Changing prescriptions

Pharmacists compound a new formula to keep fit a business that's
been in the family four generations.
By Edward Martin

The past seems to cling to Mount Pleasant, change treading lightly on this 160-year-old town of about 1,400, with its quiet, shady streets and antebellum homes. The most prominent structure is still Mount Pleasant Collegiate Institute’s main building, erected in 1855-56 and now a museum, its 30 rooms and three floors crammed with Cabarrus County history. Down East Franklin Street, the mill built in 1899 of brick made at the site is still spinning yarn. On a corner under the town’s only stoplight stands an exception.

Not that the drugstore Archibald Walter Moose founded in 1882 looks much different than when it reopened after a fire in 1927. Like the Tuscarora Yarns mill, the building is brick. Inside, along a wall above shelves of remedies and sundries, sit red, blue and green apothecary jugs labeled vinum portense, pulvis scilla, acidum citricum. The ingredients once treated rheumatism, finicky digestion and various other miseries.

It’s the way Moose Drug Co. does business that has changed, radically in some ways. “When Mrs. Jones comes to us today, she’s not just getting a bottle of pills,” says Joe Moose, 43, who with his older brother owns the company. “She’s getting time with Whit and time with me. She’s getting help in order to get the most from her prescriptions. We’re selling health care.”

It’s a formula that’s working. The Moose brothers and their father have opened two more drugstores in nearby communities and keep adding lines of business, such as Moose Pharmacy-branded dietary supplements. Their pharmacists — eight among 28 employees — train for niches in what’s called disease-state management. Whit Jr., 46, is an expert in osteoporosis and fibromyalgia. Whit Sr., 69, focuses on diabetes. Joe concentrates on pharmacoeconomics — cost-benefit analyses of drugs or drug therapies — for customers and compounding — making — many of the remedies himself. “I came in early today,” he says. “I had to start mixing one that included 13 ingredients.”

The bottom line: “We’re solidly in the black.” Getting there isn’t easy, and many community pharmacies find it hard to stay in what health-care experts describe as the most competitive segment of modern med­icine. Pummeled by giant drugstore, supermarket and discount chains, parsimonious managed-care plans, shrinking government reimbursements and rising wholesale drug costs, independent pharmacies face a choice: change or die. Nationwide, about 1,300 went out of business last year; it’s unclear how many did in North Carolina. In 2000, the N.C. Board of Pharmacy tallied 942 chain pharmacies and 539 independents operating in the state. Last September, there were 1,131 chain stores and 593 independents.

Nationwide, according to IMS Health, a Norwalk, Conn.-based pharmaceutical and health-care research company, independent pharmacies accounted for about $35.5 billion of the nearly $275 billion of prescription drugs sold in 2006. Chain stores, including drugstores and such mass-market retailers as Wal-Mart and Target, sold $96.1 billion, while mail-order companies sold about $42.2 billion. The independents sold $34.4 billion in 2005.

But sales aren’t the only thing rising. Take cost of dispensing, a standard industry calculation of everthing from labor to the light bill. It was $10.69 per prescription in North Carolina last year. Medicare Part D, which pays for drugs for government-insured patients, is pushing it higher. It takes 8.7 minutes to fill a typical cash order, compared with 12.5 minutes for Part D patients, mostly the elderly.

“Not all of them but a lot of community pharmacies are having a tough time,” says Rebecca Slifkin, director of the federally funded North Carolina Rural Health Research and Policy Analysis Center in Chapel Hill. “That’s important because there are things that really matter in the life of a small town. There are things that make it desirable to live there and less desirable if you don’t have them. Things like a doctor or a small hospital. Or a drugstore.”

Like the Scotch-Irish, Germans started drifting down the Great Wagon Road from Philadelphia through the Shenandoah Valley of Virginia into the Carolina Piedmont in the 1700s. In the 1800s, Mount Pleasant was a stop on the road from Salisbury to Charlotte, and John Moose — by then the German surname had been anglicized — was its doctor. “His practice became so successful, he didn’t have time to compound prescriptions,” Whit Sr. says. ”He encouraged my grandfather — his brother — to go to pharmacy school. He was in his 20s then. He came back and opened here in 1882.”

