Time to test yourself at the college of pharmacy knowledge!
Q: According to IMS, which of the following pharmacy channels had the fastest rate of growth in 2007?
a. Chain Stores
b. Mail Order
Contrary to what you may have heard, the answer is … Independents! In fact, independents grew more than 5 times as fast as chains.
Nope, this is not another April Fool’s joke. I was surprised, too, especially given the heated rhetoric around the “debilitating consequences” of Part D, Wal-Mart’s “predatory pricing,” and the “devastating impacts” of AMP.
Looks like your friendly neighborhood blogger will once again have to be the bearer of … good news???
When IMS released the final 2007 data in March, they noted that the
However, growth varied by channel. Below is a chart showing the 2007 growth rates for the four major retail pharmacy channels. You can check my math with IMS Health’s 2007 Channel Distribution by U.S. Sales report.
As I understand the data, NSP purports to represent sales at invoice pricing, not sales at a list price such as Wholesale Acquisition Cost (
Like it or not, US retailing continues to become more concentrated and increasingly dominated by chain stores, warehouse clubs, home centers, and big box superstores. Consumers are fueling this trend by consolidating their purchases and shopping at fewer, larger stores. Low prices and self-service ("How can you help you?") now dominate.
Consider the massive consolidation occurring at the top end of the pharmacy market. The biggest six dispensers –
Retail pharmacy is now undergoing a similar shakeout that will leave us with fewer, but larger, independents. There are half as many independent pharmacies today as there were 15 years ago. Yet by my calculations, the average independent pharmacy today fills 50% more prescriptions than the average independent 15 years ago.
Meanwhile, the aggregate number of pharmacies has barely budged in the past twenty years because new competitive channels – supermarkets, mail, and mass merchants – have filled the gap. As I pointed out last July, consumers of independent pharmacies still have access to many pharmacies within a reasonable driving distance. Yes, I recognize that patients in some rural communities may have an access issue if their local independent closes. If that’s true, then the solution is targeted support for pharmacies in at-risk markets, not blanket protections for all pharmacies in all markets.
And contrary to the claims of doom, Medicare Part D has been neutral to positive for independents. Re-read January’s Pharmacy Profits & Part D, in which I analyze the relationship between pharmacy size and profitability for independents under Part D. The second comment on this Part D post (apparently from a pharmacist) reads: “What the data is basically saying is that the system is going to weed out the pharmacies that are not running efficiently, or not filling a high enough volume of prescriptions.” 'Fraid so.
Put all of these pieces together and you can understand the surprising resilience of the surviving independents in the IMS data.
One of my consulting advisory clients recently told me that he values my opinions because I’m a “tough, cynical hard-ass.” Believe it or not, I took his comment as a compliment. My job is to tell people the hard facts – even when the news is good!