In-Brief
Sponsored by
Dear Reader
The National Community Pharmacists Association (NCPA) and Cardinal Health are proud to celebrate
the 80th anniversary of the NCPA Digest. Over the past eight decades, information provided in the
Digest has helped shape public policy, while arming independent community pharmacy with the
information necessary to make sound business decisions. From galvanizing support for the RobinsonPatman Anti-Discrimination bill of the 1930s to adapting to the implementation of Medicare Part D, the
Digest has been the trusted source of information for independent community pharmacy.
While the challenges facing independent community pharmacy have been many and varied, the strong
relationship between community pharmacists and their patients has remained steadfast. Year after year,
community pharmacists rate as being number one or two as the most trusted health care provider. This
undeniable bond, combined with information provided in the Digest, will pave the road for a bright and
prosperous future.
Looking toward the future, community pharmacy must expand beyond the role of dispensing
medications and take on a more proactive role in the total health care of their patients. Offering
specialized services tailored to patients and serving key niche markets will allow community pharmacy
to diversify its revenue stream and grow as small businesses, while having a positive impact on
health care. As an example, pharmacists are uniquely positioned to improve adherence to life-saving
medications that will ultimately limit the more costly expenditures of unnecessary physician visits and
hospitalizations.
Cardinal Health values its relationship with independent community pharmacy, realizing that
community pharmacists play a critical role in helping improve our nation’s health care system. To
support this role, NCPA and Cardinal Health continue to provide new services and resources that can
help independent community pharmacies thrive into today’s competitive market.
NCPA, with the support of Cardinal Health, is pleased to continue the Digest tradition of providing
meaningful information and insight into the independent community pharmacy marketplace. We are
confident that you will find the 2012 NCPA Digest, sponsored by Cardinal Health, to be an excellent
resource on the industry, providing you value throughout the year.
Sincerely,
B. Douglas Hoey, Pharmacist, MBA
Chief Executive Officer
Pharmacists Association
Mike Kaufmann
Chief Executive Officer, National Community
Pharmaceutical Segment
Cardinal Health
Copyright © 2012 National Community Pharmacists Association, Alexandria, Virginia, USA.
All rights reserved. No right of reproduction without the prior written consent of the National
Community Pharmacists Association.
Executive Summary
The NCPA Digest, sponsored by Cardinal
Health, provides an annual overview of
independent community pharmacy, including a comprehensive review of the financial operations of the nation’s independent
community pharmacies for 2011.
Independent Pharmacy, At-a-Glance
TABLE 1
2011
Average number of pharmacies in which each independent owner
1.76
has ownership
Average number of prescriptions dispensed per pharmacy location
In 2011 independent community
pharmacy represented a $88.5 billion
marketplace, with 92.2 percent of sales
for independents derived from prescription drugs. Although most independents
continue to face slim margins from
private third-party contracts and government reimbursement programs, they
have strived to reduce their overhead
costs through running a more efficient
business. They are using labor-saving
technologies to control payroll expenses. The number of employees per
pharmacy location decreased in 2011,
and the wages paid to pharmacists
and technicians remained relatively the
same. In 2011, the number of independent community pharmacies increased
to 23,106 independent community pharmacies employing over 300,000 workers
helping to stimulate local economies,
paying state and local taxes, and providing high quality services that are greatly
valued by patients.
An overview of the average independent
community pharmacy is provided in Table
1. In general, the average independent
community pharmacy location dispensed
62,969 prescriptions (201 per day) in
2011, which is a slight decrease from last
year’s prescription volume of 64,169. Total
New prescriptions
28,881
Renewed prescriptions
34,088
54%
Total prescriptions
62,969
100%
Average prescription charge
46%
$56.09
Number of hours and days per week per location
Hours open per week
55
Days open per week
6
Inventory
Prescription Inventory
$240,000
6.2%
Other Inventory
$38,000
1%
Total Inventory
$278,000
7.3%
Annual Rate of Inventory Turnover
10.6
Annual Rate of Prescription Inventory Turnover
11.3
Percentage of total prescriptions covered by
Government programs (Medicaid or Medicare Part D)
49%
Other third-party programs
38%
1936: The average prescription charge was 34 cents
sales slightly decreased this year due to
the flat prescription volume, increased
use of lower-cost generic medications,
and the increased emphasis on 90-day
refill prescriptions. These numbers may
also reflect the reality that some payers
have forced their beneficiaries to use
mail-order for refill prescriptions.
Many independents continue to operate
multiple pharmacies. Twenty-four percent
of independent community pharmacy
owners have ownership in two or more
pharmacies and the average number of
pharmacies in which each independent
owner has ownership is 1.76.
