It's no news to regional drug chains that, in today's fast-shifting marketplace, they have their work cut out for them.

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Regional chains adapt to fast-changing market

January 28th, 2014

NEW YORK – It's no news to regional drug chains that, in today's fast-shifting marketplace, they have their work cut out for them.

Not only are regionals going up against the national drug chains and the growing pharmacy operations of mass merchants and supermarket retailers, but they also are working to help their pharmacy teams and customers gain a better understanding of the Affordable Care Act (ACA) and the evolving U.S. health care system while trying to meet the demands of consumers seeking bargains without sacrificing quality.

The challenges and complexities of the retail pharmacy market form the backdrop for discussion at the upcoming National Association of Chain Drug Stores Regional Chain Conference, to be held Feb. 2 to 4 in Naples, Fla.

Though some regional drug chains find market forces and other issues too difficult to overcome, others survive — sometimes by stressing the edge they have over their competitors in customer service, and sometimes because their size enables them to be more nimble than the large chains in deploying new front-end and pharmacy concepts and technologies.

Still, the obstacles cannot be overlooked. One of the major issues facing regional chains is their ability — or lack thereof — to participate in the preferred pharmacy networks that are part of the ACA's health insurance exchange plans.

Under the ACA, millions of Americans will gain insurance coverage, presenting pharmacists with increased opportunities to dispense medications and provide one-on-one counseling, medication therapy management and other health care services to a crop of new patients. Yet before such services can be offered, regional and small drug chains must find a way to overcome health care plan ­limitations on the number of pharmacies that can participate in a network as well as restricted drug formularies.

"Regional players have come a long way and continue to demonstrate their value in providing patient care."

— Robert Narveson,
Thrifty White Pharmacy

"Network accessibility is one of the major challenges that the industry will face in 2014," said Robert Narveson, president and chief executive officer of Thrifty White Pharmacy. Narveson, who is also NACDS chairman, will present a state-of-the-industry update at the regional conference and report on key ­initiatives.

Mark Griffin, president and CEO of Lewis Drugs, also points to the severe consequences that restricted networks will have on smaller pharmacy operators.

"To compensate for the customers lost to these networks, we must continue to develop new relationships with our patients and work to create independent networks," Griffin said, adding that by taking those steps and others, regional operators will also be able to reinforce their own brands.

Lynne Fruth, chairman and president of Fruth Pharmacy, recently told Chain Drug Review that smaller chain drug operators need to keep the spotlight on the issue of pharmacy services access as health care reform unfolds.

"As a regional chain, we believe that access to customers will be a significant issue in 2014. Closed and preferred networks continue to impact regional chains and independents, and it is imperative that we gain access to all customers," Fruth explained. "As a company, we will continue to lobby for access to patients on behalf of smaller drug chains and independents."

Despite the challenges presented by health care reforms, regional chains are not backing down from finding new opportunities that help illustrate the value that neighborhood phar­macies can deliver to the health care system.

At Sav-Mor, a number of specific wellness initiatives have been developed and implemented over the past two years targeting such conditions as high blood pressure and diabetes.

"We also have systems in place that trigger a pharmacy intervention for issues like missed prescription refills and proper antibiotic use," said Yvonne ­Gallagher, executive vice president at Sav-Mor.

While distinguishing themselves from the national counterparts, regional chains at times have taken pages from the playbooks of bigger retailers. Narveson noted that today's regional players have specialty pharmacies, central fills, patient care centers, long-term care pharmacies, generic warehouses and medication synchronization programs.

"Regional players have come a long way and continue to demonstrate their value in providing patient care," he said.

By the same token, sometimes it's a regional chain-developed model that catches on in the industry.

For example, the emphasis by Kerr Drug (acquired last year by Walgreen Co.) on pharmacy and health care services, while still offering the typical drug store merchandise mix of health and beauty aids, over-the-counter products and other front-end items, is a plan that has since been shared by a number of larger chains. And Kerr, under the leadership of chairman and CEO Anthony Civello, is credited with having been one of the nation's first retailers to have pharmacists provide patient care in a stand-alone, chronic care ­environment.

"Under the ACA, there's a possibility of more people getting prescriptions, so that would be an opportunity for us," Tom McConnell, chief financial officer at Discount Drug Mart, said in a recent interview. "But it's still a little unclear how it will play out. We're looking forward to it helping us, at least in the short term." The chain, too, is exploring opportunities to expand its home health care offerings and services, he added.