in this environment. In addition, the independent community pharmacist has had to become a better manager in order to survive in such a competitive marketplace.

The 2000s brought major changes to health care and pharmacy in particular. In 2003, the Medicare Prescription Drug, Improvement and Modernization Act was passed that provided prescription drug coverage through Medicare Part D. With its implementation at the beginning of 2006, the nation's community pharmacies bore the burden of this new program by experiencing increased prescription volume and major delays in reimbursements (Kostick, 2006). Most recently, health care reform has taken center stage as a major national issue. Year 2010 provided the venue for President Obama to sign into law the first health care reform legislation in decades (APhA, 2011). The two laws that make up the Affordable Care Act—the Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010—include pharmacy-related provisions regarding medication therapy management (see Chapter 19), recognizing the pharmacist's role in medication use, and improving patient access to medications and service (APhA, 2011). Independent community pharmacists continue to be very active participants in these areas to improve the care of their patients (Hoey, 2011).

Today's Independent Community Pharmacy

According to various agencies, a strict definition of independent community pharmacy means that no more than three pharmacies are owned and operated by one person (Smith, 1986). Even with this established definition, other organizations have expanded the number of pharmacies that can be owned to as many as 11. A better sense of what independent community pharmacy is can be gained from the views of various stakeholders.

What do patients think? Beginning in 1976, Gallup has conducted a survey of Americans to rate the honesty and ethical standards of a variety of professions (Jones, 2010). Since 1981, pharmacists have consistently been rated one of the most trusted and respected professions identified in the Gallup survey (NCPA, 2010b). In recent years, Consumer Reports has been conducting a survey of their readers and asking them to rate drugstores. In 2003, over 85 percent of customers were very satisfied or completely satisfied with their experience at independent community pharmacies. This highlights the fact that customers found independent pharmacists to be accessible, approachable, and easy to talk to while also being very knowledgeable about prescription and nonprescription medications (Consumer Reports, 2003). In the May 2011 issue, 94 percent of readers shared that they were highly satisfied with their experiences at independent community pharmacies, which sustained their reputation in areas of pharmacists' knowledge, helpfulness, personal service, and approachability (Consumer Reports, 2011). Independent community pharmacies also were recognized for offering additional patient care services, such as disease-state management education, health screenings, and specialty services such as compounding. In the fourth annual U.S. National Pharmacy Study conducted by J.D. Power and Associates, independent community pharmacies received the highest rankings for customer satisfaction (J.D. Power and Associates, 2010).

While these examples provide a look at patient perceptions, it is important to get a sense of what independent community practitioners think. One of the principal advantages of this type of practice frequently pertains to personal control. Referred to in various ways, such as “being my own boss,” “wanting to do things my way,” and “besides my patients, I answer to no one but myself,” the issue of personal control is a driving force for individuals to become owners. Other factors, such as involvement and recognition in the community and personal motivations, are also considered to be advantages of this practice setting (Smith, 1986). One of the predominant disadvantages of independent community pharmacy relates to the increased responsibilities assumed by the owner: financial, legal, and professional. Because the pharmacy is a business, in some sense everyone (e.g., customers, employees, payers, and regulators) is the “boss” of the independent (Smith, 1986). An additional disadvantage that also might be included are the long hours typically put in by the owner, especially during the business's formative years (Smith, 1986).

Overall Health Care Environment

Pharmacy continues to assume a larger portion of the health care dollar. Spending for prescription drugs accelerated in 2009 to $249.9 billion, representing 5.3 percent growth from the previous year (Centers for Medicare and Medicaid Services, 2009). Spending for drugs is expected to reach nearly $500 billion by 2016 (Poisal et al., 2007).

Through 2003, Medicaid reimbursement had remained one of the best-paying third-party programs for independent community pharmacies. In addition, Medicaid programs had been the active “laboratories” for pilot projects paying community pharmacists fees for managing the therapy of select groups of patients based on their disease state, such as diabetes and asthma (English, 1998). As the costs of each state's Medicaid program continued to grow, additional changes were looming on the horizon that would affect the revenue stream of independent community pharmacies dramatically.

The Medicare Modernization Act (MMA) of 2003 (CMS, 2005) introduced a major change to the entire health care environment, with millions of beneficiaries eligible for this new program. This influx of individuals with an opportunity for prescription drug coverage can be shown by examining the changes in prescription drug spending by payer from 2005 through 2006 (Fig. 31-1) (CMS, 2005; Poisal et al., 2007). Medicare, as a payer, jumped from 2 to 22 percent in spending for prescription drugs, whereas Medicaid and out-of-pocket expenditures decreased. Although it has been suggested that Medicare Part D might not have much impact on the future prescription drug growth rate, the immediate impact in a variety areas has been significant and will be long lasting (Poisal et al., 2007).

Independent community pharmacies/pharmacists were the front-line professionals dealing with the issues leading up to and far after January 2, 2006—the first day of Part D. Such major change in the payment structure for prescription drugs has significant repercussions. Leading up to “Part D Day,” there was great concern regarding the profitability of pharmacies with the shift in payers and subsequent reimbursement rates (Ukens, 2006). A July 2006 survey of over 500 independent community pharmacists revealed that 89 percent of respondents reported a worsening of cash flow, 55 percent reported that they had to obtain outside financing to supplement their cash flow, and 33 percent admitted to considering closing their pharmacy (Edmondson, 2007). A major factor relating to the cash-flow issues was the slow reimbursement rates related to the Part D program. A 2007 study confirmed the slow reimbursement rates to pharmacies (Medical News Today, 2007). The researchers found that 50 percent of community pharmacy claims were being paid more than 30 days after adjudication and that over 17 percent experienced delays over 60 days (Sheppard et al., 2007). These delays are critical considering that pharmacies must pay their wholesalers/supplies every 2 weeks to receive added benefits and within 30 days to avoid penalties.