The Independent Community Pharmacy Marketplace
1
Averages of Pharmacy Operations
TABLE 2
2002
2003
Sales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Cost of goods sold
76.5%
76%
77.9%
76.4%
77.2%
76.8%
76.8%
76.2%
76.0%
77.1%
Gross profit
23.5%
24%
22.1%
23.6%
22.8%
23.2%
23.2%
23.8%
24.0%
22.9%
Payroll expenses
13.1%
13.2%
12.2%
13.4%
13.6%
13.7%
13.5%
14.1%
14.5%
13.4%
6.6%
6.8%
6.3%
6.5%
6.4%
6.5%
6.5%
6.4%
6.5%
6.6%
19.7%
20%
18.5%
19.9%
20%
20.2%
20.0%
20.5%
21.0%
20.0%
3.8%
4%
3.6%
3.7%
2.8%
3.0%
3.2%
3.3%
3.0%
2.9%
Other operating expenses
Total expenses
Net operating income
2004
2005
2006
2007
2008
2009
2010
2011
1945: The average cost of goods sold was 31,020 or 66% of total sales
Average Annual Sales (in Thousands) Per Pharmacy Location
2011
FIGURE 1
$3,831
2010
$4,022
2009
$4,026
2008
$3,881
2007
$3,604
2006
$3,612
2005
$3,745
2004
$3,580
2003
$0
$2,855
$1,000
$2,000
$3,000
$4,000
1945: Average annual sales per pharmacy location was $47,000
Data for the Digest have been collected
for 80 years, providing the opportunity to
look at long-term trends for independent
community pharmacies. Since 2002,
gross margins as a percentage of sales
have remained relatively flat at 22 to
24 percent. Figure 1 and Table 2 show
these trends:
2
2012 … NCPA
of sales, decreased by 1.1 percentage
points in 2011 to 13.4 percent. Payroll
expenses decreased by reducing the
number of full-time employees and not
increasing wages. With a lower gross
margin, payroll, and operating expenses
had to be carefully monitored.
+ Through attempts by independents
to control operating expenses, the average net operating income remained similar to last year at 2.9 percent. Since sales
decreased, the net operating income
dollars before tax decreased slightly.
+ The average monthly prescription
$3,244
2002
+ Payroll expenses, as a percentage
+ Average sales per location for
2011 was $3,831,481, which is less
than in 2010.
+ Gross margin decreased slightly
from 24 percent in 2010 to 22.9 percent in
2011, but remained in the 22-24 percent
range seen over the last 10 years.
DIGEST …Sponsored by Cardinal Health
drug inventory was $240,000, and the annual turnover rate of prescription inventory
was 11.3. (See Table 1.)
The Independent Community
Pharmacy Marketplace
Independent community pharmacies are
all privately held small businesses but
they vary in practice setting. They include
single-store operations and other independent pharmacist-owned operations
such as regional chains, franchise, compounding, long-term care (LTC), specialty,
and supermarket pharmacies. At the end
of 2011, there were 23,106 independent
community pharmacies, which is slightly
up from 23,064 in 2010. Independent
community pharmacy represents a significant portion of pharmacies in the United
States. (See Figure 2.)
25,000
23,318
22,728
20,000
20,230
23,117
23,064
23,106
20,705
20,804
21,020
19,202
10,000
It is important to note that this independent community pharmacy industry
represents 38 percent of all retail pharmacies in the U.S. and a $88.5 billion
marketplace.
Other notable characteristics about
independent community pharmacies:
FIGURE 2
Pharmacy Practice Settings
8,949
8,505
8,392
8,351
8,274
7,721
8,086
8,163
8,248
8,240
2007
2008
2009
2010
2011
Independents
Traditional Chain
Mass Merchant
Supermarket
Pharmacy Staff Positions
TABLE 3
2009
2010
2011
+ Over 55 percent of independent
Non-owner pharmacists
1.6
1.8
1.6
community pharmacies are located in
an area with a population of less than
20,000.
Technicians
3.9
3.8
3.7
Drivers
n/a
.75
n/a
Other positions
4.1
3.2
3.8
Total non-owner employees
9.6
9.5
9.1
Working owners—pharmacists and other positions
1.1
1.1
1.2
10.7 FTE
Employees
10.6 FTE
Employees
10.3 FTE
Employees
+ In 2011, 13.8 percent of independent community pharmacies had total
sales over $6.5 million, 30 percent with
sales between $3.5 and $6.5 million, 19.2
percent with sales between $2.5 and $3.5
million, and 37 percent with sales under
$2.5 million.
Total workforce
1955: There were 67,000 full-time pharmacists
Pharmacy Profiles
5
+ The majority (60 percent) of independent community pharmacies are organized as a small corporation, followed
by 20 percent that are a C corporation.