Archibald Moose probably didn’t know it, but he was at the dawning of modern pharmacy. A new breed was being born: trained health professionals who also were retailers. By the early 1900s, the wooden drawers of A.W. Moose’s drugstore — later, son Hoy’s — bulged with prescription files and formulas. Bottles and bins held chemicals and herbs. Lore has it that rowdies gambling next door started the 1927 fire. Fire trucks from Concord, 10 miles away, raced into town, but their hoses didn’t fit the hydrants. “The whole downtown burned,” Whit Sr. says. “The building next door was two stories, and it fell over on top of this pharmacy. The next day, my father opened up across the street in a borrowed location.” A new drugstore would rise on the foundation of the one that burned.

A generation later, Big Pharma was stirring. “In the early to middle 1950s, commercial manufacturers began making drugs, as opposed to chemicals,” Joe says. “Since the Civil War, druggists had operated basically with recipes to formulate prescriptions.” Whit Sr. joined his father as a pharmacist soon thereafter. “We still formulated a few prescriptions,” he recalls. “Each ingredient was weighed and measured, but there was a certain level of skill required, too.” When Whit and Joe were growing up in what was still their grandfather’s store, the business was a blend of the old apothecary and newer drugstore. “We read comic books and magazines and would creep around the store to find all the hiding places,” Whit Jr. says. “We had work to do, and we’d get paid in merchandise. When we got older, we got paid in money, but my dad couldn’t stand to see you spend it, even in the store, so he’d drive you down to the bank and wait for you to deposit it.”

Prescriptions and sundries created a comfortable business. “My father told me at least 20 times, ‘You’ll never get rich in a drugstore,’” Whit Sr. says. “‘You might make a living, but you’ll never get rich.’ When I started in the business in about 1960, our sales were about $200,000 a year. I thought that was awfully low, but it was about average for independent pharmacies at the time.” The Community Pharmacists Association estimates independent drugstores now average $3.6 million a year.

Whit Jr. graduated from UNC School of Pharmacy in 1987 and started work the next week. “The day I came, Dad took off for the beach,” his first vacation in seven years. Three years later, Joe received a doctor of pharmacy from Campbell University and went to work the day he was licensed. “When I came was about the time the third parties were coming in,” Whit Jr. says. “I was on autopilot, doing it the way Dad did it. But we could see things headed in a downward trend. Joe and I were trained as pharmacists, not business people. We’d done things by the seat of the pants, but we realized we had to have professionals to help us. We hired some accountants, who could tell us what the numbers meant, and that helped us turn things around.”

The family opened Moose Pharmacy in Concord in 1989 and Moose Midland Pharmacy in 1997. In 2006, the bro­thers bought out their father, becoming the fourth generation of Mooses to own the business.

Joe Moose was on a Christmas Eve mission, heading to the home of a woman who had been a Moose Drug customer for 69 years. One of her children had bought a lift chair to help her stand — medical equipment such as wheelchairs, shoes for diabetics and other health-related gear is sold at all three Moose stores — but wanted it to be a surprise. Joe personally delivered it. A few weeks earlier, the Mount Pleasant store had celebrated its 125th anniversary downtown with bluegrass music, barbecue, flounder and hush puppies — and health-care pep talks. One guest was a woman who had been a customer for 74 years.

Such tactics win skirmishes in the conflict over how prescription drugs will be sold — the personal service offered by the independent pharmacies versus the mass marketing of drugstore chains. A Consumer Reports survey of 32,000 customers nationwide found that most thought independent drugstores were cheaper and better. But the independents also face some long odds.

For one thing, they are more dependent on filling prescriptions, says Fred Eckel, executive director of the North Carolina Association of Pharmacists in Chapel Hill. “To a big-box store, pharmacy sales might be 5% or less of revenue. Prescriptions are a loss leader to get people into the store.” In 2006, Wal-Mart, now the nation’s third-largest drug retailer, began selling about 150 generic drugs for $4 a prescription. Target and some other retailers have followed its lead.

