BOISE, Idaho — Mark Panzer, chairman of the National Association of Chain Drug Stores, has been involved with the chain drug business for over 40 years. During that time, he has seen the industry transformed, above all by consolidation, but also in response to broader changes in retailing and consumer behavior as well as changing legislative and regulatory landscapes.
Now senior vice president of pharmacy, health and wellness at Albertsons Cos., Panzer started out in chain drug retailing with Osco Drug Stores. He ultimately became vice president of sales and marketing for Osco’s parent, American Drug Stores, then continued in that role for Albertsons when that supermarket chain acquired American Stores in 1999.
In 2001, Panzer left Albertsons to take the post of executive vice president of store operations at Rite Aid Corp., and in 2005 he was named senior executive vice president and chief marketing officer of that chain. He left Rite Aid in 2008 to become president and chief executive officer of Pharmaca Integrative Pharmacy before returning to Albertsons in his current role in 2015.
At Albertsons, pharmacy is far more than just a traffic-driving ancillary business in a supermarket. Its network of more than 1,760 in-store pharmacies in 34 states — soon to be supplemented by more than 2,500 Rite Aid stand-alone pharmacies — is a critical part of the company’s growth strategy. In addition to its pharmacies, the retailer operates more than 200 in-store clinics, and last year it moved into the specialty pharmacy arena with the acquisition of MedCart Specialty Pharmacy, a specialist in HIV and hepatitis specialty medications and disease management.
Panzer’s breadth and depth of experience, and the long-term perspective they confer, equip him extraordinarily well to serve as NACDS chairman at a truly critical time for chain drug stores, and for retail pharmacy in general. In the interview reproduced below, Panzer shares his views on the priorities facing NACDS and the pharmacy industry, as well as a thought-provoking vision of the future of health care in this country.
CDR: You’ve been in the industry many years. Talk a little bit, if you would, about how you viewed NACDS at the outset, its evolution, and the role it plays in community pharmacy.
PANZER: First of all, NACDS has been an advocate for the industry. It has been very stable in its messaging, consistently on point, on the right issues, supporting community pharmacy. [President and chief executive officer] Steve Anderson has refocused the entire organization and, in effect, has retooled the organization. [Senior vice president of member programs and services] Jim Whitman and the team, as they have for many years, does an outstanding job putting on events such as Total Store Expo, the Regional Chain Conference, and the Annual Meeting.
NACDS keeps its focus on what’s important to chain drug retailers and the people and organizations who support retail. In the end, their biggest role is managing government affairs, influencing and monitoring legislation that’s being considered or being passed, both state and federal legislative actions or regulations that impact our industry. They’ve been just outstanding, in that regard, during Steve Anderson’s tenure. He’s been a great leader, structuring a team to focus on relevant and imperative issues that are facing the industry. He’s got some tough ones this round, such as DIR [direct and indirect remuneration] fees.
Steve and his team tackle the tough topics with the legislators and with governing bodies, with a goal of influencing or producing a positive outcome for the industry. That allows us, the retailers and pharmacists, to spend our time concentrating on what we do best — servicing our customers, our patients and taking care of our associates.
CDR: So obviously you think well of the work NACDS does, as we do. It’s a great organization. Have you had a chance to think about your priorities, what direction you intend to take when you assume chairmanship?
PANZER: First and foremost, as did both Martin [Otto of H-E-B] and Alex [Gourlay of Walgreens Boots Alliance], the focus will remain on point of access and convenience for the customer or the patient. Taking care of our patient, through affordable and accessible health care, should always be our major point of focus. I don’t think that message is going to change with NACDS going forward. We need to stay on point in that regard, but we also must place increased focus on DIRs and how they are applied or implemented. One of the biggest threats to the industry right now is DIR fees. DIRs are negatively impacting the entire retail pharmacy business model and industry. If the current rate of acceleration of DIR charges continues, I believe there will be significant fallout within the industry, and that will negatively impact patient access.
DIRs have changed the dynamics in the marketplace and our industry. I believe the fallout created by the continued acceleration or implementation of DIR fees will especially be felt in underserved and rural communities. As community pharmacies in those areas find It difficult to compete or stay in business due to DIRs, those points of access will disappear, and patient access and outcomes will suffer. It’s become an issue for everyone operating in the retail pharmacy business.
Everyone supports outcome-based reimbursements. What we need is consistency and transparency on how and when DIRs are applied and implemented. We need a clear set of rules guiding how DIRs are applied that can be easily interpreted, monitored and budgeted for as we move forward. We need a standard set of rules governing DIRs. This would be a benefit to the government, patients and the industry.
