SCOTTSDALE, Ariz. -- Pharmacies in supermarkets have gained the acceptance of supermarket executives and food store customers alike. It is now a given for most supermarket companies that new stores will have a pharmacy. The industry continues to grow in number of stores and in prescription volume.
ience and image, especially since it offers the one-stop-shopping experience.
The contribution that pharmacy can make to the total store was a key issue discussed by participants in Supermarket Pharmacy's first state-of-the-industry roundtable discussion held here Feb. 10.
Among the participants were three supermarket pharmacy directors: Terry Cater of Save Mart Supermarkets, Modesto, Calif.; Barrett Moravec of Abco Markets, Phoenix; and Gary Reinhardt of Harvest Foods, Little Rock, Ark.
The pharmaceutical industry was represented by: Steve Trebing, pharmacy operations manager at Upjohn Co., Kalamazoo, Mich.; and Harold Cohen, director of professional relations at Barr Laboratories, Pomona, N.Y., a generic drug manufacturer.
Also taking part were: Dan Boesen, vice president of professional affairs at PCS Inc., Scottsdale, Ariz., a third-party plan administrator; Chuck Prieve, director of retail sales at Bergen Brunswig Drug Co., Orange, Calif., a drug wholesaler; and Bruce Laughrey, president of Medi-Span, Indianapolis, which develops data bases for pharmacy computer systems.
Six of the panel's eight participants are pharmacists. In addition to the three supermarket pharmacy directors, Boesen, Laughrey and Cohen are also pharmacists.
The biggest variable in the success of a supermarket pharmacy, say supermarket pharmacy directors, is the pharmacy manager. Pharmacy directors also insist that food store pharmacies are on their way to becoming destination drug stores based on loyalties formed by patients to individual pharmacists.
"We have people coming into our pharmacy because the person who works in the pharmacy is their pharmacist," says Moravec of Abco Markets.
"Our pharmacists are the service ambassadors of the company. Every transaction is eyeball to eyeball with the customer. They know the customers' names," says Cater of Save Mart Supermarkets.
"We build traffic," adds Harvest Foods' Reinhardt. "We build the loyalty of the customers and the sales out front in HBC."
The growth and declining margins of third-party plans have eroded the profitability of pharmacy. Dealing with third-party plans and related issues is clearly on the minds of supermarket pharmacy directors these days, and, in fact, accounted for nearly half of the roundtable discussion.
"Pharmacists have a new customer in the marketplace. Third-party plans are coming in with some requirements, some needs of their own," says Boesen of PCS.
While some tensions still exist between pharmacy and store managers, and though top management support is not all it could be, the supermarket pharmacy directors reported dramatic progress on both fronts.
The roundtable was moderated by Janice Zoeller, editor of Supermarket Pharmacy. Highlights of the discussion follow:
Fitting Into the Supermarket
SP: Has pharmacy has become a much more accepted and integral part of the supermarket, or is it still an ongoing process? Do supermarket executives understand the impact pharmacy can have on the HBC business?
REINHARDT: There's greater corporate acceptance of pharmacy. Management sees the value of pharmacy; they see the numbers. It's my job to convince them and give them a vision of what it does for the whole store.
They see the impact that pharmacy can have on the HBC business. Some pharmacists keep a small HBC section right by the counter to make sure we have whatever our customers want and what we recommend.
CATER: Every new store we open -- our format's about 45,000 square feet -- has a pharmacy in it. We did some studies on what a store with a pharmacy means in terms of HBC sales vs. a store without a pharmacy. Comparing like stores, we saw from 25% to 35% higher HBC sales in our pharmacy stores, vs. nonpharmacy stores.
A key issue influencing a lot of supermarket executives to get into pharmacy is demographics. They are also seeing the upcoming barrage of OTC switches.
We are enjoying increased sales, but little margins, so it's difficult to say our mission is we're going to be a profit center. That may not be possible in every case.