Fifteen percent are organized as a limited
liability corporation (LLC).
+ The average independent community
pharmacy is open six days a week and 55
hours per week. (See Table 1.)
+ Independent community pharmacies
are attempting to control payroll costs in
a myriad of ways. In 2011, independent
pharmacy owners on average employed
10.3 full time equivalents (FTE) per location, similar to 2010. (See Table 3.)
+ Hourly wages for staff pharmacists
and technicians continued to decrease in
2011. Staff pharmacist wages decreased
to $52.89 and pharmacy technician
wages decreased to $13.62. Clerk/cashier wages increased by 19 cents per
hour to $9.93. (See Figure 4.)
FIGURE 4
Average Hourly Wages
60
50
$52.43
$53.39
$52.89
$13.24
$13.47
$13.70
$13.62
$8.95
$9.05
$9.97
$9.74
$9.93
2007
2008
2009
2010
2011
$49.60
$50.45
$12.88
40
30
20
10
0
+ The 2012 Digest pharmacy’s cost of
Pharmacist
dispensing for all pharmacies is $12.19,
down from $12.44 last year.
+ During these difficult economic
times, independent community pharmacists continue to help patients lower
their costs through encouraging the
appropriate use of generic drug products, which are less expensive than their
brand counterparts. As shown in Figure
5, generic dispensing increased again in
2011 to 76 percent of total prescriptions.
A majority of prescriptions are for chronic
conditions, indicating the importance of
medication adherence.
4
2012 … NCPA
Clerk
Technician
Percentage of Generic Prescriptions Dispensed
FIGURE 5
2011
76%
2010
72%
2009
69%
2008
65%
2007
61%
0%
20%
DIGEST …Sponsored by Cardinal Health
40%
60%
80%
Patient Care Services
Independent community pharmacies are an easily accessible health care provider
specializing in high quality patient-centered care. One of the hallmarks of independent
community pharmacy has long been the services to which patients have access and
receive in the pharmacy. As Medicare Part D continues to be a factor, community pharmacists are positioned best to provide medication therapy management services to
patients, and the data indicate that 61 percent of independent community pharmacies
are reimbursed for MTM services under Medicare Part D. As shown on the following
pages, independent community pharmacists continue to offer patient care services
and find niches to serve their communities.
FIGURE 6
Summary of Patient Care Services Offered
82%
76%
76%
Delivery
66%
66%
67%
Compounding
65%
69%
71%
Durable
Medical
Goods
64%
69%
68%
Patient
Charge
Accounts
52%
48%
43%
Assisted Living
+ The most offered service in
2011 was delivery, followed by
compounding and durable medical
equipment. These services have
been in high demand among
patients for the past three years.
Additionally, these services provide a
competitive advantage for independent community pharmacy.
+ Fifty percent of independent
community pharmacists offer a
medication adherence program.
(See Table 5.) Over a third of the
pharmacists provide synchronization
of medication refills.
+ The percentage of pharmacies
providing compounding services has
remained almost constant at nearly
66 percent over the past three years.
+ As independents provide more
prescriptions to Medicare beneficiaries, they are also offering more
services to the elderly. Compared to
2010, more community pharmacists
are providing services to assisted
living facilities and hospice.
28%
34%
36%
Long-term Care
HIGHLIGHTS
27%
33%
29%
Conduct Patient
Education Programs
0%
20%
2011
2010
40%
60%
80%
2009
Patient Care Services
5
Join NCPA today!
To receive a FREE 2012 NCPA Digest, sponsored by Cardinal Health—detailed
pages of financial information regarding the independent community pharmacy marketplace—simply become a member at www.ncpanet.org or call 1-800-544-7447.
Here is a limited sample of what you are currently missing from the Digest:
+ An in-depth analysis of the independent pharmacy marketplace including trends
in operating results for the average pharmacy on expense management, staff costs,
productivity, cash flow, and more.
+ Independent pharmacy benchmarking data to compare profitabity, cash flow,
productivity, and your pharmacy’s financial position with other pharmacies. This includes financial data for the average pharmacy by geographic region, sales volume,
population of the community, as well as third-party prescription activity.
+ Trends in third-party prescriptions and an analysis of the continued impact of
Medicare Part D on pharmacies.
+ The cost of dispensing for the average pharmacy by geographic region.
+ Data regarding trends in patient care services at pharmacies, medication
therapy management, and long-term care service.
+ Profiles of several independent community pharmacists and their respective
pharmacies.
To learn more, please visit www.ncpanet.org.
100 Daingerfield Road
Alexandria VA 22314
800.544.7447
www.ncpanet.org
100 Daingerfield Road, Alexandria, VA 22314 • 800.544.7447 • www.ncpanet.org