CDR: How could the industry get that fixed? Does it need Congress to change the law, or the Centers for Medicare and Medicaid [CMS] to do something?
PANZER: CMS, basically, because that’s the organization or body that can alter or dictate the guidelines for DIR fees.
CDR: Where do things stand in terms of convincing CMS to implement changes and make it more equitable for everybody?
PANZER: We’ve got support in both the House and the Senate. NACDS has done a good job rallying support across the board to communicate and influence congressional support and CMS to take look at the current rules and implementation of DIRs. I think there’s enough support and emphasis on the issues surrounding DIRs from the legislative side and from the retailer side to make some positive improvements to the program. NACDS has been a bird dog on this issue — if nothing else, it’s going to be the focus of everyone’s efforts to try to get CMS to come up with solid ground rules governing the use of DIRs.
CDR: DIRs weren’t intended to be beneficial to either PBMs or retailers. The point was to create savings for the government. From that standpoint, do you think the program is working?
PANZER: From the government’s point of view it has been somewhat successful in lowering overall spending. What is not successful is how they were applied. And not having, again, a set of rules that are consistent across the industry, not having it at the point of sale — that’s the issue.
CDR: So each individual PBM can use its own set of rules?
PANZER: They can all choose different measures. That is where the inconsistency lies. Transparency is an issue in some cases.
CDR: Clearly, from everything you’ve said, that needs to be one of the top issues facing the industry and thus NACDS. What are some of the other priorities you foresee?
PANZER: There are probably three other priorities to focus on — opioid abuse; the provider status and medically underserved bill, S. 109 and H.R. 592; and Tricare. I think the issues probably have not changed from last year.
CDR: Tricare is a perennial problem.
PANZER: The Tricare pharmacy issues have been at a standstill for a number of years now. With all the issues legislators are focused on, Tricare is just not the first item on Congress’ agenda, but it remains high on our list.
CDR: One thing I do not understand: A majority of people in the House and the Senate supposedly support provider status, but still the legislation goes nowhere.
PANZER: In the case of provider status, there has been increased focus on the cost of the program as depicted by [the Congressional Budget Office]. The grading or cost has become a major hurdle. To lower the cost there will need to be compromises to the language, such as allowing for provider status only in medically underserved communities. This may help push the bill through Congress.
CDR: Wouldn’t that create a strange situation within the pharmacy profession? Wherein if you live in rural South Dakota, you can do more than if you live in Phoenix.
PANZER: It’s probably no different from what you see today as you look at the scope of practice for pharmacists allowed by the board of pharmacy from state to state.
I believe it is manageable.
CDR: Do you have a vision of what you would like to see the pharmacist’s role be in five to 10 years? How much room is there for pharmacy to expand?
PANZER: That will have to be left up to the medical community and state boards of pharmacy to decide. There is a case to be made, in certain situations under strict protocols, where pharmacists should be given the authority to write scripts for selected conditions. It will have to be a handoff by the medical community to the pharmacist. We are facing a doctor shortage, especially in rural and underserved communities. We should be exploring how to best use the pharmacist to serve that need. Utilizing a pharmacist’s clinical skill set and knowledge would be a plus, not a negative. Immunizations are being handled by pharmacists; birth control prescribing and the distribution of naloxone are some examples of where a pharmacist can be used to fill a void or improve care and access.
CDR: Where do you see retail clinics in the health care continuum?
PANZER: Health care in the long run is going to become a limited network of large health care ecosystems. Patients will be enrolled in a self-contained vertically integrated program or health care system that monitors and controls every aspect of their medical care. The access to doctors, specialists, procedures, where and how your scripts get filled will be dictated by one self-contained entity. In my view, that is what health care is going to look like in five to 10 years. Everybody is going to belong to a very large integrated health care ecosystem. We are getting a glimpse of the future of health care today as we witness the rapid consolidation within the health care industry. I believe this will lead to better outcomes and improve patient care. This type of a health ecosystem produces a more efficient model from record keeping to communication between all the professionals or points of contact with a patient.
CDR: Will those ecosystems result from mergers and acquisitions or partnerships?
PANZER: I think it is all of the above until one model proves to be much superior to the other. We will see modified versions of the model or health care ecosystem as it evolves.
CDR: Retail clinics are very good in terms of convenience and cost for minor ailments.
PANZER: There is a place for retail pharmacy to fit in this model. We still will fill prescriptions, but we can increase our participation by allowing these health care giants to establish a convenient community-based clinic network or partnership inside our existing real estate or stores. By utilizing retailers’ stores or real estate and forming partnerships with pharmacy chains, these health care organizations can move closer to their patients and the communities they serve. At Albertsons we have over 250 clinics operating today.