MORAVEC: I've got great corporate support for pharmacy. Our board chairman was formerly head of McKesson Drug. We're also lucky because our company is only 10 years old. Everybody from the CEO on down can try new ideas without having to deal with an overbearing layer of bureaucracy and how things had been done before.
When I first started working in the grocery industry, the perception was, "The pharmacy's back there. We don't quite understand what they do, but we've got some customers who go there and it seems like our competitors do that so we need to do it, too."
Now we have people coming into our pharmacies because the person who works in the pharmacy is their pharmacist. Whenever I find cases like that, it really makes me feel good, to have the pharmacy be the destination of the customer, not just the grocery store.
CATER: It used to be you would depend on the traffic in the supermarket to build the pharmacy. Well, we have a lot of customers who come to the store for the pharmacy. In some cases, the tail is wagging the dog.
Our pharmacists are the service ambassadors of the company. Every transaction is eyeball to eyeball with the customer. They know the customers' names.
MORAVEC: We don't sell anything at our store that our customers can't buy somewhere else. So we distinguish ourselves by bending over backwards to give excellent customer service. That involves person-to-person contact. If the pharmacy can establish itself as where you go to have good experience, customers will keep coming and it'll support the rest of the grocery store, too.
REINHARDT: I feel it's important that management goes out and actually sees what pharmacies are doing. District managers and store managers need to spend some time training to see what's going on in the pharmacies. Then they will understand that when it looks like we're not doing anything because a customer is not there, we're filling the prescriptions.
Some store managers understand pharmacy better than others. The ones who understand and support the pharmacy will say, "I really don't care if you make a dime back there. You're bringing people to the store. Just keep doing what you're doing." We build traffic. We build the loyalty of the customers and the sales out front in HBC. Many of them do realize it.
CATER: The greatest supporter you can have is a store manager who has a successful supermarket pharmacy. That guy will do wonders for you. We try to get them involved.
Initially, you may have to first have a successful pharmacy. Then you'll have the store manager looking at the numbers and saying, "This guy is putting money in my pocket. I better get back there and make sure he's got his doughnut in the morning." Eventually you establish a relationship.
We did a study of what happens in an area where a competitor comes in, comparing a pharmacy store vs. a nonpharmacy store, in about five different marketing areas, and we saw some really good things for pharmacy.
When a competitor would come in, we would see a loss in business. But the pharmacy would never lose a heartbeat. Then slowly the base would creep back up. The store might not get back to where we were before, but we were a lot better off with a pharmacy than without one. It didn't matter whether the grocery competitor had a pharmacy or not.
Typically the strategy to attract new customers is a price, and we honor our competitors' coupons. Certainly the dumbest reason to lose customers is price. If people like you and trust you and it's convenient, why would they go anywhere else?
COHEN: When I worked as a pharmacist in a supermarket, I had to fight with the general merchandise managers and headquarters to put in an ad for the pharmacy, especially if it wasn't product-oriented that returned an investment or a co-op ad. They didn't want to hear about just promoting the pharmacy department. Is that still the case?
MORAVEC: It's not the case in Arizona. My company and several competing chains have an ad in every supplement. We have the latitude to promote the pharmacy or feature a product. Or the ad might be informational regarding health care or insurance programs.
PRIEVE: The pharmacy directors who are successful in educating their corporate executives on what pharmacy is and what they do -- they're the ones that are going to get the support. From what I've seen, support tends to be greater on the West Coast than in the East.
COHEN: Do any of you have much say in the design of the pharmacy? Do you fight for space, for location?
CATER: I completely design the pharmacy. The only space I fight for is the waiting area. If you walked into my pharmacy, you'd be shocked at the space we have. As for location, we don't fight anymore. I've always felt it should be in the front but my boss told me it's going to be in the back. (Laughter.) Giant Food is very successful with its pharmacies in the back. Safeway has
them in the back.
REINHARDT: We've got stores with the pharmacy in the back that are doing better than ones in the front. We've seen it both ways. The biggest variable is the pharmacist, rather than the location of the pharmacy.