Internal Pharmacy Environment

A unique publication provides financial benchmarks for independent community pharmacies. The NCPA Digest, sponsored by Cardinal Health, is an annual survey that compiles and summarizes financial data from independent pharmacies nationwide (NCPA, 2011). Data from the past 2 years of the NCPA Digest are used as a benchmark to describe the typical independent community pharmacy, as shown in Table 31-1. In general, the typical independent community pharmacy has a total sales volume of just over $4 million, of which 93 percent is derived directly from prescription sales. Over 64,000 prescriptions are filled annually, with 89 percent of those prescriptions being paid for by a third party: 14 percent by Medicaid, 30 percent by Medicare Part D, and 45 percent by other third-party payers.

Independent community pharmacies have incorporated various elements of technology into the practice setting, including specialized software that checks for medication errors, fills and labels each prescription, and even processes the sales transaction. Additional uses have grown to include automated dispensing machines, specialized compounding and intravenous mixing equipment, and customized software that can be used in the management of patients with particular disease states such as diabetes. One of the major technological growth areas is electronic prescribing. These capabilities refer to the connectivity between a prescribing physician and a community pharmacy, allowing for the electronic transmission of a patient's prescription from the physician to the patient's pharmacy of choice. This trend is relatively new, occurring within the past 3 to 5 years. The 2010 NCPA Digest reported that 92 percent of participating pharmacies were connected and capable of receiving electronic prescriptions, with 12.2 percent of prescriptions received electronically (NCPA, 2010).

A typical NCPA Digest pharmacy offers patients a number of specialized services, including but not limited to delivery, patient charge accounts, compounding, health screenings, hospice, and durable medical goods, as well as scheduling of patient appointments and speaking to local organizations (NCPA, 2010). The trend to offer disease-state specialty services in independent community pharmacies continues to increase. Based on a survey conducted by the National Institute for Pharmacist Care Outcomes (NIPCO), nearly 15,000 community pharmacists have completed disease management programs accredited by NIPCO since its formation in 1995 (NCPA, 2003b). In the latest Digest, disease management service offerings continue to increase in frequency. The most frequently offered programs are immunizations, diabetes training, and blood pressure monitoring (NCPA, 2010).

In addition to patient care services, another area that has been expanded by Medicare Part D has been medication therapy management (MTM) services and programs. MTM programs are designed to improve medication use, enhance patient safety, and increase patient adherence to their medication regimens (NCPA, 2007). Many of these initial MTM programs offered in independent community pharmacies do not include the service of a pharmacist; however, this trend is changing. The 2007 NCPA-Pfizer Digest reported that over 46 percent of independent community pharmacies offer MTM services, with an average charge of $40, and that 48 percent of the pharmacies are receiving reimbursement under Medicare Part D. The most recent Digest reported an increase in pharmacies offering MTM services to 68 percent, with a corresponding increase in the number of pharmacies receiving reimbursement to 59 percent (NCPA, 2010).

Independent community pharmacy provides a unique venue for an individual pharmacist. Opportunities exist to be an owner and run the pharmacy, a part-time employee interested in staying in touch with community pharmacy practice, an entrepreneur with ideas for creating new service offerings for patients, or an employee working for the owner/manager. In this venue, the individual is limited only by his or her imagination. Thus, with this in mind, who chooses a career path in independent community pharmacy?

Whether one is interested in ownership or not, one of the key characteristics for a pharmacist in this practice setting is the importance of interacting with people. The independent community pharmacy provides pharmacists with a great opportunity to help patients. Problem-solving skills are critical as a pharmacist, and this setting provides constant challenges that require those skills. Other characteristics that are fostered by the independent setting are the ability to embrace change, deal with risk, and adapt to an everchanging environment.

It is important that stereotypes sharing a negative connotation of independent community pharmacists be addressed. In some cases, pharmacists who are business oriented have been viewed in a negative light. In addition, many individuals interested in independent community pharmacy practice have been falsely accused of generalities such as “They are only going into business for the money,” “They are not very clinical,” and “They have a lack of professionalism.”

Based on the descriptions of independent community pharmacy practice and the characteristics of the individuals who pursue this career path, several points must be made. First, independent pharmacists are placed in a difficult situation because of their need to possess expertise in pharmacy practice and business. All pharmacy organizations must stay in business so that they may provide goods, services, and care to patients. Second, independent community pharmacy practice represents one of the most accessible health care venues for patients. Because of this, there exist numerous clinical opportunities for pharmacists in the provision of quality patient care and positive patient outcomes. Third, independent community pharmacists contribute to the overall health of any community not only in the care provided but also in contributions to the economic and civic health of the community. As a health care provider, the pharmacy adds a stable business to any town's economic structure. In addition, through involvement of the owner and other staff members in civic organizations, these individuals serve as volunteer leaders in activities ranging from school and hospital boards to elected offices.

Today's Independent

In visiting one of over 23,000 independent community pharmacies across the country, one might find the following two individuals. The first individual is the younger of the two. This pharmacist received a doctor of pharmacy (Pharm.D.) degree from an accredited program. There is a chance that this individual completed an MBA in conjunction with the pharmacy degree or at least had the chance to take some business courses. During his or her professional education, this individual took the required courses that introduced issues such as management, marketing, and economics into pharmacy practice. If available at the alma mater, any electives focusing on subjects ranging from pharmacy management and economics to entrepreneurship and ownership also would have been taken. While not a requirement, this individual probably was active in pharmacy school organizations. After graduation, this individual may have gained work experience at various practice settings or may have completed a community pharmacy residency. The individual has gained a variety of experiences from the practice settings work that ranged from one independent pharmacy to a variety of jobs that included experiences in hospital, chain, and other specialty practice areas, such as long-term care, home infusion therapy, or compounding pharmacy. This individual is in the process or has already established a specialty patient care service, such as an immunization program or disease-specific monitoring program in diabetes or asthma. The individual, along with other staff members, has received certification in these various specialty areas.

