Q: According to the new 2010-11 NACDS Chain Pharmacy Industry Profile, which of the following pharmacy formats had the biggest growth in number of locations in 2009?
- Chain Drug Stores
- Independent Drug Stores
- Mass Merchants
The bad news? Both total revenues and number of prescriptions continue to decline at independents (as shown in New Data on Pharmacy Industry Market Share). Thus, the average independent survivor is smaller and less productive than we all previously thought.
Read on for the wonky details. And no more complaints that your friendly neighborhood blogger never provides good news about independent pharmacies!
REVERSAL OF FORTUNE
Anyone who reads Drug Channels should have a copy of The 2010-11 NACDS Chain Pharmacy Industry Profile, which is hot off the presses. In my opinion, the NACDS Profile is the single best compendium of pharmacy industry data and statistics available.
The latest edition recalculates the number of independent pharmacies in a dramatic way. the chart below compares the old versus new times series. (Click the chart to enlarge it.) They diverge in 2002. Quite a difference!
So, what happened? NACDS’ Head Economist Laura Miller told me that the data source changed versus previous reports. This year’s edition uses information from NCPDP to count the number of independent pharmacies. NCPDP data were also used to recalculate prior years’ independent store counts.
FYI, franchises such as Medicine Shoppe are included with chain outlets, but Health Mart franchisees are still counted with independents.
Alas, aggregate prescription data have only changed slightly, implying much slower growth in average pharmacy size. The “fewer but bigger” storyline needs to be revised.
Consider the number of prescriptions per pharmacy outlet, a high-level measure of pharmacy productivity. The average chain pharmacy filled about 79 thousand prescriptions per year in 2009, up 32% from roughly 59 thousand per year filled in 1998. The average independent pharmacy filled only 10% more prescriptions in 2009 versus 1998.
The old data showed the average independent pharmacy growing at a comparable rate to the average chain pharmacy location. (See Pharmacy's MTM Challenge.) The new data imply that the rate of growth has actually been one-third the rate of chains.
WHAT WILL NCPA SAY?
The National Community Pharmacists Association (NCPA), which represents independent pharmacies, has used the apparent decline in the number of pharmacies to push its legislative agenda.
Here's former NCPA President Bruce Roberts writing about the Medicare Part D program in January 2010 (source):
“During its rather chaotic implementation four years ago this month, local pharmacists spent countless hours online and on hold, trying to resolve coverage problems for their patients. Often they were “rewarded” with long waits for reimbursement from plan administrators, typically pharmacy benefit managers (PBMs). These payment delays became so elongated that they created a credit crunch that led, at least in part, to thousands of community pharmacies closing in the year or so following the launch of Part D. At NCPA’s urging, Congress enacted a 'prompt pay' requirement that became effective Jan. 1, 2010, but that’s another story.” (emphasis added)Yes, the new NACDS recomputation shows that sometimes the data tricks us all. Curiously, the first chart above shows the number of independents jumping in the year of Part D implementation (2006) but then reverting back to its pre-2006 level.
Nevertheless, I presume Mr. Roberts and other pro-independent voices will be pleased with the positive news in the new NACDS data. It does mean that NCPA will need to be much more creative when complaining to legislators.
When the facts change, I change my mind. What will NCPA do?