COHEN: What's the future for combo stores, those that are divided down the middle between food and general merchandise? I've heard that there's a move to isolated pharmacy departments.
CATER: We put our pharmacies between the dairy case and the meat department, though not next to them, because these are high-traffic areas. BOESEN: I'm a one-stop-shopping customer. My pharmacist is in the supermarket and so is my banker. One thing that puzzled me is that I have more privacy at the bank than I do at the pharmacy. The departments seem to have about the same square footage, but the bank has dividers made of sound-deadening material. The pharmacy is elevated. I have to stand on my tiptoes to see over a display.
PRIEVE: A bank is a separate company that's leasing that space from the supermarket. The pharmacy inside the supermarket is the company's own square footage and they are keenly aware of how much it's costing them by not filling it up with product.
MORAVEC: Pharmacy design is changing. If you visit an Osco store, they've got a patient waiting room next to a counseling room. Privacy is enhanced. The patient and pharmacist sit opposite each other, with eye-to-eye contact. Safeway is doing some similar things, and we will have a similar setup.
REINHARDT: We put in a counseling booth where the patient and pharmacist go in and close the door and sit down and talk.
CATER: On one side, we have a Dutch door that we use for semiprivate counseling. I would estimate that 5% of the people need completely confidential counseling. We bring those people inside to meet the pharmacist and sit down at his desk.
Our pharmacies are not elevated. Our customers can look in and see what we do. The pharmacy is not physically open, but it's visually open.
SP: What is the role of pharmacists concerning Rx-to-OTC switches? How are you planning to promote naproxen sodium?
REINHARDT: We are only responsible for pharmacy sales, not HBC. But we are looking at having pharmacy be responsible for the sales of selected OTCs.
CATER: Because our HBC sections are very close to the pharmacy, our pharmacists will be very involved with this switch.
Syntex picked a good partner to merchandise Aleve. P&G is going to sell that product. We're going to see floor stands, and a lot of advertising on TV, in newspapers. If ibuprofen is any indicator, naproxen sodium will be an extremely successful switch.
I have a pretty good relationship with the head of our nonfoods department. In fact, he used to work at PayLess, a drug chain, and he understands the importance of pharmacy. We will have that product in stock before they have it in the warehouse because we'll get it from the wholesaler. Something like this is so big, you don't want to miss out on initial sales.
PRIEVE: You're fortunate to have that kind of relationship because, from what I've seen, managers don't want to give up one SKU to anybody.
CATER: Typically the structure in a supermarket has been that the pharmacy director or supervisor has reported to the vice president of nonfoods. At our company, pharmacy is run separate from nonfoods.
TREBING: Ninety percent of the time the patient accepts the recommendation of the pharmacist and they leave the store with that product. With patients who have a prescription for Napro-syn, and also new patients coming in complaining about head-ache or arthritis pain, the pharmacist has the opportunity to recommend a product.
BOESEN: Switch products could be tied back to the pharmacy. Shelf talkers could encourage customers to purchase such products at the pharmacy so the pharmacist can add the medication to the patient profile.
Because the product is no longer on prescription doesn't mean it's any less important, and maybe there needs to be payment for carrying those products and the consultations on them. Unfortunately we don't have a third class of drugs that could be used to market these products.
COHEN: How do you treat prescriptions that come in for naproxen sodium or Anaprox? BOESEN: The pharmacist could say something to the patient like: "The medication you've been taking on prescription is also available in a nonprescription form and may be included as a component in some of the products you pick up. Therefore, to avoid any problems, be sure you consult with the pharmacist next time before picking up an OTC product."
You would be bringing patients back to the pharmacy and also let them know, "I'm your pharmacist and I give a darn about what you're taking." That's another reason to go back to what your management and say, "We need to have some control over that OTC area because this is the potential that we can have of patient loyalty to the pharmacy, when pharmacists get paid on profit."
REINHARDT: Patients could benefit from having the pharmacist check antacids against other medications being taken. Pharmacists could then counsel based on all the medications the patient is taking. Insurance coverage is needed for OTCs that are purchased in the pharmacy.
