Buying groups: A powerful resource for indie pharmacies
Buying groups have been an important part of the community pharmacy landscape for nearly four decades. Their original purpose was to give independent pharmacies buying clout with wholesalers. Now these groups, estimated to number more than 30, have become full-service organizations with the tools and talent to help single-store independents and regional chains compete successfully in a chain- and PBM-dominated world.
The common good
Don Anderson is the CEO of the Independent Pharmacy Cooperative (IPC), a 4,000-member group headquartered in Sun Prairie, Wis. He also serves as the chairman of The Federation of Pharmacy Networks (FPN), a consortium of groups out of Laguna Niguel, Calif., that work together for the common good.
In explaining the core function of his and other groups, he said, “Naturally our members look to us to provide them purchasing power.” But, he adds, “Perhaps even more important is our ability to help our members manage, advertise, and run a more profitable pharmacy.”
While Anderson runs one of the largest groups, Mel Brodsky is CEO of The Keystone Pharmacy Alliance, a regional group based in Philadelphia, Penn. Keystone boasts several hundred members centered in the mid-Atlantic area. When asked how his group can compete with larger ones that have thousands of members, Brodsky noted several characteristics of smaller groups that appeal to his members.
For one thing, his group can arrange for contracts from regional suppliers who simply do not have the ability to service a national group. He cited as examples a greeting card company and a regional candy maker.
“Both companies provide products, prices, and extra care to our members that generate meaningful sales and profits,” said Brodsky, adding that there is no way they could service a group with thousands of members spanning a large geographic space.
Next, Brodsky said, is the purely personal side of business. “Our members know one another, enjoy sharing ideas with one another, and like knowing they can contact the home office at any time and get the help they need.”
Best of both worlds
Still, Brodsky admitted, there are things the bigger groups can do that are beyond the capability of his small staff. To counter that, he and many regional groups have affiliated with larger groups, providing small-group members with the best of both worlds. In these situations, small-group members are able to access the contracts the larger group has negotiated. This increases sales to endorsed vendors and strengthens the hand of the larger group when it is time to renew or review contracts.
Anderson noted that one of the benefits provided by his group and several others among the larger buying groups such as American Associated Pharmacies (AAP) in Scottsboro, Ala., and PBA Health in Kansas City, Mo., is warehousing. These groups operate large, sophisticated drug-distribution centers that collectively ship hundreds of millions, if not billions, of dollars’ worth of pharmaceuticals, OTC drugs, and other products important to the success of community pharmacies.
Thomas Cory, RPh, owner of Standard Drug in Fall River, Mass., is currently a member of two groups.
One, the Northeast Pharmacy Services Corporation (NPSC), a regional group based in Framingham, Mass., helps him with a number of business and regulatory issues.
The second, which he joined a few years ago, is the Compliant Pharmacy Alliance (CPA), a national group headquartered in Stoughton, Wis. This group, Cory said, has a major focus on negotiating contracts with a single national wholesaler and prides itself on driving what Cory describes as “a hard bargain.”
Cory said he finds the combination works well for him and credits both groups for making it possible to stay in business.