Iffy economy tempers view of 2002

December 10, 2001

Fewer independent pharmacy owners and drugstore executives are optimistic about their economic prospects in 2002, according to a Drug Topics survey.

 

COVER STORY

Iffy economy tempers view of 2002

The majority of community pharmacy owners and executives think the year ahead will be a good one, but the downward trend of managed care fees and general stagnation have taken some air out of the economic engine's tires.

Sixty-three percent of independent pharmacy owners and 58% of chain executives predicted 2002 will yield good to excellent results. That's still pretty optimistic, until it's compared with the 74% of independents and 77% of chains who were upbeat about the 2001 business climate. The biggest business bummer they identified was managed care's how-low-can-you-go reimbursement. Many independents also mentioned the mail-order menace, while more chains see the R.Ph. shortage as a drag.

In the sales department, 55% of independents and 75% of chains expect cash registers will ring more next year. The median sales hike anticipated is 10%. Another 35% of independents foresee a sales status quo, and 10% are bracing for a sales downturn. Among chains, 16% think sales will be flat and 9% expect a dip.

Sales will go up, but so will overhead, according to 60% of independents and 63% of chains. The largest component of operating expenses—R.Ph.s' wages—is going to get larger in 2002, according to 69% of independents and 91% of chains. Independents expect average pay hikes of 8%, while chains put wage inflation at 7%. Only 15% of independents and 39% of chains plan to hire more staff.

The main source of revenue in 2002 will remain private insurance plans, accounting for 47% of the average independent's business next year, about the same as this year. Chains expect 63% of revenue to come from third parties, about the same as this year. Cash customers will account for only 20% of revenues among independents—the same as this year—and 15% in chains. Medicaid will provide 31% of independents' revenue and 18% of chains' income.

With the winds of economic fortune shifting to the north, independents and chains anticipate financial chills from several directions. The chief negative factor for 88% of independents and chains is Medicaid reimbursement cuts. President Bush's Medicare discount drug card is bad news to 79% of independents and 88% of chains. Meeting next year's deadline for compliance with Health Insurance Portability & Accountability Act's (HIPAA) claim transaction regulations is worrisome to 52% of independents and 82% of chains.

There isn't much ahead that's worth a thumbs-up, but falling interest rates are a plus for 42% of independents and 71% of chains. Also, Rx drugs offer moderate sales growth potential, according to 43% of independents and 56% of chains.

Carol Ukens

HOW DOES 2002 SHAPE UP?

 PoorFairGoodVery GoodExcellent
Chains14%28%42%11%5%
Independents43343164

WHAT’S AHEAD FOR NET PROFITS IN 2002?

 IncreaseDecreaseRemain the same
Chains39%33%28%
Independents223345

 



Carol Ukens. Iffy economy tempers view of 2002.

Drug Topics

2001;23:32.