The second individual has been an owner for over 15 years. This individual received a bachelor of science degree. More than likely, this individual also completed course work pertaining to management and ownership. This individual may even have taken a class or two from the business school. This individual has a vast background of practice experience, often focused in community practice. This individual may have spent time working in a chain, a hospital clinic, or even another independent before pursuing ownership of his or her own practice. This individual manages a staff of pharmacists, technicians, clerks, delivery personnel, and other individuals, such as bookkeepers, accountants, part-time help, and contract employees. The owner has been a preceptor and has provided a recognized rotation site for the state's college or school of pharmacy since opening the store. This individual has always felt that the students provide the pharmacy with as much as the pharmacy gives to them. This individual may also have additional training experiences available, such as an administrative rotation or a community residency program. In addition, this individual is an active member of several civic groups in the community, such as Rotary and the Chamber of Commerce. The owner is politically active, knowing the state and federal senators and representatives and voicing concerns to them regarding issues related to independent pharmacy practice. The owner supports various activities of the local schools, such as speaking at career days and sponsoring various programs. The pharmacy may sponsor a little league team in the summer and a basketball team in the winter. The owner knows his or her patients and is now taking care of several generations of families. He or she continues to participate in various certificate-training programs and has implemented a variety of specialty services.

It is clear that both individuals enjoy their jobs from a professional, clinical, and personal perspective. They value the freedom to care for their patients through the variety of services they provide. Their career choice provides them with a salary that can support them individually and their families if appropriate. They are constantly learning and growing as practitioners, managers, and businesspeople. For both individuals, management plays an important role in their lives. The application of management tools is critical to the success of these individuals, as well as to the success of the independent community pharmacy.

Sue has been on staff at Professional Pharmacy for 6 months. She is beginning to feel comfortable with the employees, customers, and flow of the business. The immunization program that she helped institute while a student has continued to grow, now offering vaccinations year round for influenza, diphtheria, and tetanus, in addition to miscellaneous travel and childhood vaccinations.

Sue began to realize that a large portion of Professional Pharmacy's patient population was diabetic. As she learned more by participating in diabetes-related continuing-education programs, Sue started to see opportunities for enhanced patient services that could be provided to this specific population of patients. In one of the continuing-education programs that she attended, Sue learned how to create a business plan (see Chapter 5) for the development of a diabetes care center. Sue created a business plan for a service that would help patients identify whether they were diabetic, as well as to help educate and train those with diabetes to care for themselves and enhance their quality of life.

In Scenario 2, Sue has formulated an idea, developed the idea through education and analysis, and created a business plan to test the strength of the idea. The process that Sue progressed through and the steps she took to develop her idea implicate her as a potential entrepreneur (see Chapter 30).

It is easy to see why most small-business owners, including independent community pharmacy owners, are categorized as entrepreneurs. There is more to being an entrepreneur, however, than just setting up a business. Entrepreneurs typically demonstrate the effective application of a number of enterprising attributes such as creativity; initiative; risk-taking, problem-solving ability; and autonomy and often will risk their own capital to set up a business (Bloomsbury Publishing, 2002).

Prior to a more descriptive discussion regarding the characteristics of an entrepreneur, Scenario 2 must be reexamined. Although it was suggested that Sue may be a potential entrepreneur, she is not really starting a business. She is an employee of Professional Pharmacy, and Sue's idea will provide a new business opportunity for the pharmacy and Mr. Burke, the owner. A more accurate definition of Sue in this scenario is as an intrapreneur. An intrapreneur is an employee who uses the approach of an entrepreneur within an organization (Bloomsbury Publishing, 2002). As a business ages and grows, the original entrepreneurial spirit can diminish. Intrapreneurs are critical to any established business in that they question the establishment and provide the internal spark to pursue innovation and new opportunities.

Characteristics of Entrepreneurs

Entrepreneurship is a growing area of research. A major area of interest is in identifying that magic combination of characteristics that makes a successful entrepreneur. Over 40 traits believed to be associated with entrepreneurship have been identified. Five of the more frequently identified characteristics include the following (Daft, 1994; Gartner, 1985):

• Internal locus of control. A belief by individuals that they are in control of their future and that other external forces will have little or no influence.
• Need to achieve. A human quality in which people are motivated to excel, so they pick situations in which they will be challenged but where success is likely.
• Tolerance for ambiguity. The psychological characteristic that allows a person to be untroubled by disorder and uncertainty.
• Risk-taking propensity. The likelihood of being a risk taker no matter the circumstance.
• Demographics factors. These factors focus on a number of characteristics, including past work experience (experience in independent settings supports entrepreneurial tendencies), entrepreneurial parents (more likely to be entrepreneurial when parents have been as well), and age (most businesses are launched between the ages of 25 and 40).

The history of independent community pharmacy provides a wealth of examples of entrepreneurship. Independent practitioners were some of the first to provide and use (Gumbhir, 1996)

• Complete patient medication profiles.
• Total parenteral nutrition.
• Delivery of products and care to prisons and long-term care facilities.
• Home infusion services.
• Veterinary pharmacy.
• Specialty compounding services.

In today's marketplace, entrepreneurial opportunities are everywhere. Individuals are limited only by their imagination in developing new services or other innovations. The biggest concern for any business is the ability to keep the entrepreneurial spirit alive. To continue that spirit, the owner/manager must create a climate that will support and foster the entrepreneurs and intrapreneurs in the pharmacy. Some rules that can be used in creating that climate in the pharmacy include (1) encourage action, (2) tolerate failure and use as a learning example, (3) be persistent in getting an idea to market, (4) use informal meetings to provide opportunities to share ideas, (5) provide challenges with the staff to help problem-solve given situations, and (6) reward and/or promote innovative personnel (Daft, 1994).

