by George D. Bartell

If there is a business that should understand the importance of creating proper chemistry, it is drugstores. But the prescription for success is more elusive than ever.

The drugstore industry has become dominated by large regional and national chains while smaller local chains and independents are on the wane. Even so, all drugstores face economic and market challenges in addition to competition within the industry. Competition from grocery stores and mass merchants, shrinking profit margins, personnel shortages, and the labor intensiveness of managed care and insurance reimbursement requirements pose serious challenges.

The core of any drugstore is its pharmacy, where the average chain drugstore has experienced a 20 percent sales growth in the past year. Despite this growth, pharmacies produce a smaller profit margin than in the past because of insurers reimbursement rates and the pricing practices of pharmaceutical manufacturers. At the same time, demand for pharmaceuticals is rising, which means our pharmacies are busier than ever. It is a time of great challenge in the business.

One of the fundamental problems facing drugstores is a shortage of pharmacists. Colleges of pharmacy simply are not producing enough pharmacists to meet demand. In our company, the shortage means that we struggle to maintain the high level of customer service that is our standard.

Unfortunately, there will be no quick solution. Colleges of pharmacy recently began requiring an additional year of school for students, who will graduate as doctors of pharmacy. The extra year further delays the arrival of new pharmacists, despite the worst pharmacist shortage in history. Of course, this shortage creates a seller's market. Salaries and benefits are rising fast, which takes a bigger bite out of a store's shrinking profit margins.

An equal challenge is dealing with the demands of managed health care, which dominates the prescription field. As more Americans receive health care through managed plans, the need for drugstores to develop a better working relationship with managed plan organizations is critical.

"There's a disconnect between third parties and retail, in terms of what their policies are and how that impacts at the store level," says Kurt Proctor, senior vice president of pharmacy policy and operations for the National Association of Chain Drug Stores.

"There's a whole litany of things (third party payers) do that contribute to the workload of the pharmacist and yet, at the same time, they want us to get into more services and be doing things to serve heir patients quickly and efficiently."

The shortage of pharmacists, as well as other limiting factors, interferes with efforts to expand the role of the pharmacist to provide more counseling and information services. We must also ensure that managed care plans and insurers are willing to pay for these services. Discussion of pharmacists doing more for patients must also include ways to reduce the time pharmacists spend dealing with paperwork and authorization requirements by insurance companies.

A couple of pharmacists who have left our company in the past few months have said that the main reason is because they have to deal constantly with the frustratingly complex issues of our customers insurance companies. These individuals have not gone to work for other drugstores.

In general, the drugstore industry spends a good deal of time dealing with inconsistencies in health-care plans as well as the mountains of paperwork and procedures each plan requires. But it is clear that managed care will remain as a dominant player in healthcare, which means the drugstore industry must find better ways to deliver pharmaceuticals and deal with managed care requirements.

Larry Kocot, senior vice president of government affairs for the National Association of Chain Drug Stores, told Drug Store News that the drugstore industry is entering a new era that will see universal prescription benefits coverage of Americans by some form of managed care.

"Chain pharmacists must reinvent themselves as patient-care practitioners and more effective communicators involved in their patients' welfare," he said. According to Kocot, that in turn, will make the chain drug industry a more effective partner of managed care.

It is important to note that despite the challenges that drugstores must deal with, there are many good things happening in the business. Computers have helped us streamline record-keeping, which saves time and expense. Those same computers also help our pharmacists identify drug interaction for customers and provide background information that can be used to counsel customers.

We are just beginning to discover advantages that the Internet and other electronic communication can bring. Customers may find e-mail or automated phone systems to be comfortable alternatives to ordering refills in person.

Of course, we still want the pharmacist to talk to people when it is most productive and when that is what the customer wants. But writing down a prescription number and person's name is a poor use of the skills of our staff. Their time should be used for interaction with customers to discuss things that are crucial to their health and well being.

While e-commerce will have its own role in our industry, I believe customers will always appreciate and seek out their neighborhood pharmacists, who offer valuable information, trusted counsel and quick service.

Drugstores will continue to adapt to the needs of customers and the challenges of competition and changing technology. Just as the corner drugstore has given way to larger stores that offer greater variety, the future drugstore will evolve to meet the needs of its customers. It's just a matter of finding the right chemistry.