Drug Topics Perspectives: Do your distributors’ interests conflict with yours?

May 9, 2017



We currently live in a time when our healthcare treatment is continuously evolving. This is especially true when we visit our local pharmacy. Independent pharmacists play a pivotal role as a trusted advisor to patients – you, me, our parents and children. Collectively, we are all taking more medications than ever before. Because of that, it’s crucial that we able to visit our local pharmacist for health care delivery, and know that they will tell us about contraindications or side effects we might encounter, suggest how to stretch our dollar, give us whole-health advice beyond just prescriptions, help us adhere to our medication, and keep our best interests in mind.

Research by Consumer Reports shows that more than 90 percent of readers gave independent pharmacies excellent or very good scores for pharmacists’ knowledge about drugs and other products, helpfulness and courtesy, speed and accuracy, and personal service. No other type of drugstore came close. Readers who shopped at independent stores were twice as likely as chain-drugstore shoppers to characterize their druggist as easy to talk to and able to give them a one-on-one consultation.

Similarly, pharmacists should rely on their wholesaler to treat them with the same respect and sense of trust. Wholesalers are no longer just middlemen to independent pharmacies. Wholesalers have become powerful entities that can propel a pharmacy’s path to profitability or, in many cases, impede their ability to compete in their market.

A phenomena in recent years is the emergence of sourcing alliances created between the largest wholesalers and the largest national pharmacy chains. These alliances are designed to drive down costs from manufacturers and increase shareholder value. However, the impact of these alliances is far more than your traditional wholesaling services. They are designed to let the big get bigger, and that means increased competition for your local community pharmacist. While these wholesalers may claim to support independent pharmacies, the truth is that they need the profit they get from independent pharmacy customers to subsidize the smaller margins of their largest national chain pharmacy customers. And if the alliance is designed to benefit both sourcing entities first (wholesaler and national chain), then an independent pharmacy might get a better acquisition cost only to make their largest competitors more profitable, thus making it even harder to compete. The deck is stacked against these healthcare entrepreneurs in a way we’ve never seen before. These conflicts of interests must be carefully measured when selecting a wholesale partner.

As the healthcare model moves toward more personalization, independent pharmacies can survive, and even thrive, by evolving their business practices and strategically aligning with business partners. These partners should share common goals and interests. H. D. Smith, the fourth largest national wholesaler, has been exclusively focused on community pharmacy for more than 60 years; not chains or mail order pharmacies. Without conflicts of interests embedded in our business model, our future is your future; the future of independent pharmacy.

We encourage pharmacies to research any potential partner. Look beyond the sales pitch and into the publicly available data regarding your potential wholesaler’s interests.

Independent pharmacies aren’t competing against each other. They are competing against a headwind trying to commoditize pharmacy and reduce our care options. So, while we know the most common desire in selecting a wholesaler is better pricing, what will a better price get you if your business is leveraged to make your competitor more profitable? If your wholesaler is directing profits from your business to the success of your competitors, then you might be getting a better price initially, only to get farther behind the big box retailer down the street.

Pharmacy profitably is not exclusively dependent upon “buying better” in today’s landscape. You must understand where your profit opportunities are and how to access them; all while running the best possible operation you can.

Because big-box retailers now own parts of the nation’s largest wholesalers, we independents can no longer just “accept” that these things have happened and be ok with it. There are alternatives and there should be consequences when companies work against their customers. Collectively, we must become stronger to take back independent, community-focused pharmacy.

H. D. Smith’s emphasis on meeting the needs of independent retail pharmacies and regional chains distinguishes it from larger competitors who primarily distribute to national pharmacy chains. Independent pharmacies are the number one priority of H. D. Smith, as our size and structure differentiates us in the market, and allows us to be flexible and responsive to meet the needs of independent chains. We know first-hand how hard it is to compete with larger competitors, and remain independent because it’s part of our mission. We strive to support caregivers who have the highest potential to improve patient outcomes.

As the world moves toward personalized medicine, your patients will demand options to choose how they are treated. The reality is that very few people get the same level of care from a national pharmacy chain than they do from an independent pharmacy. We, as an industry, need to ensure our independent pharmacies are here to stay. By doing so, we can improve our own health outcomes and create a stronger healthcare system. Because as patients, we all want better healthcare.

Visit stopfundingyourcompetition.com to hear from your independent pharmacy peers who have joined the movement.