Circling the drain
It’s harder than ever to run an independent pharmacy
Over her 48-year career as a pharmacist, Janet Balbutin has learned a few secrets to longevity in a competitive, volatile business: A pharmacy must be more than a drug store, and a pharmacist must be more than a person who counts your pills.
Seems basic, but that model—which she stresses at her three local stores—has become harder to maintain in the face of financial pressures, government regulations and insurance-company red tape. Independent pharmacies are getting pushed out of operation, and Balbutin wonders how long she will be able to buck the tide with Chico Pharmacy, Chico Medical Supply and Paradise Drug & Medical Supply.
“You have to make a decision: Can you afford to keep going on the razor’s edge, and maybe even borrow money every once in a while, before somebody comes to their senses?” she said of the current system. “It really isn’t right, and I say nobody is going to come to their senses in time.”
She spoke with the CN&R at Chico Pharmacy between helping her staff and customers. It was a relatively slow afternoon, but not idle.
The store does a brisk business—a bit more so since an immediate development a half-block away.
Next Door Pharmacy, a literal neighbor of Chico Pharmacy (separated by the Enloe Regional Cancer Center), is transitioning into a Rite-Aid. It had been there around four years, Balbutin said, and is just the latest independent buyout. Robert’s Drug Store and Olive Pharmacy, owned by the same family for decades in Oroville, also have become Rite-Aids.
Balbutin, soon to turn 72, says she gets offers regularly. She’s reluctant to sell for many reasons that include loyalty to customers and employees who are like family. In fact, four on her staff are family: sister Ava, the pharmacist in charge; brother Ray, a pharmacy technician; son Kevin Harris and niece Alysen Burnham, both clerks/techs.
“You want to keep going on,” she said, “because we’re sort of having fun—except for that thorn of not making money.”
Balbutin and her North State counterparts may get a measure of relief should Congress take up H.R. 592. The Pharmacy and Medically Underserved Areas Enhancement Act, authored by Kentucky Republican Brett Guthrie, would amend Medicare to cover pharmacist services.
The U.S. Department of Health and Human Services considers half of Butte County as a medically underserved area, where at least 50 percent of residents lack adequate access to medical professionals. The advocacy group Pharmacy Choice and Access Now (PCAN) is lobbying Rep. Doug LaMalfa and others to co-sponsor H.R. 592.
In an email, PCAN national Chairman Bill Mincy said: “Our nation’s health care system is now witnessing a number of challenging trends. There are millions more patients accessing insurance coverage; we have seen increases in chronic conditions and a shortage of primary care physicians.
“All of these trends present challenges that are especially concerning for medically underserved areas … To help remedy the situation, we must draw further on the expertise of pharmacists and more formally recognize them as nonphysician health care providers under Medicare Part B.”
Balbutin asked LaMalfa to do so, by letter, and thinks he’ll be receptive.
“He’s been here—sitting right here,” she said, pointing to a stool in the back room at Chico Pharmacy. That was about a year ago, when she said the congressman and Assemblyman Jim Nielsen foreshadowed business problems she’s encountered.
“Everybody was coming to me scaring me,” Balbutin said, “and at that point they knew a little bit more than [I did] of the big picture. I didn’t really feel it bad until about four months ago….
“We’re circling the drain, but we want to stay up there.”
Bruce Crowson got out of the independent pharmacy business eight years ago. He co-owned Terrace Pharmacy in Chico, closing when his partner retired, and now works at Chico Pharmacy.
“The issues Janet [faces] are part of the reason I didn’t want to try to find another partner and basically start over,” he said, taking a moment from filling prescriptions. Challenges then were “not this bad, but it was still very much an effort to pay your bills.”
Unlike the chains that negotiate with drug companies (suppliers) and insurance companies (payers) on large scales, independent pharmacies lack leverage. Moreover, they lack the cash reserves to cover lapses between paying for drugs and receiving payments from insurers.
Getting those payments sometimes requires multiple claims. Each electronic submission goes through a switching company, which assesses a fee. The insurance company then may require additional documentation and even demand a refund.
The latter is the case with Medi-Cal, California’s version of the federal Medicaid program for low-income children and adults (versus Medicare for seniors). Balbutin says the state is reclaiming a portion of past payments for certain drugs by reducing the amount it pays this year.
When the margin between drug cost and reimbursement already is thin, each of those hits hurt.
Meanwhile, Balbutin has to dedicate multiple employees to insurance billing and last year—amid her financial crisis—needed to invest in new computer technology to stay compliant with government regulations. All the while her staff must follow ever stricter procedures that aren’t unique to independent pharmacies but create a proportionally bigger strain on smaller-scale operations.
“The primary goal is to make sure the patient gets what they need for their health, to provide a better way of life,” said pharmacy tech Shaun Sims. “They’re getting cheated out of it by all these little hoops we have to go through. Kind of like a carrying capacity, there’s only so much we can do in a day, and when they add all that extra work, we can no longer at times provide the service that we once did by treating the exact same amount of people.”
Despite the pressures, Balbutin, who spent her early career working for chain drug stores, is determined to stay independent.
“There’s just more pleasure in being this kind of a pharmacy,” she said. “Very much more.”