BOESEN: There's a lot of rationale for including OTC products in prescription programs. The difficult part is coming up with a methodology to make sure there is a legitimate reason for the purchase of the OTC, and that purchases are not being made for other family members who may not be covered by the insurance. There could be a limited formulary for insurance reimbursement of OTC products related to specific disease management.
SP: From a retailer perspective, what is the problem with third-party plans?
CATER: Margins have been spiraling downward. We are getting lower and lower reimbursement and networks (of pharmacies that contract to provide services) are getting more restrictive.
Just as important is the issue of control. As providers, we don't have that much say about how it all comes together.
REINHARDT: We've got administrators (of third-party plans) saying, "Sign up with us. We've got this group of people. We've got that group of people." We feel totally hamstrung. We've got to accept it because of the customer base.
MORAVEC: Terry mentioned the three most important concerns of third-party programs: declining margins, restrictive networks and the loss of control. At one time, these contracts were negotiated, there was give and take, with two parties trying to agree. That doesn't happen anymore. It's a take-it-or-leave-it proposition. Quite frankly, nobody's really going to leave it, so we take it.
CATER: At some point, at least in California, there is a floor as to what you can take and still survive. Recently we turned away some programs and we never did that in the past.
BOESEN: Pharmacists have a new customer in the marketplace. Third-party plans are coming in with some requirements, some needs of their own.
Pharmacy has to begin communicating with these new customers about cognitive services. Pharmacy directors need to be at the table discussing what services pharmacists at their stores can deliver. At the same time, pharmacists behind the counter have to begin to show what it is that they do beyond handing over the product. If all the payers see is the distribution or delivery of a product, and reimbursement is linked to the product, you're going to see continued negotiation for the lowest price for delivery. Pharmacy offers much more, but until pharmacists can get to the third-party payer and describe what services they are providing, pharmacy is going to have a difficult time. I believe third-party payers are open to these arguments. They just don't know at this point what pharmacy can or is willing to deliver.
As pharmacists, we've done a disservice for years of hiding those services. When we talk to the payers, we take for granted that they know about and understand the many services pharmacists provide, such as patient profiles, computerized systems, drug utilization review.
The average patient doesn't know we do all that because we do it behind the counter in a corner somewhere. We need to bring that out in front of the public. We also need to bring it out at the boardroom table where we have practicing pharmacists and pharmacy directors talking to these new customers.
COHEN: The growth of third-party plans has been a double-edged sword. Pharmacists experienced diminished profits right at the start of third-party plans with Medicaid in the late 1960s. I was a practicing pharmacist then, and the plans did bring customers to into my store. I wasn't making a lot of money but I was seeing customers that I had lost to the chains. My concern, Dan, is that while pharmacists have been doing those services for so many years, they have not done a good job of selling their services.
Then again, I'm not convinced that they should sell their services. Pharmacy is the No. 1 trusted profession. Pharmacists offer their services without asking for anything in return. We
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should raise the professional fees without pharmacists having to exhibit what they do.
Pharmacists are not out there counseling as they should be in many cases. I don't think they have to be out there on every prescription. Counseling is only one dimension of pharmacy. What the patient doesn't see are the discussions with physicians on a daily basis on the telephone, and checking of drug interactions using the computer. These services are part and parcel of the profession and should be recognized with better reimbursment.
BOESEN: It may be as simple as showing that you keep a patient profile, and that when you fill a prescription, you assess that medication against other drugs the patient is taking. Patients only see that they give in a prescription and receive a product in return.
The managed care organizations have experience in putting together packages such as disease management programs. Pharmacy ought to be at the table, saying, "I'm part of disease management. I'll assure patient compliance. I'll take some responsibility for patient therapy. I can do it less expensively than a clinic."
CATER: For years, pharmacy has been sort of the triage service. I think it's a valuable part of the health care delivery system. Pharmacists might advise a patient on a skin disorder or lice or any number of conditions. Whether pharmacists will ever get paid for this service, I don't know. That's certainly a value in pharmacists detecting drug interactions and drug allergies, and in counseling patients. We need to explain to people, and not just patients, more about what we do.
