Family practice
November 13, 2006
Small Pharmacy Facing Big Competition
When William Overkamp opened his insurance-free pharmacy three years ago, he knew he would be facing a lot of competition. Not accepting insurance is an obstacle he was willing to accept, because his cash prices — especially for larger quantities — are likely to be lower than an insurance plan's price.
But Overkamp probably didn't count on his Bill's Pills pharmacy having to compete against discount chains that are charging less for some medications than it costs to bottle and package them and are even giving drugs away. Nor did he think when he opened his business in 2003 that Medicare would actually offer a drug insurance policy to the population that purchases the most pharmaceuticals.
Still, after a rough sales period earlier this year, Overkamp said business has gotten better.
"It's starting to pick back up again. We were really good through January, February and March, and then it kind of died off as more and more seniors got on that Medicare Part D program. And because of their insurance, they had to go to other pharmacies, and I was forced to transfer those prescriptions to other pharmacies," he said.
But Overkamp said business has stabilized during the past few months, Many of his former customers who enrolled in a Part D program hit the plan's notorious "doughnut hole" that doesn't offer any coverage; they returned to Bill's Pills because Overkamp's cash price is lower than what they would pay at the pharmacies they switched to for Part D.
"They are back to paying cash for their prescriptions, and they're coming back for some opportunities that we have been able to provide for them," he said.
Then Wal-Mart announced it would sell over 140 generic drugs for $4 per prescription. The world's largest retailer activated that policy in Michigan after Meijer Inc. said it would make seven generic antibiotics available to customers at no charge.
Overkamp, though, said the Meijer program hasn't greatly affected his business because generic antibiotics aren't that expensive to begin with. But he added that it's difficult for him to go head-to-head with the regional discount chain because he doesn't sell clothing, food, housewares, paint or automotive parts.
"Obviously, they're doing that to fill volume for the rest of their store — and I don't have a rest of the store to fill volume for," he said. Combating Wal-Mart's generic pricing, though, is a bit more difficult for Overkamp. But he has found a way, at least on some of the prescriptions that have come across his counter.
"If we've been able to, we've been moving them to a three-month supply for $12. Then at least I can pay for my lime, my product, the ink, the labels and the vials — those types of things. So I've been matching their prices for three-month supplies," he said.
"But not on all the medications. They're selling a lot of the medications below cost, and I don't have that luxury."
Overkamp said Wal-Mart's $4 pricing policy might cover most of the cost of the drug, but likely doesn't cover the packaging, labeling and personnel expense to put the medications in the bottles. A recent industry estimate revealed that Wal-Mart is losing up to $5 on every $4 prescription its pharmacies fill.
"I think the average price that I've seen in the latest literature for service or labor cost to get a prescription pulled together is probably around $9. That's not the cost of the drug; that's the cost of doing business, keeping the lights on, paying the technicians," he said.