Sue loves her job. In the 3 years that she has been at Professional Pharmacy, she has developed patient care services in such areas as immunizations and osteoporosis, created a disease management program in diabetes, and successfully marketed the pharmacy's services to other health care providers in town. She has a great relationship with Mr. Burke, the owner, and thoroughly enjoys the people she works with and the patients she cares for in the community. While she is pleased with her accomplishments, she is beginning to detect the emergence of several obstacles. Mr. Burke has been very supportive of her ideas, and even when he has disagreed, he has carefully explained his position against an idea. Over the past year, Sue has become more involved in the area of specialty compounding. A new dermatologist recently moved to the area, and during one of Sue's “detailing” visits to the Midtown Physicians Group, she struck up a conversation that has evolved into a steady stream of prescriptions for his “special” ointments and creams. Mr. Burke, although appreciative of the new business, is not interested in any expansion of the pharmacy to incorporate additional technology for use in compounding specialty items. Sue has been thinking so much about the potential for such a service that she sketched out a rough business plan one night when she could not sleep. Sue believes that this is a major local market that is going untapped; however, she knows that Mr. Burke wants no part in this venture. If she were her own boss, she could direct the business in the direction she saw fit. “Hmmm,” she thought, “should the idea be shelved for a while, or is it time to look at the potential for owning her own business?”

While working for an independent owner can be a very fulfilling experience for many, one of the most attractive aspects of the independent setting is the opportunity to own a pharmacy. Interest in ownership has peaked and waned over the past 30 years. A significant decline in the number of independent community pharmacies occurred between 1990 and 1997 (NACDS, 2003). From the late 1990s to 2006, the number of independent practices has hovered around 24,000 sites (NCPA, 2007). From 2006 through 2009, the trend marked a decline of independent community pharmacies, reaching a first-time low of 22,728. However, 2010 marked a reversal to this trend, with the total number of independent pharmacies returning to just over 23,000 (NCPA, 2010). This number of pharmacies represents a significant portion of pharmacies in the United States (NCPA, 2010).

Some of the top reasons for wanting to go into business include self-management, creative freedom, and financial independence. Other reasons include (1) not having to answer to others regarding the focus of the pharmacy, (2) being recognized and playing an important role in the business and health care needs of the community, (3) achieving a level of self-fulfillment and pride, and (4) continuing the legacy of pharmacy ownership established by family and/or mentors (Smith, 1986, 1996). Each individual who pursues ownership is driven by his or her own reasons. Once the decision of pharmacy ownership is made, the prospective owner must do the following: identify available pharmacies for sale or suitable locations for a new pharmacy, determine a satisfactory purchase price, evaluate and determine capital needs, and investigate and select the best source of capital (Gagnon, 1996). He or she must determine whether to start a new independent practice or purchase an established pharmacy.

Option 1: Starting from Scratch

Sue is determined to pursue her idea of creating a compounding specialty service. After her discussions with Mr. Burke confirmed his lack of interest, she realized that she has two options: Find another pharmacy that would be interested in pursuing this specialty service or start her own business. Sue decides that despite how well things have been for her at Professional Pharmacy, the time is right to start her own business.

The act of starting a new independent community pharmacy practice in a given community follows a long and rich history. As mentioned previously, a new pharmacy appears for various reasons, ranging from support of unmet health care needs for a particular patient population to taking advantage of a potentially lucrative business opportunity. Starting a new pharmacy, as with any business, requires considerable planning.

A number of distinct advantages are available to an owner opening a new independent community pharmacy. The opportunity to select and purchase each item of this new venture, such as fixtures, equipment, and inventory, is a great advantage. Also, hiring your own personnel, finding a great location, creating sound policies and procedures, and avoiding paying for intangible assets are additional advantages.

One of the intangible assets that requires further attention is goodwill. By definition, goodwill is an intangible asset of a company that includes factors such as reputation, continued patronage, and expertise, for which a buyer of the company may have to pay a premium (Bloomsbury Publishing, 2002). For an independent community pharmacy, specific factors that contribute to goodwill include the prescription files and accounts receivable (Smith, 1996). Since goodwill is related to the profitability of the pharmacy, the most frequently used method to estimate goodwill is some multiple of the annual net profit. The most recent year's net profit generally is considered the minimum price for goodwill, whereas a common value for goodwill is estimated at 1 to 2 years of net profit (Jackson, 2002; Smith, 1996).

If the venture is not planned carefully, the advantages of opening a new pharmacy can turn into disadvantages. There is a greater amount of risk that must be assumed by the owner and an increased chance of experiencing unforeseen events. For one, the lag time between startup and profit tends to be longer. Moreover, the challenge to secure capital is a formidable one.

How to Get Started

An individual interested in starting a new business can find a great number of books on the topic. While there are few books that specifically relate to the opening of a pharmacy, the general topics covered in the new business development literature are pertinent to any business type. This section offers a list of steps that can be followed on the path toward independent community pharmacy ownership:

1. Decide on the type of pharmacy.

2. Assess the potential market.

3. Develop a detailed business plan.

4. Determine the organization's structure.

5. Identify financing options.

6. Select a location.

7. Obtain licenses, permits, and insurance.

8. Develop a marketing and promotion plan.

9. Establish the management philosophy of the business.

Decide on the Type of Pharmacy

This question can only be answered by the potential owner. While it seems a very simple question, the answer requires considerable contemplation. As in Sue's case, most individuals have a general idea of what type of business they want to start. For Sue, a compounding specialty pharmacy is her wish. Now Sue must begin to evaluate her idea thoroughly by resolving such questions as

• What products and services will I sell?
• From what base will I derive my customers?
• What skills do I bring to this business?
• Where should I be located?
• Will I have any competition?

Assess the Potential Market

Based on her evaluation of the type of pharmacy she would like to open, Sue has decided that she will start a compounding prescription business in the community where she currently lives. She has had a great deal of specialized training in this area and believes that there is a need for this type of pharmacy in the community. Now she must assess the potential market.

