How North Bay independent pharmacies are beating the odds
When the 9,000-plus-stores Walgreens scooped up the last 22 Pharmaca stores last month, including three in the North Bay, it was another example of how difficult it is for small pharmacies to survive.
For years, Walgreens, CVS and other big players in the retail health care space have been acquiring independent pharmacies, using a business model the smaller players can’t easily overcome.
“Insurance reimbursement rates are down, and Medicare claw backs, or DIR fees, are hurting pharmacies,” said Mark Guttormsen, co-owner of Dollar Drug in Santa Rosa. DIR, short for Direct and Indirect Remuneration fees, are collected for Medicare-covered drugs and managed by pharmacy benefit managers — the middleman between pharmacies and insurance companies.
PBMs, which don’t reimburse independent pharmacies quickly, also collect more money after prescriptions have gone out the door, cutting further into profits, Guttormsen explained.
Yet some independent pharmacies in the North Bay, including Dollar Drug, have found a way to carry on, and a lot of it has to do with selling more products than prescription drugs.
“You can't just rely on filling common prescriptions,” Guttormsen said. “You have to have different revenue streams.”
Finding a niche
Dollar Drug, founded in 1984, sells an array of retail items and also has a couple of specialties.
One is compounding. Opened in 1984, Dollar Drug was the first in Sonoma County to prepare individually tailored drugs based on a doctor’s instructions.
And there’s something else.
“We have a niche where we service hospice,” Guttormsen said, explaining hospice providers like independent pharmacies because of the specialized service they can provide. That includes palliative medications, such as morphine and other opiod drugs that are used for illnesses that can’t be cured. "So hospice is important to us, as well as the compounding.”
So far, Dollar Drug has continued to fend off the likes of Walgreens and CVS.
“We get solicited frequently by those groups wanting to come in and buy our business,” said Guttormsen. “They sort of take the Amazon approach, and Amazon has got their hands in it, too, where they try to take over every facet of the business.”
But Dollar Drug has remained profitable, and for as long as that is possible, the owners will stay in business, Guttormsen said. Dollar Drug’s annual revenue is approximately $6 million, he said.
“I worked at a (pharmacy) chain when I first came out of school,” said Guttormsen, noting several of the owners have, too. “We understand what that side is like, and we would prefer to run the business our way, the way that we feel a pharmacy should be done.”
Longtime customer Rose Watson, of Santa Rosa, said she got her medications filled at Walgreens for many years and was routinely frustrated because of the long waits and lack of personalized service.
Watson said she didn’t know about Dollar Drug until her husband discovered the store about 15 years ago.
“They know who you are as soon as you walk in the door,” she said. “When you want their advice, they’ll talk to you, and you don’t have to wait.”
And she routinely refers people to Dollar Drug.
“If they left, I would be sad and not know where to go,” Watson said.
Guttormsen, who has been with Dollar Drug for 17 years, said the store prides itself on customer service and has had little turnover in staffing, which helps patients with continuity of care.
Only choice in town
“You know in real estate, they say ‘location, location, location,’” said Zsuzsanna Biran, pharmacist and owner of West Marin Pharmacy, located on the coastline of Point Reyes Station. “I don't have any competition here.” Hers is the sole independent pharmacy within about a 17-mile radius, she said.
Biran, also a West Marin resident, bought the pharmacy from its previous owner 15 years ago, fulfilling a lifelong dream to have her own store.
“I never thought I would last this long,” Biran said, referring to the prolific closures of small pharmacies in her area that left hers the last one standing. “But I'm still here, and I love it. I really love it.”
Biran sells retail items like sunglasses and greeting cards, and works to differentiate West Marin Pharmacy by specializing in holistic health medicines, such as echinacea, ginseng, chamomile and elderberry.
“I went to the American School of Herbalism, so I have knowledge of herbal medications and traditional Chinese medications,” Biran said. That allows her to consult with customers interested in homeopathic medicine and supplements, or just advise them about potential side effects from certain prescription medications. “Another pharmacy may not tie into that.”