From what once was essentially a cash business, 91% of prescription sales are now through Medicare, Medicaid or managed-care plans. Pharmacy benefit managers, companies that contract with government and private insurers to administer prescription benefits, sometimes force stores to sell drugs at less than cost and swaddle them in red tape. “It used to be, people on Medicare or Medicaid had one payer and one set of rules,” says Slifkin, the rural-health researcher. “Now, they have to deal with as many as 60 different plans, each with its own formulary. Administrative time goes way up, while reimbursement is going down.” Under Medicare Part D, bureaucracy has slowed reimbursement. Previously, most claims got paid in 15 days. Now they typically stretch 45 to 60 days. Moose Drug has weathered the change. Others haven’t. “If you were marginally capitalized, it catches up to you,” Whit Sr. says. “That’s a great reason 1,300 independent pharmacies went out of business last year.”

Mail-order prescription plans, increasingly pushed by managed-care insurers, captured more than 15% of the market in 2006, up from practically zero 15 years earlier. Though co-pays are the same, allowing community pharmacies to compete on price with chains, insurers let patients buy a three-month supply through the mail while requiring them to refill prescriptions monthly at local pharmacies. “Our competition is more the insurance companies than the other pharmacies,” Whit Sr. says.

However, he says, the mail-order companies, working on behalf of insurers rather than customers, don’t necessarily offer bargains because they often strike deals for discounts from manufacturers. “On diabetic strips, for one thing, you might have a $5 co-pay for a generic, but the mail-order company will give you a strip they’re getting a discount on and charge you a $20 co-pay.”

To survive in the face of these trends community drugstores have to exploit niches that chain pharmacies and managed-care companies haven’t tapped. “The bottom line is, profit for these guys is so thin, they have to find ways to supplement their prescription income,” says J. Andrew Bowman, director of continuing education at Campbell’s pharmacy school. In this dog-eat-dog world, the Mooses have turned to dogs — and other pets — to broaden sales. They formulate veterinary prescriptions — many have the same ingredients as human medicines, except in different dosages — and can flavor them to appeal to finicky animals. They sell consultations. A 30-minute session in which one of the pharmacists goes over a patient’s record, making suggestions for more effective drugs, typically costs about $60. “Pills don’t do a patient any good sitting behind a counter,” Joe Moose says. “In North Carolina, over a third of prescriptions are never filled” — usually because patients can’t afford them. “Of those filled, a third are never taken or never taken correctly.” About a dozen insurers, his father estimates, cover such consultations.

“Selling pills is just one piece of the pie now,” Joe says. ”Compounding is another piece. Selling consultations is another. Where the Walgreens and Wal-Marts have diversified into potato chips and beach balls, we’ve come full circle. Manufacturers make a tablet that works for the majority of people but not everybody. We can make things for patients that might have trouble swallowing or are allergic to certain ingredients.” The Mooses’ stores have focused on new medications formulated as lollipops or syrups for those customers.

That kind of customized service forces community druggists to sacrifice volume in hopes of bringing in business chain drugstores can’t get. The average price of a prescription was $58.58 in 2006. “It takes more time at a compounding pharmacy, and you need special equipment,” Eckel says. A typical community pharmacy compounds six to 10 prescriptions a day. “If they do 100 prescriptions a day total, they’re really busy, where a Wal-Mart or CVS might do 600 without compounding.”

Bowman and other experts say the Mooses are on a track other community pharmacists will have to follow. They will become more-integral parts of the health-care system, working more closely with physicians and expanding patient-care skills. It won’t be easy, Slifkin says. “What we’ve heard from a lot of pharmacists who’ve been in business in their communities for a long time is that ‘we can stay in business, but when we retire, we’ll never be able to sell it,’” she says. “A new person having to take over the mortgage couldn’t handle it. There’s not enough return. In the next five to 10 years, I think a real crisis is coming.” Bowman notes that the state is already experiencing a shortage of druggists, and the N.C. Board of Pharmacy says more than 58% of the 8,967 practicing pharmacists are older than 40.

All three Mooses live in Mount Pleasant — Joe in a restored house that his grandfather built — within walking distance of the drugstore. They want to add stores, one at a time, controlling their growth. “We expect to move forward with what we have,” Whit Jr. says. “We want to continue and expand our branding and encouraging our staff to continue advanced educations” for disease-state management. They will adapt to the times. But one thing won’t change. “When a customer goes to CVS, they see the way a corporation thinks a pharmacy should be,” Joe says. “When they come in here, they see a pharmacy the way we think it should be.”