As described in the Chapter 22, Sue must undertake a complete market assessment of the area in which she plans to locate. Some of the questions to resolve include

• What is the potential customer base?
• How many physicians are in the community? Specialists?
• What is the competition? Other pharmacies? Other businesses?

Develop a Detailed Business Plan

It is important that the plan is well thought out and that due diligence is paid to eliminate as much uncertainty as possible when starting a new pharmacy (see Chapter 5).

Determine the Business Structure of the Pharmacy

A decision regarding the legal structure of the pharmacy must be made fairly early in the business development phase. Deciding on the legal structure of the pharmacy is critical to the overall success of the business. Each business venture is unique, and there is no one single ownership structure that suits every situation. The prospective owner should consult with an accountant and an attorney to help select the ownership structure that will best meet her needs.

In general, three legal structures are available to pharmacy owners: sole proprietorship, partnership, and corporation. Table 31-2 identifies some of the unique characteristics of each legal structure (SBA, 2011a, 2011b, 2011c, 2011d; Spadaccini, 2009; Tootelian and Gaedeke, 1993).

Sole Proprietorship

This is the simplest ownership form because the business is owned by one individual. The sole proprietor owns all the assets, receives all profits, and is responsible for all aspects of the business. While the owner receives all the profits generated from the business, there is also no legal distinction between the business and the owner, making the owner completely responsible for any liabilities and debts. This form of ownership is ideal for starting a business (Spadaccini, 2009). However, as a business grows, there are other ownership forms that provide more security to the owner and the business.

Partnership

By definition under the Uniform Partnership Act, a partnership is an association of two or more persons to carry on as co-owners of a business for profit (Tootelian and Gaedeke, 1993). While seemingly straightforward, partnerships have the potential to be complex. Because of this, it is strongly recommended that a written legal agreement between the partners be executed. The agreement, also referred to as articles of partnership, should outline issues including, but not limited to, profit-sharing, business decisions, resolving disputes, adding additional partners, and dissolving the partnership.

There are two types of partnership for consideration: general and limited. A general partnership entails all partners to divide the responsibility for management and liability, as well as profit or loss (Tootelian and Gaedeke, 1993). In addition, partners are jointly and individually liable for the actions of one another. While this is usually considered the least favorable form of ownership, a partnership can be less complicated than a corporation. For example, a payroll is not required for the partners in this relationship, and this provides for less paperwork and similar tax benefits to a sole proprietor (Spadaccini, 2009). A limited partnership consists of at least one general partner and one or more “limited” partners (Tootelian and Gaedeke, 1993). Limited partners are individuals who provide capital to the business but are held liable only for the amount of their investment. These same individuals are not involved in any of the management decisions or operational issues of the business.

Corporation

A corporation is a business that is chartered by the state and legally operates as a separate entity from its owners. The Supreme Court defined the corporation in 1819 as “an artificial being, invisible, intangible, and existing only in contemplation of the laws” (Tootelian and Gaedeke, 1993). This means that a corporation can be sued, taxed, own property, and enter into contractual agreements, whereas the owners of the corporation, the stockholders, are protected from liability. The stockholders elect a board of directors to oversee the entity and adopt bylaws to govern the corporation during its existence.

While incorporating a business seems like good move with regard to the limited personal liability experienced by the owners, there are challenges to consider. The complexity of corporations requires a great deal of time and money for the setup and running of such an organization. Based on this structure, operating in accordance with local, state, and federal governments may result in higher taxation and require additional resources.

There are three forms of corporations that most businesses use the S corporation, the C corporation, and the limited-liability corporation (LLC) (Table 31-3). Over 82 percent of “average” NCPA Digest pharmacies identified their structure as a corporation, with one-fourth of those 82% further identifying themselves as C corporations (NCPA, 2010). Overall, the trend toward LLCs is recent because this corporate form is relatively new.

Identify Financing Options

Once the business plan has been outlined and the organizational structure has been selected, the next step for the soon-to-be owner is financing the pharmacy. Some questions that must be resolved include

• What are the financial needs for this venture?
• What type of financing will be best for the given situation?
• Where does one go to obtain capital for such a venture?

Financial Needs

Every business has financial needs. These needs vary with the type and individualistic nature of each business. A pharmacy located in an urban area will have different financial needs than one located in a rural area. The buyer must understand the needs of the business venture. These financial needs refer to capital. Capital is wealth, in the form of cash, equipment, property, or a combination of these factors, that can be used in the production or creation of income (Kelly, 1996).

There are three areas of capital need: setup capital, startup capital, and operating capital (Tootelian and Gaedeke, 1993). Each area represents a period of time in the life of a business during which particular activities that require capital are conducted.

Establishing a pharmacy, whether starting new or making changes to an existing business, often requires a considerable amount of capital. The activities that represent the largest initial capital expenditure focus on the physical aspects of the business. The remodeling and renovation of the pharmacy, purchasing of fixtures and equipment, finalizing the building's lease deposit if it is not owned directly, and purchasing the beginning inventory, prescription and nonprescription merchandise, are the major sources of capital expenditure. Most of the other activities in the area of startup relate more to paperwork and attention to detail. Such activities include prepaying insurance and utilities, obtaining the appropriate licenses and permits, and covering the professional fees of hired advisors (e.g., attorneys and accountants).

Types of Financing

Having identified a number of financial needs that come with the purchase of a pharmacy, the next step is to identify the type of funding available. Three main types of financing will be discussed: personal, debt, and equity.

Personal financing is just what it sounds like, the use of personal funds to finance the purchase of the pharmacy. It is no different from saving money for that first bicycle, car, or even one's retirement; personal savings is an important type of funding. This type of funding provides the buyer with the best possible funding source because there is no cost or payback terms, the amount can be unlimited, and it is relatively easy to use, whereas the only detractor is that there is a risk of loss (SBA, 2011e). However, in most cases, the buyer will need additional funds for the purchase, setup, startup, or operation of the pharmacy.