MORAVEC: Exactly how do we get to be part of that forum with third-party payers? Originally, the third-party claim adjudicators served the market. I believe that we are now seeing cases where they make the market. LAUGHREY: Let's say PCS is negotiating with a third-party payer. I'm not sure if the pharmacy is in that equation. The retail pharmacy should present its side of the program. What could happen is that the third-party administrator will do whatever it can to get that contract and force the pharmacy to pay for some of the consequences.
REINHARDT: I agree with Terry. We save people a visit to the doctor. Or we've told them they need to go to the doctor now instead of waiting and ending up in the hospital. That takes time. That takes availability. How do we put a dollar amount on that?
Third-party payers say that sometimes someone goes to the pharmacy and doesn't see the pharmacist. That's right. With the reimbursement we're accepting now, I've had to cut off clerks. Our pharmacists are tied up trying to fill the prescriptions. The pharmacy can't get enough technician hours because the dollars aren't there. If we were able to get a dispensing fee that allowed the pharmacist to spend time with patients, there would be savings, not only on the prescription benefit but also in medical costs. Do third-party administrators look at this?
BOESEN: We're going to do more of it in the future. One of the reasons PCS has expanded into medical claims management is to pull in that other part of the equation. What impact does pharmaceutical care have on dollars that are being spent? As our system improves, which is happening very rapidly, we should be able to look at these two together. Almost all the RFPs (request for proposals) we've seen in the last three to six months have asked how we handle disease management.
A company like PCS has to determine how many of those services we do in-house, and how many the retail pharmacy network can do. Those able to deliver these services and demostrate their performance level are going to be the most sought-after pharmacies in the future.
I don't see us continuing this downward spiral (on product reimbursement). There's not much more room there to go down. The payers are saying, "What else can pharmacy deliver?" We're going to see PCS and other companies bundling services and working with retail pharmacists to develop performance-based networks.
For example, if we're going to treat diabetes, we need to get the manufacturers to bundle some of the products, including the educational services that they have. Can pharmacy monitor that patient in exchange for specific reimbursement? Can we demonstrate to payers that by doing that we can decrease hospitalization and physician office visits? The real question is, how many pharmacists are going to step up and deliver these services?
We're developing a compliance program that will alert pharmacists and provide them with additional information to provide to patients on the rewards of medication compliance. Initially the program will be sponsored by manufacturers.
Ultimately, I think managed care is going to pay for it because they are going to recognize the value of excellent compliance to medication means no more hospitalization in many cases, certainly a tremendous decrease.
MORAVEC: Studies of compliance with blood pressure medications indicate that most hypertensives discontinue their medication, by their own volition, after the second refill.
LAUGHREY: The pharmacist can intervene with that person and explain that "this is a condition that may be with you for the rest of your life. Here are the consequences should you stop the medication suddenly." That, I believe, a pharmacist should be paid for. But it takes the pharmacist 20 minutes to properly counsel patients on the value of continuing their medication. There are some studies being conducted by Purdue University and Washington State University on what happens when patients discontinue their medications and what costs can be saved by encouraging compliance. It's called outcomes research. Actually, over 90 mandated studies are being conducted on what happens when a pharmacist intervenes. They're not funded, just mandated (by the federal government as part of the OBRA legislation). (Laughter.)
BOESEN: Some of the results are encouraging from the standpoint that there's a substantial savings in the actual intervention. The difficulty is that when you spread that out over the number of prescriptions a pharmacist fills in a day, each intervention saves approximately $32, but it's less than a quarter per prescription.
There are other opportunities as well for pharmacists. I've been taking anti-hypertensives for years. I go to an HMO every six months and my physician checks how well the medication is working. I've asked the plan manager how much that costs, and he said about $75 for each visit.
