What Veterinarians Can Learn from Successful Independent Pharmacies – Part One

As consolidation ramps up in the veterinary field, it is worth looking at other industries to help understand the drivers of this phenomenon and also to look for private ownership bright spots.

The pharmacy industry has seen tremendous changes over the last 40 years. In the early 80s, there were over 40,000 independent pharmacies.  However, in the 1980s, grocery stores and discount department stores realized that by adding a pharmacy, they could increase traffic into their stores.  These grocery and department stores were not only very convenient for customers (one stop shopping) but because of their pre-existing buying power, they could negotiate for better deals on medications, increasing profit margin and providing more cash for expansion. Unlike veterinarians, pharmacists have not traditionally developed strong relationships with their customers.  In addition, pharmacists have not been as good at explaining why their specific individual knowledge base is important directly to consumers. Thus, research in the pharmacy field showed that most customers choose a pharmacy based on location and convenience, not pharmacist, brand, or chain.

One of the biggest players in the market, Walgreens, actually started as a single pharmacy in Chicago that Charles Walgreen purchased in 1901.  Walgreen was very ambitious and grew the chain to 100 stores by 1926 and the company became public in 1927.  In the early 1980s, Walgreens was 1000 stores and 10 years later, they had doubled to 2000.    Realizing that convenience was very important, Walgreens diligently only opened on corner lots to allow for easy access to their businesses (See Good to Great by Jim Collins) and were one of the first to do drive up pharmacy pick up.

By 2000, the number of independent pharmacies was dramatically reduced to 25,000.  Three main chains, all publicly traded, dominated, and continue to dominate, the market – Walgreens, CVS and Rite Aid.

Despite this consolidation, today there are still approximately 22,000 independent pharmacies. These independent businesses employ over 250,000 people and account for $80 billion in revenue. (Data from www.ncpanet.org)

What has allowed these independent pharmacies to survive in the era of grocery store pharmacies, big chains, and consolidation?  This article described several tips from successful pharmacy owners.  Pharmacy is a very different industry than veterinary medicine with much more reliance on sales than service and different regulatory pressures. However, I think these tips are relevant to locally owned veterinary practices.

Find your niche:   Many of us have used independent pharmacies that concentrate on compounding.  There are some pharmacies that have specifically found their niche serving the veterinary community. Other pharmacies have concentrated on treating and helping people with certain specific diseases such as high blood pressure or diabetes.

Some of the most successful privately owned veterinary practices I have seen have been very clear about which niche of clients they are trying to serve.  It is very hard to be all things to all people.  Deciding you are going to be a fast-paced outpatient walk-in clinic is a different niche than an appointment always with the same doctor type of hospital.  Both are important and can be successful but it may be more challenging if you mix models.  As a veterinary practice owner, it is really important to have a clear picture of who you most want to serve and what you want to provide.

Consider new revenue sources: Many of the innovative growth areas in veterinary practice are coming from small independently owned practices.  It is easier to innovate when you are small, have the freedom to try new things, and can build time into your work to think creatively. Rehabilitation services, pain management clinics, home palliative care, transfusion services, and more recently, after-hours telemedicine services, are just some of the innovative ideas we have seen in the last 20 years.   In pharmacy, working hard to synchronize medications (working with clients so that they schedule their medications for ease of administration and also have all their refills due at the same time) is leading to better satisfaction, compliance, and also revenue as refills are not missed.  This is a worthwhile consideration for us especially with pets with heart disease, liver disease or multiple health problems. As a practice owner, it is important to watch trends in the industry and also to ASK our clients what they wish we provided.

Be convenient: More families need two incomes to support their families and their pets today than in times past.  That means it is harder to make an appointment between 9am and 5pm during the week, especially on an ongoing or chronic problem. Part of the growth of big box pharmacies had to do with convenient locations and hours.

I am not saying every practice should be open every night.  However, thinking about efficient drop offs, how to handle urgent care needs, how to make your Saturday hours most efficient, and contemplating one later night a week could really help.  It also means that if you are planning a new hospital, you should be very focused on convenient location.

In addition, people are less likely to want to spend time on the phone and are looking for ways to schedule and confirm appointments that use text, email or online forms.   You are most likely to capture phone appointments if you can make it the first time they call.  Voicemail is your enemy.

Educate your customers: The more we show that we actually do have more information than the dog breeder or Dr. Google, the more clients will come to us for help.  Don’t be afraid to have a section in your lobby that highlights your education and the education of your staff.  We need to explain our diagnoses clearly, provide written information about diseases and care, and find ways to make sure our clients understand their pet’s illnesses and how they can best participate in care.

Keep it simple: One of the best ways to improve your business is to have a clear focus on getting rid of steps that waste time and don’t add value.   It is also important to realize that you can’t be all things to all people.  Figuring out clearly what your mission is, where your passion is, and who you most want to serve will help target which equipment it is most valuable to have in your practice.  Looking at your processes from how you admit patients to how you process lab work and trying to get rid of steps not only makes you more efficient but also makes your medicine safer, improving both quality and your bottom line.

I am not so idealistic to believe that running your business effectively is all you need to do to run a long term sustainable (existing with local ownership for more than one generation) veterinary practice given current pressures.   Next up, I’ll profile an interesting pharmacy group that found an innovative way to both support local ownership but also leverage buying power for increased profitability– stay tuned!