A common type of funding for a pharmacy is debt financing. Debt financing can be defined as something of value such as money that is borrowed at interest for a specified period of time (Kelly, 1996). Debt financing provides a buyer with an advantage by allowing him or her to borrow the needed capital without having to share any of the profits with the lender and to keep control of the management of the pharmacy. The disadvantages of debt financing highlight the fact that if something is borrowed, it must be returned. Loans must be repaid, with some measure of interest, over a defined period of time. In addition, the amount of debt incurred is limited by the value of assets and earning record of the borrower (Tootelian and Gaedeke, 1993). Debt financing can consist of either/or a combination of short- and long-term strategies (see Chapter 18).

Used less frequently, equity financing results in the buyer sharing ownership with investors who contribute funds. This level of investor ownership brings with it varying degrees of involvement in management of the business. Depending on the structure of the pharmacy, investors could be recognized as anything from a partner to a stockholder in the business. An advantage to equity financing is the chance to reduce the debt that must be repaid on a particular scale. Depending on the fiscal health of the business, partners or stockholders may or may not receive paid dividends. A significant disadvantage is that ownership of the pharmacy is spread among a larger group of individuals, thus reducing the owner's decision-making abilities (Tootelian and Gaedeke, 1993). Most small businesses, such as a pharmacy, are unable to attract much funding in this manner owing to the risk of small business survivals.

Sources of Financing

Banks are not the only source for obtaining capital. In fact, establishing an entirely new independent community pharmacy may not be appealing to a bank. Banks view the purchase of an established pharmacy as less risky, but there is no guarantee of obtaining a loan.

The choice of a funding source is critical to the future of a business venture and should be made carefully. The buyer must thoroughly weigh the options regarding the types of financing and the specific requirements provided for by each funding source. Table 31-4 provides a brief list of potential lenders (Kelly, 1996; SBA, 2011e; Tootelian and Gaedeke, 1993).

Select a Location

The familiar mantra Sue hears consists of three words: Location! Location! Location! The selection of the trade area, as well as the actual physical site of the pharmacy, is a primary factor in determining the success of the business. Sue has already incorporated the idea of location into her planning process by deciding on the type of pharmacy she wants to start and in conducting a market analysis.

Sue must evaluate the location of her pharmacy thoroughly with regard to population, potential customers, competition, physician availability, and community trends ranging from general health to economic issues (Kelly, 1996). To help Sue in accomplishing this task, a number of information resources are available to help analyze her pharmacy's location, including, but not limited to, public libraries; realty companies; utility companies; local, state, and federal documents and Web sites; state and national small business administration (SBA) offices; and individually conducted or contracted surveys, interviews, or traffic counts. Sue is also reminded continuously that this is a process that will be time-consuming and take hard work. She should not depend solely on what the computer provides in the way of information. By putting in the work on the front end, the next steps will be smoother.

Obtain Licenses, Permits, and Insurance

As the owner of this new pharmacy, Sue will need to obtain specific licenses and permits to operate. While local zoning laws, building permits, and standards set by health, fire, and police are requirements that must be met by all businesses in a given community, Sue also must ensure compliance with a variety of state and federal regulations that pertain specifically to pharmacy (NABP, 2011; Tootelian and Gaedeke, 1993). Insurance is of critical importance to a pharmacy. Sue will need to find an insurance agent to help with creating a comprehensive insurance plan that covers events ranging from natural disasters and physical accidents to employee health and workers' compensation. In addition, Sue must examine and acquire professional liability insurance for herself, professional staff members, and the business.

Develop a Marketing and Promotion Plan

How will Sue inform the community of her new pharmacy and the innovative services that she will be offering? Using the techniques and tools provided in Chapter 22, Sue will be able to develop a specific marketing plan to educate the community. Through the use of the local media outlets, such as newspapers, radio, television, and local Web site sponsorship, Sue will be able to execute a specific promotion plan for the new pharmacy. Sue should not focus all her marketing and promotional efforts on potential customers. A critical area for her specialty pharmacy will be the community of health care professionals, ranging from physicians and nurse practitioners to specialty practices such as dermatologists and veterinarians.

Establish the Management Philosophy of the Business

The owner of an independent community pharmacy sets the tone for the business. The owner has been involved in virtually every aspect of the business, from conceptualization and planning to development and completion. As the new owner, Sue will be involved in all aspects of the business. In addition to the potential tools available in print, the experience that she has gained from working in an independent community pharmacy will be even more valuable to the dissemination of her management philosophy.

Option 2: “Why Reinvent the Wheel?”—Purchasing an Established Pharmacy

Sue has worked for Professional Pharmacy for 3 years. As she was closing up the pharmacy one night, Mr. Burke, the owner, brings up the idea that he is starting to think about retirement. He and his wife Helen eventually would like to move into a beachfront property. There they could take out their boat and have a place for their kids and grandchildren to visit. Sue is shocked by this sudden revelation. Mr. Burke reassures her that retirement is in the near future, but he wants to chat about her future career goals and whether those goals might include pharmacy ownership.

For a potential buyer, looking for the right pharmacy may seem like a daunting task. There are a number of places to begin a search. In many cases, the potential buyer already may have identified several businesses either through research or as a result of his or her current job. Local and state pharmacy associations are excellent resources for initial listings and referrals. A common section in the flagship publications of these organizations is a “pharmacy for sale” listing. The journals of most national pharmacy organizations have similar pharmacy listings. In addition, professional brokers who deal on the business side of the real estate market can be contacted and hired. There also exist specialty services provided by organizations. One example of this is the Independent Pharmacy Matching Service (IPMS), found on www.PharmacyMatching.com that is coordinated by the National Community Pharmacists Association (NCPA). The IPMS helps match prospective buyers and sellers on various criteria, including geographic location.