A pharmacist could do this. You could monitor compliance and supply the physician with a listing of two or three blood pressures over that span of time. You could go to that HMO and offer to perform the same services for, say, $50. CATER: We're going to start seeing pharmacies at the table. The real issue will become not what's the cheapest price, but what has the most economic impact?
REINHARDT: We're at the bottom now and we really can't go any lower.
SP: Does anyone see exclusive contracts either going away or is it going to get worse? Are there real savings in that? Or are plans just moving people from one bunch of stores to another?
LAUGHREY: The Clinton plan for health care reform talks about freedom of choice. Some states have adopted legislation supporting choice.
MORAVEC: It would be better if we had no closed systems, no exclusive contracts, at all.
CATER: To foster the image of supermarket pharmacies and to help supermarket pharmacies compete for third-party business, a coalition of supermarket pharmacy operators created Super Net. We now have 64 corporate members and 4,000 individual pharmacy members. (Cater is president of Super Net.)
Long-term, Super Net may become a buying group.
SP: Will the computer technology being developed help pharmacists prove their value?
MORAVEC: All pharmacies have been investing heavily in technology that may prevent drug-drug interactions. We're still not being recognized for providing these services, let alone being paid for it.
LAUGHREY: When we first came out with our program to check for drug interactions, we suggested that pharmacies promote the fact they check one prescription against another.
Hooks-SupeRx improved on that with a program that they call "Rx Watch." Patients enroll in the program. Advertising for the pharmacy shows the actual computer screen, with interaction signs popping up. Perhaps pharmacists can convince payers that they can encourage patient compliance, for example, for Mevocor. If the patient has been educated and continues to take the medication, that may prevent the myocardial infarction or a triple bypass.
Two years ago the National Council on Prescription Drug Programs developed standardized intervention codes for when there is a drug-drug or drug-allergy conflict. The computer catches these but the pharmacist goes over the interaction, counsels the patient and calls the doctor. The pharmacist uses a code to indicate that he has called the physician, who said, for example, to continue the medication.
Recently we developed a professional services work group at NCPDP that is developing standardization for the professional services that pharmacists provide. Not only time, but also degree of seriousness will be part of these standards. These standards will then be incorporated into new software systems. SP: Have pharmacists considered using their data bases to make a list of all the people on Naprosyn, or even other non-steroidals, and doing a mailing to tell them Aleve is available over the counter?
CATER: We've wrestled with this issue because of concerns about patient confidentiality. We really don't have an answer. I think it would be effective to notify people about Aleve. You could be doing them a favor, if, for example, they're taking Naprosyn. We haven't come to terms with whether that is the right thing to do. Is it the ethical thing to do? At some point we'll make a decision and hopefully it will be right for our customers.
SP: Any predictions for multitiered pricing or class-of-trade discounts going away?
CATER: I think the Clinton health care reform proposal does a fairly good job at least in addressing this issue. I think we can all agree that the guy who buys 5 million should get a better price than the guy who buys five.
TREBING: There's a difference between single price and best price. I think there may come a time when you'll see more evidence of single pricing within the quantity range discounts, but it may not be the best price that we see today. It would be naive to think that the lowest, best price available today would be accessible to everybody. There's all kinds of criteria. Class-of-trade discounts are addressed in the Robinson-Patman Act.
CATER: Selling a product at a lower price to a mail order pharmacy, as opposed to a retail-based pharmacy, that's the controversy for us. We hope the law is changed.
SP: In a survey we did (see Page 11), pharmacists said they want more information on cost-effectiveness of pharmaceutical products. What's being done?
TREBING: As an industry, we're probably very late in doing that. We should have starting doing these things 10 years ago. The ads developed by the PMA (Pharmaceutical Manufacturers Association) looking at the value of research are an example. As formulas become more prevalent, price becomes the concern. Just as pharmacists offer services to their patients and other customers, we do the same thing. We've got a lot of value-added projects, programs and materials. We're in the process of incorporating them into some of those contracts. We've got to because we're never going to be the lowest price around.
