Community Practice

Independents stay the course, NCPA survey shows

Independent pharmacies sold more goods and filled more prescriptions than ever last year, but their gross profit margins continued to shrink, according to preliminary data from an annual snapshot of the industry.

Each of the nearly 1,000 independent providing detailed financial data reported total sales of more than $2.45 million last year, according to statistics released by the National Community Pharmacist Association at the New York City press briefing last month. Preliminary data from the NCPA-Pharmacia Digest found that total sales were 6.5% higher than in 2000. The independent pharmacy industry racked up total sales of $60 billion, up from $58 billion in 2000.

Most of the independent's sales growth stemmed from prescriptions, which accounted for $2.15 million of the total revenues, up from 10% from 2000. Prescription sales represented 88% of all sales in the average independent pharmacy, compared with 83% the previous year. Independent pharmacies dispensed 1.32 billion scripts worth $53 billion in 2001. The average independent dispensed 53,808 prescriptions last year, up 5.5%. The average daily dispensing rate was 172 scripts.

The bad news came as no surprise. Gross profit margins continued their downward slide last year, to 22.1% of sales, compared with 23.3% in 2000. Due to volatility of the numbers, the average net profit margin was not revealed. However, NCPA's senior v.p. for strategic initiatives Todd Dankmyer said that net profit will probably end up in the 3% to 3.5% range comparable to the 2000 margin.

Gross Margin shrinkage has been a thorn in pharmacy's side for years said Bruce Roberts, NCPA executive v.p. -CEO. "It's one of the reasons we've focused so heavily on the PBM issues," he said. "Continued downward creep of margins is causing us a lot of heartburn. We're doing everything we can to turn it around."

Providing services has given some independents traction o the slippery slope of gross profit margins. "When things have become very difficult over the past 10 years, what independents have done is become very innovative in developing a number of services total help supplement their income and move the profession forward," said Roberts.

After staging a comeback to 24,811 stores in 2000, independent pharmacy slipped back to 24,602 outlets last year. NCPA believes a pharmacy is independent if it is pharmacist-owned and privately held, which includes single pharmacies, independent chains, independent franchises, and independent pharmacist-owned supermarket pharmacies.

With 50% of owners over the age of 50, independent pharmacy has a problem. However the need for new blood is coinciding with heightened interest in ownership among young pharmacists, Roberts said. After a year or two in practice, more grads are seeing easy to use their patient care knowledge and skills. "These types of services are what excite young folks and draw them to ownership," he said. "The services we've developed allow us to grow.