Once a potential pharmacy is identified, an important question to ask is, “Why is this pharmacy for sale?” (Cotton, 1984). Is the owner retiring? Has the neighborhood changed owing to increased competition or economic changes to “sour” the location? Is the pharmacy on the verge of bankruptcy? These are just a few of the many questions that should be asked regarding the pharmacy. These questions reinforce the importance of researching the business and obtaining advice from various sources.

Purchasing an established pharmacy can provide an excellent opportunity to a potential buyer. Identifying the advantages and disadvantages of this ownership alternative will provide valuable insight into an individual's decision-making process regarding ownership (Smith, 1986, 1996; Tootelian and Gaedeke, 1993).

Advantages and Disadvantages

According to many in the pharmacy and business literature, there are a number of advantages to purchasing an established pharmacy (Table 31-5). An established pharmacy already has eliminated a number of the unknowns that face the startup of a new pharmacy. There is a lower level of risk on the buyer's part because the pharmacy has an established history. Pending thorough research and assessment, the buyer should have fewer uncertainties regarding the pharmacy, ranging from the physical facility, inventory, and equipment to the personnel and patient base of the pharmacy. Based on this transfer of ownership, the pharmacy obtains new management while not adding another business to a competitive marketplace. Another advantage is that an established pharmacy provides the buyer with great potential for reducing startup costs and decreasing the length of time between startup and profitability. In addition, the buyer receives the goodwill and reputation of the pharmacy.

The advantages related to this method of ownership can just as easily become disadvantages. The established assets, such as facilities and equipment, may be outdated or inadequate to meet the needs of the interested parties. The inventory of the business in question could consist of a large amount of out-of-date and unsalable items or even be too large for the pharmacy to support. The previously established policies and procedures could be in direct conflict with what the potential owner has in mind, thus creating potential human resources management problems. In addition, the pharmacy's location may not be optimal, and the purchase price may be overinflated by goodwill.

During the negotiation of such a transfer of ownership, the careful review of all leases is a critical factor that is often overlooked. A lease refers to a long-term agreement to use or rent a fixture, a piece of equipment, the physical structure in which the pharmacy is located, or the land the business occupies (Gagnon, 1996).

Value Assessment and Price Determination

Once the decision has been made to purchase an established pharmacy and a specific property has been identified, the next step is to determine the value of the business. Prior to a value assessment, the future owner should conduct a thorough review of the external environment of the business; that is, the community in which the business is located.

The predominant method of determining the value of a business is through financial analysis. Chapter 17 discussed the basic principles of financial analysis. In determining the fiscal health of the business, its financial records (income statements and balance sheets) from at least the past 3 to 5 years should be reviewed. From these data, the various facets of financial analysis—solvency, liquidity, efficiency, and profitability—can be determined for the business, and trends can be projected based on the time frame analyzed. A number of financial formulas are used to provide a range of values that serve as a guide for either the buyer or seller to begin the negotiation process (Jackson, 2002). It is important to note that while there is no single formula that must be used, each formula determines the value of the business from various perspectives, providing a range of values that can be used to determine an initial buying or selling price.

Based on the preceding discussion, it should be obvious that determining the value of a business is not an exact science. While a number of established techniques may be used, each business is unique. In fact, the value of a business ultimately is determined through negotiation between the buyer and the seller (Jackson, 2002). The agreed-on price usually will lie somewhere between the initial price of the seller and the initial offer of the buyer. The valuation of a business is based on the assessment of facts about the business, informed judgment, and some common sense (Jackson, 2002).

Purchasing Methods

The next step for the prospective owner is to finance the cost of purchasing the pharmacy.

Financing

As was done during the preceding discussion regarding the financing of a new pharmacy, similar questions regarding the needs of the business, the type of financing, and the sources of capital must be addressed for the purchase of an established pharmacy. Whether purchasing an established pharmacy or starting one from scratch, a significant amount of capital will be needed to cover the cost of the venture. In this case, the buyer has a significant advantage over someone starting a new business because the established pharmacy will have lower startup costs and should take less time to begin making a profit.

From a buyer's perspective, various types of financing are available for purchase of a pharmacy. While personal, debt, and equity financing are examples available to the buyer, the main question that must be determined is will the pharmacy be bought outright, or will there need to be some financial arrangement made for purchasing over a period of time. In most cases, an individual buyer would have great difficulty in securing financing to buy a pharmacy outright. With this in mind, the following discussion illustrates a transfer of ownership that provides a win-win scenario for both the buyer and the seller.

Junior Partnership

A junior partnership provides an opportunity for a buyer to purchase a pharmacy with little or no initial capital and a seller to ease out of ownership and keep the legacy of the independent pharmacy alive in the community (Jackson, 2002). Instead of trying to figure out a way to sell the pharmacy when the owner is ready for retirement, this option allows the current owner to transfer ownership to a buyer, continue to have an income, and prepare for retirement.

The advantages of a junior partnership range from less risk and less initial capital needed by the potential buyer to the continued presence of an independent pharmacy to the economic and health care needs of the community. A junior partnership has disadvantages that are similar to those of any partnership arrangement. However, in this situation, because of the established relationship, the chance for both parties to determine compatibility, and the detailed nature of the agreement, a junior partnership proves beneficial.

It has been 4 years since Sue entered into a junior partnership with Mr. Burke, and at the end of next year, she will be majority owner of Professional Pharmacy. While the time has just flown by, Sue marvels at all she has learned about pharmacy practice from both the business and professional sides. Sue came to this realization shortly after her first scheduled meeting with this year's community pharmacy resident, Cindy Ryan. After laughingly explaining to Cindy that there is no such thing as a typical day when you are in the business of caring for patients, Sue offered the following description:

As the owner, I am responsible for the 40-member staff that makes up Professional Pharmacy, Incorporated. This includes the main pharmacy, Professional Pharmacy West, and the compounding/home infusion pharmacy, Professional Pharmacy East. My day usually begins at East, where I check in with Jerry, the manager, to review the workload for the day and take care of any problems, usually human resources issues. I am usually at East for most of the morning, taking care of e-mail, mail, and so on. I usually spend the afternoons at West. There I meet with Lois, the store manager, to go over things for the day and take care of problems. In each facility, on a weekly basis, an all-staff meeting is conducted to update staff regarding procedure changes and new third-party coverage, address employee concerns, and check in with everyone. The meeting can last up to 20 minutes. As the owner, I have had to spend more time managing the business and less working with the compounding center and the diabetes care program that we established several years ago. While I miss the time with patients, I have come to realize that becoming the best manager I can be helps to ensure that the patients we serve receive the best possible care.