Some of these value-added services include continuing education programs, value-added programs that may help pharmacists counsel patients more effectively. Also compliance aids, such as posters that encourage patients to ask questions of the pharmacist. As pharmacy and industry hit heads from time to time, it's usually on about 2% of those issues that we don't always agree on, such as pricing or quantity discounts. When you look at quality of life and what we can do to help educate you in taking care of customer needs, we agree. We're seeing more pharmaceutical companies beginning to fund research that you're looking for, to prove that our products, combined with the services that you can provide, really are of value. I think we'll see more of that. At some future date, it may even be required to show the cost-effectiveness of a product to gain marketing approval.
COHEN: As manufacturers, we are also paying rebates to Medicaid programs. The rebate program has escalated into the private sector in certain areas, and I think that's going to continue. I don't think anybody can afford to pay these kinds of rebates, much less the generic industry.
We paid $1.5 million in rebates last year -- that came right off the bottom line. One of the problems we have concerning rebates that affects the generic industry is when the wrong NDC
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numbers are entered. Pharmacists will start to fill a prescription. But for some reason there's a shortage and you can't get that product, and the pharmacist doesn't change the NDC number. The company whose NDC code is entered ends up paying the rebate on that product and any refills. Bigger Role for Wholesalers
SP: What is the wholesaler role with food store pharmacies and how is it changing?
PRIEVE: We're finding as more and more food stores get into the pharmacy business, or even if they're in already, they're taking a hard look at whether to warehouse pharmacy products. Some are withdrawing from warehousing and deciding a wholesaler can distribute better than they can.
Pharmaceuticals represent a significant investment in inventory that doesn't turn like perishables. A supermarket chain has to be a fairly significant size to have a warehouse for pharmaceuticals, like a Safeway. Wholesalers also offer services such as computer programs, electronic data interchange, pricing up-dates and automatic ordering.
COHEN: In the generic industry, wholesalers act as a buying group. They have source programs and they become the buying group for some supermarkets and chains.
As more third-party programs go to exclusive contracts, it has become difficult for generic drug companies with multisource products. Because of preferred generic drug programs, costs are being driven down and third-party programs have become increasingly formula-driven. Our company has made an effort to work more closely with wholesalers because we feel that they are going to be key players going forward. PRIEVE: We can negotiate better prices for retailers from the manufacturers if we can get compliance to a certain formulary. In other words, the supermarket pharmacies that don't run their own warehouses may not have the purchasing power we have as a wholesaler. We can get them a better deal if they stick to certain medications, starting with generics, but then including brands.
If the pharmacy were to dispense a brand of ibuprofen, we could use the buying power to go to the generic manufacturers. Whoever has the best price on the ibuprofen is going to get on the formulary for those stores.
COHEN: It's not just price. There's also availability, quality and services.
PRIEVE: Most of the pharmacies deal direct with us to supply prescription drug products. We have turnaround for the next day. There is some spillover into OTC for products kept in or near the pharmacy, such as diabetes test strips and blood glucose meters.
SP: How will pharmacies in supermarkets evolve? Will the format war continue?
MORAVEC: The sign of one of our major competitors in Phoenix, a so-called traditional drug store (Deerfield, Ill.-based Walgreens), says, "Pharmacy, Liquors and FoodMart." So it looks like they're moving in our direction, but at the same time, we're moving more into pharmacy by volume. Maybe it'll intersect and we'll all be true food-drug combos.
I see the potential for supermarket pharmacies to offer more counseling services, possibly a kiosk with an interactive screen where you can get information on certain conditions. There might be tie-ins with clinics. Also clinical screenings, such as for colorectal cancer.
CATER: God created supermarkets as a place for pharmacies. I think the format will continue. In the future, we'll be almost the corner drug store. We'll be on the Home Shopping Network. We'll be on the computer networks. We'll do infomercials. We'll build coalitions. I believe in freedom for customers to choose their pharmacy, but it doesn't exist anymore. Super Net is our effort to level the playing field for supermarket pharmacy operators. Looking into the future, we fear the most for the independent pharmacists.