Independent pharmacies a vanishing breed in the Northland

The least of Doug White's worries is another pharmacist coming to Proctor to compete with him.

"If anybody tried to open, they'd have some misinformation," the owner of LTC Prescription Providers said with a chuckle.

White, 60, founded the pharmacy in 1999 in a building that previously had housed another drug store but had been vacant for about two years.

Some of the customers didn't return.

"Proctor is kind of a bedroom community, and I think when the old one closed, a lot of them just moved out to Kmart, Walgreens," White said. "And they're just more used to going where they are now."

By serving a niche - assisted-living facilities in the region - White has been able to generate enough revenue to support his retail business, he said.

And that makes him part of an increasingly rare breed: independent pharmacists.

"It's a really tough thing for independents to make a go of it," said Michael Swanoski, senior associate dean at the Duluth campus of the University of Minnesota College of Pharmacy.

Swanoski, a Superior native, has made a study of the decline of independent pharmacies. He rattled off a list of independents that once served Duluth, including Newman's Pharmacy, Rutter Pharmacy, Oberg Pharmacy and Falk's Pharmacy. Only Falk's remains, and that's as a service for nursing facilities and group homes, not as a traditional retail pharmacy.

People's Drug Store, "the last independent standing" in Superior, closed recently, Swanoski added. Globe Drug, a mainstay for almost 60 years in Grand Rapids, recently sold to the Thrifty White chain.

The numbers confirm the anecdotes, according to Swanoski's research. In 2002, St. Louis County had 31 independent pharmacies and 51 chain pharmacies, he said. By 2017, the number of chain pharmacies had dropped to 41, and the number of independents was down to 12.

In Carlton County, the number of chain pharmacies actually was up from six to nine, but the number of independents had dwindled from three to one, he said.

PBMs to blame?

Why the decline?

Both Swanoski and White blame prescription benefit managers - PBMs. Originally developed to process prescription drug claims for a fee, the PBMs have consolidated and become a powerful force that are keeping too much money for themselves, the two say. And this is more of a hardship for independents than chains, because the chains are big, too, and have more bargaining power.

"Ultimately, the reimbursement rates for prescriptions have gone down significantly," Swanoski said. "And at times, they barely cover the cost of the drugs."

White, who employs five pharmacy technicians, one full-time pharmacist and one part-time pharmacist beside himself, said in the case of one prescription, all LTC Prescription Providers was paid was 60 cents.

"When you pay a pharmacist $60 an hour, what does 60 cents get you?" he asked rhetorically.

The PBMs have accumulated undue power, according to the National Community Pharmacists Association, because just three of them control more than three-quarters of all prescription drug benefit transactions in the U.S.

But as one might expect, a spokesman for one of those three PBMs has a different take on the situation.

Brian Henry works for Express Scripts Holding, a PBM that is No. 25 on this year's Fortune 500 list. Even if three PBMs hold most of the market, dozens are in existence, he said, so there's ample choice. He insisted that PBMs such as Express Scripts actually are protecting consumers from prices that otherwise would be even higher than they already are.

"Pharma companies and drug stores would want to charge more money," he said. "The people that we represent want to pay less."

Express Scripts has bargaining power, he said, because it represents 83 million people working for 3,000 companies, health plans, labor unions and state entities.

Henry challenged the idea that pharmacies are being squeezed. "We've never had more pharmacies, ever, as a country," he said.

The disappearance of independents isn't unique to drug stores, he added.

"I don't know that I would say it's any harder for an independent pharmacist versus an independent toy store, versus an independent bookseller, versus any type of independent retailer," Henry said. "That is just: Where do people shop? How do they acquire goods?"

Locally oriented

White acknowledged that some people choose chain stores for convenience's sake. LTC Prescription Providers is open from 9 a.m. to 5:30 p.m. weekdays, 9 a.m. to 1 p.m. Saturdays and over the lunch hour on Sundays. A 24/7 pharmacy, Walgreens in West Duluth, is 4 miles away.

But he said he can offer his customers services they might not get from a chain store, such as providing the kind of packaging they prefer.

Swanoski laments the decline of independents, he said, because they are owned by people in their community who will make decisions based on local needs rather than follow a "cookie cutter" approach set at the corporate level.

The local attitude was reflected in the advice he got from one of his first bosses, George Oberg of Oberg pharmacy.

"The first thing he said to me was, we're here to serve patients, and don't ever feel in a rush," Swanoski related. "That person standing in front of you is the most important person, the most important part of your work."

Independents still can survive, he said, but they may need to chart a new course to do so. Some rural pharmacies are opening telepharmacies, in which a pharmacy technician in one town can be linked to a pharmacist in another town to fill prescriptions in a place that otherwise wouldn't be served. At Globe Drug, Mike Brandt offered a variety of services, such as medical supplies and a nurse on staff to talk with patients about respiratory therapy issues. Goodrich Pharmacy in the Twin Cities has agreements with medical providers to help manage chronic diseases.

At LTC Prescription Providers, service to assisted-living facilities comprises 70 percent of his business, White said.

Walk-in business from Proctor residents alone wouldn't be enough to sustain his business, he added.

He also is part of a cooperative group of independents that, together, have some bargaining power, he said.

But surviving as an independent pharmacist still is challenging, White said.

"Every day, it's a struggle," he said. "It's not like I'm hauling in the big bucks and having the big cushion. It's day to day. ... It's not easy, and it's not getting easier."