The life of an independent community pharmacy owner provides numerous challenges and can be highly rewarding. As Sue pointed out, most of her responsibilities have evolved into a management role. As a manager, the success or failure of the business is that individual's responsibility, and that success is dictated by the decisions made and actions taken.

The owner must balance a number of issues and ideas related to the pharmacy. Today's owner must be able to evaluate the issues, determine the feasibility of ideas, and take action. The following is a list of four issues that require a great deal of attention by an owner of an independent community pharmacy: competition, third parties, patient care service development, and niche development.

Competition

Independent community pharmacy practices operate in one of the most dynamic and competitive marketplaces. Most competition is readily apparent, such as traditional chain drugstores, supermarket pharmacies, and mass merchandisers. Independent community pharmacies also have experienced competition from other less obvious entities. This additional group of competitors consists of mail-order pharmacies, managed-care pharmacies, hospital ambulatory clinics and pharmacies, and even Internet pharmacies. While the total number of retail pharmacies has remained relatively steady, the marketplace portrait has changed. Independents have experienced a decline in total numbers, whereas chains, defined as outlets including traditional chain drugstores, supermarket pharmacies, and mass merchandisers, have become more prolific. One contributing factor to this role reversal has been competition in the prescription market. A number of independents that closed were unable to compete in certain markets for reasons ranging from third-party reimbursement rates that were too low to individuals being unable to embrace the changes that were taking place in the market. Those remaining continue to compete successfully.

Third-Party Issues

For an independent community pharmacy, addressing third-party issues is critical not only to the success of the business but also to its very survival. Addressed previously in this chapter, the average NCPA Digest pharmacy reported that 89 percent of prescriptions filled were paid for by a third party (NCPA, 2010). This relationship identifies the importance of understanding third-party issues for owners and managers.

Third-party issues are wide ranging. One of the most prominent issues from this arena focuses on the reimbursement rates for prescription medications that are received by independent community pharmacies from third parties (see Chapter 19). It is a constant struggle between third parties, who want to lower costs by lowering reimbursement rates to pharmacies, and independent practitioners, who must monitor the rates constantly to ensure that the pharmacy will be able to cover costs and have some profit margin.

Again, Medicare Part D has added an additional issue to an already complex topic. While some of the problems have been improved, the difficulties for independent community pharmacy still remain (Chi and Paul, 2006). The issues of prompt payment and reimbursement rates will continue to contribute to an already complex and stressful environment, keeping everyone's focus on the continued evolution of the Medicare Part D program.

Patient Care Service Development

Independent community pharmacies have a rich tradition of service to patients. This tradition has evolved into a number of identifiable patient care services that are offered in many pharmacies. Patient care services can range from home delivery and patient charge accounts to specialized patient care such as disease-state management programs focusing on diabetes or asthma. The development of such services usually is based on the fact that patients needed to be cared for and the pharmacist began stocking the product and creating the service to help their patients. In areas such as herbal medicine, homeopathy, and nutrition, patients not only obtain specific products but also receive valuable information and learn that the pharmacist is a valuable information resource. As a complement to this continued development of patient care services comes the MTM programs and services (NCPA, 2007). All of pharmacy is striving to develop quality and cost-effective services that will continue to provide their patients with exceptional customer service while also helping to further secure the means to receive compensation directly for such services. Only through continued political and professional pressure will pharmacy earn the right to bill for the patient care services provided, as well as the evershrinking compensation for the medication itself.

Niche Development

The nature of independent community pharmacies and pharmacists is to develop and offer patient care services. In specific cases, certain services may be developed to fill a niche in the community. In Scenario 4, Sue identified and developed a niche with the creation of her compounding specialty business. The specialty service was created and succeeded because there was an unmet need for compounding services in the community. As was discussed in the entrepreneurship section of this chapter, independent community pharmacies provide a wealth of opportunities to develop specialty services based on an idea, such as patient monitoring programs focusing on anticoagulation therapy, AIDS services, or anticoagulation therapy. The development of niches provides the pharmacy and its staff with new challenges and opportunities for additional business success through the introduction of potential revenue streams.

Independent community pharmacy practice provides a vast array of opportunities for professional development and personal satisfaction. This venue accommodates all types of practitioners, ranging from allowing entrepreneurs and intrapreneurs the freedom to develop their ideas into actual goods or services to offering individuals interested in “being their own boss” the chance to start their own pharmacy and pursue unique practice niches. The independent community pharmacy continues to evolve from its earliest appearance in the United States to the technologically advanced patient care service entities of the twenty-first century. Independent pharmacists will continue to deal with unique issues facing their practices, and yet they will continue to innovate and provide quality patient care.

1. Do you consider yourself to be entrepreneurial? Intrapreneurial? Why or why not? Can you identify another individual as being entrepreneurial and/or intrapreneurial? Explain why you selected that person.

2. After reading this chapter, what interests (or what does not interest) you about a career in independent community pharmacy practice?

3. Imagine that you are the owner of a new independent community pharmacy. If money were no object, where would you be located? What patient care services would you offer? Would you have a general or specialized practice?

4. What is the most difficult management responsibility for the owner of an independent community pharmacy?

5. In your opinion, what is the future of independent community pharmacy? What are the largest challenges facing independent practice this year? In 5 years? In 10 years?