Health care partners are looking for locations outside the trauma centers and the regional hospitals. They are moving patient care back into the neighborhoods, improving care and access and keeping the patient out of the hospital emergency and trauma rooms for minor things that can be taken care of in urgent care or acute need centers. It is more efficient and provides better access and ultimately care and outcomes.
So, if we can provide these satellite facilities from a hospital standpoint, or a health care provider standpoint, within that retail setting, which is right in the neighborhood, that’s a good thing.
CDR: Thoughts on telemedicine or telepharmacy
PANZER: Telemed and telepharmacy are also becoming popular, and I think they will become more prevalent in the next three to five years. We are already seeing them making inroads in outlying areas, and even in metro areas. The generations coming up behind the baby boomers are all about technology and convenience.
Telemed and telepharmacy both cater to that customer. Over the next three years, I believe you are going to see a big move in that direction. If patients utilize these technologies but conclude they need in-person care, they will want access to acute or urgent care facilities in their neighborhood, not at regional facilities that are totally inconvenient.
CDR: Will hospitals inform patients about this alternative treatment option?
PANZER: Right. They will ultimately educate patients that there is a more convenient venue than the emergency room. Where they get their script filled after that point is still up to the patient and the doctor. We cannot steer the patient script. Certainly we benefit from the traffic, but even more from the halo that the clinic gives us as a health care provider or destination.
Access points and convenience are a big selling point, but the more important thing is improved patient outcomes: having access to affordable care options, providing them with efficient and effective care. By eliminating the waste in the system, we’re delivering a more streamlined product than in the past, with a better patient experience.
CDR: It is exciting to see this unfold. What impact do all the changes in health care have on NACDS? Are you pretty focused on what you need to do and where you are going?
PANZER: First, I think competition in any industry is good. It forces us to rethink our models and evolve. It will take a while for this health care ecosystem model to shake out as it evolves, but in the end I think it will be a better model. From NACDS’ viewpoint, I don’t think the focus will change, because even if we move to a more vertically integrated industry, we still have some of the same issues. We will still need an advocate that stalks Congress and other legislative bodies and regulators to protect our interests — Medicare and Medicaid issues, legislative hurdles, board-of-pharmacy regulations — they will always exist; therefore, we need an organization like NACDS to protect our flank. NACDS’ function is to inform and safeguard the industry from events that can or could negatively affect the industry. I think NACDS is up for the task.
CDR: Moving on to the political climate. The Affordable Care Act remains controversial; the Republicans want to repeal the law. Failing that, the Trump administration keeps chipping away at it. How does that impact retail pharmacy?
PANZER: NACDS was very effective in keeping focused on pharmacy-specific issues during the legislative process of the ACA, and NACDS also has been very effective throughout the implementation process. Every step of the way, NACDS has been focused on staying on point on the pharmacy-specific aspects, rather than the broader political aspects.
From my perspective, if they totally abolished the ACA, the effect would be catastrophic. All of a sudden you will have millions of additional uninsured or underinsured. If you look at what ACA did for retailers when it was enacted and implemented, it was a plus for everybody — repealing it would have a negative effect on the entire industry and patient care and outcomes would suffer. They couldn’t afford it then; how will they afford it now?
In the case of older, sicker and poorer patients, they would have less access, not receive the care they need, may be less likely to adhere to their medications, which, in turn, would create waste in the system through deteriorating outcomes and increased hospitalizations.
Unfortunately, ACA has become a political football for all the wrong reasons. The focus is, “I am going to get rid of Obamacare,” rather than, “I am going to make it better.” Aspects of the plan that needed to be modified and improved can be and need to be addressed. There’s more work to be done, but they shouldn’t eliminate the whole program. To discard the whole program for a few flaws that can be corrected would not be in the public’s best interest.
CDR: Particularly something as massive as the ACA.
PANZER: Right. I know members of Congress have staff, but it’s unlikely anyone went through the entire bill with a fine-tooth comb. There are parts of it that probably did not produce the intended outcome or results. It’s very similar to DIR fees, in that the intention was good but the results and implementation have been problematic. It’s the same thing with ACA.
What was the intention? What was the impact? What do we need to change to get waste out of the system and invest in patient care? You still need to take care of the older, the sicker, the poor. Not everyone can fend for themselves. To discard the social network supporting people who do not have the ways and means to get health care would be a disservice to the population.
CDR: One area that ACA has not done much about is cost. Health care expenditures are still rising faster than inflation. How do you look at the issue of health care costs?
PANZER: Think of people who are retiring now. Their biggest concern is, “How am I going to pay for health care going forward?” For some people it is more than their mortgage payment was 20 years ago. Once they quit working, they have to pick up a supplemental insurance plan. You just cannot have that much of the gross domestic product going toward health care. It is just not efficient. There are other models outside the U.S. where there is less waste in the system and the outcomes are better.
