No-insurance shops can thrive in today's market

Perhaps fewer than 100 such shops exist nationwide, but a spokesman for the National Community Pharmacists Association said "if insurance companies keep going the way they are, they'll drive a lot of people out of business. This kind of thing could end up being the way for a lot of pharmacies to survive."

In this model, 95% or more of business is generics and pharmacists take no insurance-not even Medicare or Medicaid. That means no co-pays, no deductibles, no reimbursements, no pharmacy benefit manager audits, no hundreds of thousands of dollars in branded stock on the shelf, and to hear the few pharmacists who are doing it talk about it, fewer headaches and way less stress.

According to Tipton and Brooker, money is only part of it. "I go home feeling very good at night, knowing I've done my job and I've been helping people out," said Tipton. "I don't know how many of my colleagues can say that." Brooker agreed: "I don't think I could go back to doing business any other way."

The way Precision does business is a model for how a no-insurance shop works: The profit margin on brand drugs is generally very low. The profit margin on generics is much higher. Brand-name drugs are also much more expensive to stock. So the low margin and high inventory costs of branded drugs drives the margin on generics.

In addition, insurance companies are expensive and time-consuming to deal with, which further drives up the costs of generics in most pharmacies. If a pharmacist eliminates brand drugs-stocking only the few that are in high demand and lack generic alternatives, such as some statins and antibiotics-and stops taking insurance, he or she can significantly lower the cost of generics to patients.

"That's the way it works for us," said Tipton. "Our prices are way below our competitors. It's not their fault. Just to survive, they need to mark up their generics. We don't. I save money I can pass to consumers on just not having to hire employees to handle the insurance companies."

Another factor is that Tipton can lower prices if he chooses to do so without flak from a PBM. "That was never possible for me before or for most every other pharmacy," he said. "Chains and many independents have no leverage to offer price breaks. We don't have contracts
so we can charge whatever we want. The difference is I feel much better about how I do business."

Prozac (Lilly), for example, can cost as much as $82 for 100 capsules in generic form at nearby pharmacies, said Tipton. Precision can sell the same quantity of the generic fluoxetine for less than $13, he said. Cardura (Pfizer) typically retails for $100 for 100 tablets. Precision offers the generic doxazosin for about $20 for the same quantity.

Tipton and his partner do some marketing and also contact local doctors for referrals. Business has been booming since they opened. "I understand about eight million Californians are uninsured," he said. "That's primarily working poor. The demand is there for what we do."