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    A drugstore on every corner: Turning points in community pharmacy

    Truman LastingerTruman LastingerPharmacy practice was a predictable and profitable business for pharmacists until the late 1960s–early 1970s.

    Up to that point, manufacturers established drug prices primarily on the basis of the cost of production and drug promotion.

    See also: Are retail pharmacists an endangered species?

    Detail men

    At that time, there was no direct-to-consumer advertising, and the drug companies generally hired pharmacists to promote their products. Those pharmacists were called “detail men.” They educated the doctors about new drugs and gave them samples of their products.

    The detail men encouraged retail pharmacists to open direct accounts so that their pharmacies could bypass the markup used by wholesalers.

    See also: Pharmacist honored for half a century of service to community

    Red Book, Blue Book

    The manufacturers set yearly drug prices that were published in the RED BOOK and the BLUE BOOK. Wholesale distributers used those prices in their businesses.

    Pharmacies could normally depend on the manufacturers to honor those prices.

    A new pricing tactic

    Until the late 1960s, the wholesalers would give a retail pharmacist a 2% discount if the bill were paid within 10 days of becoming due.

    Then some small wholesalers began offering 10% discounts for their products, which were primarily generics with some brand-name drugs included. However, those drugs did not constitute a majority of their business. Those small wholesalers could demand deeper discounts from the manufacturers based on their successful sales of the products, so they could afford to offer the 10% discount on them.

    In response to those small wholesalers, the large wholesalers demanded bigger discounts from the manufacturers so that they could also offer the 10% discounts. The manufacturers then had to raise their prices in order to compensate for the discounts.

    A drugstore on every corner

    At that time there were very few chains competing with independents for business in most of the rural areas and many larger cities.

    A good many of the rural towns and cities had retail pharmacies on every corner, and pharmacists were generally successful businessmen.

    Then things began to change.

    Chain expansion begins

    For many years Rexall and Walgreens had used franchises to further their business.

    In the 1960s, Walgreens stopped franchising and bought out its members’ franchises, and Rexall went out of business.

    Walgreens realized that because of its purchasing power, it could demand even greater discounts. This meant that manufacturers had to raise prices to compensate.

    The professional fee and its consequences

    In the mid-1960s, Medicaid came into being, and pharmacy associations and universities began to promote the idea of a professional fee.

    At that time there were laws preventing retail businesses from agreeing on pricing their products. The acceptance of the professional fee in essence resulted in government price-fixing, which restricted drugstore profits.

    As a result, increasing the prescription output was the only way to sustain profits.

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    • ChloeMica
      This could be useful! I mean since medical science has been seen as a branch of science it should be payed enough concerns. Creative Peptides
    • MarkBurger
      All true. A great retrospective. And so succinct. Kudos to you, Truman, for bringing us up-to-date on the State Of Pharmacy. The shrinking number of independent pharmacies (due to the inability to make a profit in this crazy world of rebates and shortages and exclusivity of pharmacies to dispense this product or that [Walgreens just fell into bed with Valeant according the "Pharmacist Activist" February newsletter] and the lousy lop-sided contracts with PBMs) is reason enough for us to begin to offer HEALTH CONSULTATIONS, LIFESTYLE COUNSELING, HORMONE TESTING, GENOMIC TESTING, NUTRITIONAL TESTING, MEDICATION MANAGEMENT (with me it usually involves MEDICATION DISCONTINUATION and POLYPHARMACY MANAGEMENT since from 20 to 50% of ALL Rxs are inappropriately prescribed .. conservatively). BUT we need to do this with a better paradigm than the medical profession. We need to do it BETTER. Don't try to fit a patient with a diagnosis ... that's what allopaths do. They can't deal with a patient until they can assign an ICD-10 code (codes) and/or an RSV (procedure code) to a patient. That's not how patients are and it's not how we should treat them. We need to use the FUNCTIONAL MEDICINE / SYSTEMS BIOLOGY approach to patients so that we can offer them a solution (cure?) to their CORE problem, not 'band-aids-over-bullet-holes' approach so endeared to the failed western medicine approach. That's not healthcare, it's "sick care". And, finally, we need to be paid well to do these. Don't take what the PBMs and Government programs offer, we're worth more than that.]Don't do it for free and don't do it like the failed paradigm of the last 50 years. If you follow this advice, your pharmacy will not be in jeopardy. Young pharmacists can start their own business w/o having to play by the Old Rules. If they do so, our profession will have a future. My 2 cents.
    • Anonymous
      This is far from a complete list of things that transpired. Formation of health maintenance organizations with their own, in-house pharmacies or narrowly selective pharmacy participation (usually chains); PBMs and their 'black-box' technology which stole the data from the pharmacies and then used it against them to ratchet down reimbursements; insurance companies who would not allow independent pharmacies to participate. In my locale, Blue Cross had 25% of the local market and would not allow my pharmacy (and other independents) to participate (the chains were allowed in, however) and Kaiser-Permanente had 25% of the market and had their own pharmacies. 50% of our entire market was not allowed to use our services even if they wanted to. These were not the only plans that did not allow us to participate. The ones that did usually had low reimbursement rates. Wide variations in the wholesale pricing of drugs. I belonged to a large buying group (PACE) with over 1,000-2,000 participating pharmacies...but when I closed my pharmacy and went to work for a chain (of 2,000 stores), the pricing was noticeably better at the chain. I went from profitable in 1990 to bankrupt in 1996.
    • Anonymous
      Absolutely true. The demise of the independent began with the loading of State Boards of Pharmacy with employees of the established chains, Eckerd, Walgreen, etc. They worked to prevent laws protecting the actual practice of pharmacy. Gone was the one on one contact with ones clients, but it was fill baby fill. I was first registed in 1963, worked as a retail RPh for several years and then went to work as a "detail" man. The medical environment was wonderful. People actually cared about their patients and customers. You knew them by name and I remember often delivering needed medications at night and on weekends. Retrospectively it was a series of cascades. First the loss of the independent grocer to the big chains. Then the service stations gave way to the filling stations. Individual clothing outlets fell by the wayside. Independent auto dealers were soon to follow being absorbed by the large conglomerate owners such as Auto Nation etc. Those of us closer to the end than the beginning lived through the golden age of America I am glad I did.
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