I don’t condone socialized medicine, but we need to take a hard look at the true cost of health care and get a handle on the rising costs. For example, medical procedures are one price if a patient is covered and another if they’re not. What is the true price for an MRI? I don’t think patients should need or want to negotiate the price.
There has got to be a more efficient way to provide affordable and accessible health care while controlling costs.
CDR: Do you find that pharmacists are getting more questions from people seeking information because doctors may not be as accessible in today’s environment?
PANZER: After a visit to the doctor, or the physician’s assistant, or a nurse practitioner, a patient may say, “Oh, I forgot to ask the doctor this.” They cannot call the doctor and have a direct interaction. They go into a queue, and maybe get a call later that day, unless it is an emergency. Doctors’ patient loads have increased dramatically over the years.
A pharmacist, on the other hand, is always available and located right in the neighborhood. You can walk up to the counter and ask a pharmacist about an issue regarding your own or a family member’s health or prescription. Access is where the pharmacist has a better chance of interacting on a more consistent basis with patients.
CDR: It’s a bit different in urban stores because pharmacists have to fill so many scripts; in some cases they don’t have the time available. But they are very helpful when they do interact with you.
PANZER: In that situation, tech ratios need to be addressed to free up pharmacists to do the things they do best, counseling and using their clinical skills. Pharmacists are highly trained people; they go to school for six to eight years. To not use their clinical knowledge is a disservice to the health care community, and also to the profession of pharmacy.
CDR: Absolutely. Let me switch gears and ask you about NACDS and its relationship to the front end of the business. How does the association contribute in that area?
PANZER: NACDS does a fantastic job in providing venues that facilitate face-to-face meetings between retailers and vendors at the Annual Meeting, the Total Store Expo and the Regional Chain Conference. The front end still generates a lot of gross margin dollars, and gross margin dollars, not percentages, pay the bills. Even though 60% to 80% of your business could be in pharmacy, you still need a profitable front end to help pay the bills and generate income.
Walking away from the front-end business is a mistake for retail pharmacy chains. You have to have a strong front end to keep the business model viable. We’ve lost a little bit of focus by saying, “We can’t compete with category killers or the mass outlets and e-commerce.”
We’d be better served by being laser-focused on how to drive front-end business to supplement the pharmacy and differentiate ourselves from competitors. Evolving our front-end models and mix to stay relevant in the marketplace will be key to our survival.
Embrace new models, e-commerce, evolving and learning how to compete. Don’t throw in the towel. It might mean concentrating on natural and organic supplements and nutrition, or emphasizing beauty care or setting up an online business.
We need to focus on the things that are going to drive front-end business; we can’t just give it away. It’s a critical component to making the chain pharmacy model work.
CDR: Is there a role for NACDS in that process, or is that something individual companies have to do for themselves?
PANZER: NACDS can facilitate the process with meetings and expos, but it still comes down to partnerships with your vendor partners and your knowledge of the channel you operate in. Spotting the growth opportunities and continually experimenting and tweaking your model.
CDR: You clearly believe there is opportunity at the front end for pharmacy retailers.
PANZER: Definitely. Again, I don’t think you want to walk away from the front-end business, knowing that there are great tie-ins on the beauty care and O-T-C [over-the-counter product] side. When pharmacists recommend an O-T-C, patients are likely going to purchase that product. Successfully incorporating the back end or pharmacy with the front end to drive the total business … that’s the key to success in the drug store retail environment.
CDR: For this whole broad range of goals and objectives that we’ve been talking about, how much room is there for cooperation with other groups, whether that’s PhRMA [Pharmaceutical Research and Manufacturers of America], FMI [Food Marketing Institute] or any number of other groups? Is there room for NACDS and its members to join forces with them on issues of mutual concern?
PANZER: When you look at it, in many areas we’re all fighting for the same thing: growing and protecting our businesses. I think a crossover between the organizations often would be very good and very helpful in most cases.
CDR: Everybody has the same objective, but their strategy for achieving it can vary considerably.
PANZER: Everyone or every business has a go-to-market strategy. You’ve seen drug stores go from small independents to 30,000-square-foot super drug stores and back to smaller footprints over the past 15 years. We’ve seen the proliferation of big-box outlets, combination food and drug stores, and specialty retailers and the explosive growth of online shopping, or e-commerce.
Retail is constantly in a state of chaos caused by a rapidly changing retail landscape. You’re only as good as your last P&L, or results. If you quit evolving, you will definitely become extinct in today’s retail environment.