COMMUNITY PRACTICE

Pharmacy fun again, says R.Ph. who nixed third party

Michael Hebert is having fun again in his Louisiana pharmacy. He can fill 300 prescriptions a day without breaking a sweat. Every day he's pulling in as many as 15 new customers, who never grouse about insurance co-pays and high drug prices. And at the end of the day, he's putting more money in the bank.

What's the secret of Hebert's newfound success? He's keeping his New Year's resolution to be third-party free in 2003. As of Jan. 1, he stopped accepting insurance programs, including Medicaid, at his Medicine Shoppe pharmacy in Slidell, a New Orleans suburb of about 26,000 people. In the five months since he told third parties what they could do with their stingy contracts, he's seen his script count go up; his gross profit has tripled to 62%, and even though total sales are down, he gets to keep "a helluva lot more" out of each transaction.

"Pharmacy is a whole lot more fun now," said Hebert. "My stress level has gone down to almost nothing. We hardly stay on the phone. My customers aren't going to fuss at me because they're already getting the cheapest price. But the best part is that it's a cash business and I have money in the cash register today. When the wholesalers want their money, I just write them a check."

Hebert's sales pitch to uninsured customers is simple: the lowest prescription prices in town. For example, chain drugstore competitors sell generic albuterol inhalers for about $30; he said he sells them for $7.17 and still makes a nice little profit. He can afford to lowball competitors because he no longer has to overcharge cash customers to make up for insurance plans, he's no longer carrying expensive drug inventory, and he's no longer being nickel-and-dimed by Rx claim processing fees. And, perhaps most important, his patients want generics.

"We're turning generics left and right," Hebert said. "We're doing about 95% generics, which is unheard of, but then I don't have those $200 and $300 bottles sitting on my shelves."

Doing his homework to craft an exit strategy was a key to the transition, Hebert said. After initially cutting off all contracts below 15% gross profit, he slowly jettisoned all the other contracts. As he shed the plans, past claims were still bringing in third-party checks, which he invested in radio ads to trumpet his new one-low-price-fits-all policy. The ads are paying off and so is the word-of-mouth bounce. After five years of filling 100 to 120 scripts per day, the pharmacy is now breaking the 300 Rx barrier a couple of times a week, plus 200 scripts on Saturday.

Despite the conventional wisdom that cash customers are imitating the do-do bird, Hebert did his homework and found that 20% to 40% of his competitors' clientele was cash customers. "I thought there was an incredible amount of cash business out there and all I wanted was a little piece of all of them," he said. "You can make a nice living that way, and my little piece has gotten a lot bigger. We're getting seven to 15 new customers every day, and we have people drive here from 50 miles away."

Emboldened by his success with cash customers, Hebert will soon move his Slidell pharmacy to go head-to-head across the street from an Eckerd drugstore and a new Walgreens outlet. He's also tackled the nearby New Orleans market with a second cash-only pharmacy.

The straw that broke Hebert's back was a PAID Prescriptions contract in 2001 offering roughly average wholesale price minus 18% plus $1.75. He was so insulted, he faxed back a cartoon of an old man urinating on a contract. The response was a notice that he'd been withdrawn from all PAID plans but could reapply in a year. That's when the pharmacist decided he could either go broke one script at a time or go cold turkey and take his chances with the cash market.

Having escaped from the managed care matrix, Hebert believes he's seen the third-party future and it's not pretty. He thinks too many third parties are running close to the edge of ruin, and if independents don't get out now, they'll be left holding the empty bag. "Pharmacists are still scared to get out of their comfort zone even though they may be going down," he said. "I wish more independents would do this."

Does Hebert have any regrets about cutting the third-party cord? "Yeah," he said, "just one—I wish I'd done it from day one."

Hebert is willing to share the secrets of his success with other independent pharmacists serious about kicking the third-party habit. He can be reached by e-mail, at medshoppont@hotmail.com, or by phone, at (985) 649-4534.

Carol Ukens

 

Carol Ukens. Pharmacy fun again, says R.Ph. who nixed third party. Drug Topics Jun. 16, 2003;147:30.