Seizing the Opportunity: A Pharmacist’s Playbook for Chain Closures

Nick Secrest (00:04):

Welcome everybody to Webinar on what to Do when Chains Close. We thought this would be a good add-on to the blog post that we posted on our IPC website. And as you may all have seen recently in the news, there’s a lot of chain closures happening all across the country, whether it’s the Rite Aid closures or the recent news about Walgreens being bought by private equity and all the closures that they’ve announced because of it as well as CVS. There’s a lot of for the independent pharmacy owner when this happens, but there’s also a lot of things you need to be well aware of. So we partner with the USA Pharmacy group on this. It’s a great partner of ours at IPC and a couple owners that we have, have had a lot of experience with this in their markets over the last couple of years and we thought it would be great to get their expertise on what to do and what not to do and what to watch out for. So we’re going to go through a number of steps that we have and hopefully by the end of this you’ll feel a lot more comfortable knowing what to do when you have a chain in your market that closes.

Nick Secrest (01:12):

So further ado,

Nick Secrest (01:18):

I’m Nick Seacrest. I’m the vice president and member performance with IPC from the U Save team. We have Bill Snodgrass, bill Hammock, Travis Covey who’s an owner, Brian Wilson who’s an owner, and Jeff Aiden

Nick Secrest (01:31):

With usaf. So the first of many steps

Nick Secrest (01:38):

Of the seven steps that we have is really to slow down in size up the opportunity you have in your market. So that means basically obviously do I have a chain in my area that we think may be closing, but what does that chain pharmacy business actually look like? What volume are they filling from prescription perspective? Are these patients and the prescriptions that they’re filling, are they profitable? Can my team absorb the business? We just want to understand what the opportunity or maybe the pitfalls would be for that pharmacy when it closes. Travis, I’ll throw it to you. I know you’ve seen this already with a couple of stores that have closed in your market. How did you handle this first step in the process?

Travis Covey (02:29):

Well, I think you should have a pretty good handle on your competitors in your market and have a fairly good idea what their mix is and what you should expect from that. Obviously with these chains, they may have some preferred contracts that you may not be preferred in, but there’s a good chance that you’re already doing some of that plan for those patients anyway, maybe on a non-preferred basis. So I think you could look at it a couple of different ways, but you’ve got to evaluate if they’ve got a high long-term care business, let’s say, that you don’t do, that’s something you may or may not want to take on. Maybe it’s something that you’ve wanted to dive into before, but I think this brings an incredible opportunity for growth for an independent, and I don’t think you would want to pick and choose what you take. I think you take all of it and you run your business as you’ve been running it. Some of those patients may be winners, some are losers, but we see that every day and so I think you just continue with how you’ve been running your business with that model and just accept all of those that you can and just continue on like that.

Nick Secrest (03:56):

Yeah, exactly. Brian, do you have anything to add to that or?

Brian Wilson (03:59):

Yeah, I agree with Travis. I think you take the opportunity and you look at it the same way you would as any other opportunity where people are coming to you. Obviously it’s in greater volume, but we’re able to navigate what works well for us and make changes based on those patients. I think you take those patients and you do the best you can to make those patients profitable. That’s not always the most ideal. Some plans are really difficult to make that patient profitable, but I think we’re figuring it out now and so adding those patients and just being creative and looking at how we have to handle it to make them profitable to make it work is what we’re doing every day now. That’s

Travis Covey (04:51):

Right, that’s right. And on that note, we’re coming up on our Medicare D enrollment period and so it may be a case where you have to kind of bite the bullet on some of those patients for the time being, but if you’re doing Med D enrollments or evaluations for your current patients, this is a perfect time to get those patients moved over to something that works for your business more than what they’re on at the current time. You may just have to eat it for your time.

Brian Wilson (05:20):

Yeah, there’s no question there. And there’s even more opportunity outside of the annual enrollment period too when you look at how many people on Medicare D plans might qualify for some type of a special election period that the number of dual eligibles, the number of people just read an article yesterday where qualifying for extra help becomes easier. Being able to apply and get that extra help is becoming easier. A lot of this stuff qualifies for special election periods, so there’s opportunity even throughout the year outside of annual enrollment period, somebody goes into an institution, somebody comes out of an institution that creates a special election period. Even sometimes weird things like weather events can create special election periods. Your dual eligibles, they can change plans every single month if they want to. So really when you bring in this business, you take care of it, but like we’re talking here, you can also assist them in getting into a plan that’s great for them and also better for you, and I think that’s a huge opportunity that we’ve seen a lot of good result from here.

Nick Secrest (06:34):

That’s great feedback guys. Moral of the story is take them all and figure out how to make them profitable once you get them in. That’s great. The second thing that I’ve seen a lot where people can get themselves in trouble is a lot of times when these chains close, they have a fair amount of business. They’re filling a couple hundred scripts a day to I’ve seen well over a thousand and then they just close. Well, that’s a lot of patience and with that obviously comes a lot of scripts and with a lot of scripts comes a lot of inventory and with a lot of inventory comes a lot of money to pay for it. And the challenge that you want to get your head wrapped around is if that pharmacy does close again, how big the volume is, but how much am I going to have to buy to service those patients over what time period and how long does it take to get paid back? So how have you guys handled that massive influx of patients and just dealing with the cashflow implication of that

Nick Secrest (07:32):

Kick it to your first brain?

Brian Wilson (07:35):

Yeah, I think the biggest thing to look at is you’re going to have to understand that a great influx of business is going to create the need to buy a lot more inventory. Your payment terms, understanding your payment terms becomes very important as far as cashflow. Cashflow is concerned. So whatever your terms are with McKesson, whatever your terms are with your secondary IPC has some favorable terms as far as net 30 goes, so you can kind of navigate some of your purchasing to allow to help yourself out with cashflow as far as that goes. But just also understanding that this opportunity is going to cost you some upfront and to be prepared for that cost because the timing of PBM payments may not coincide very well with some of your payment terms. Of course, you do the best you can to navigate purchasing based on those payment terms, but another thing that is probably a really good idea, if not essential, is to make sure you have a line of credit. You don’t want to lose out an opportunity because you don’t have a line of credit in place to help you through and just not being afraid to borrow a little bit of money for a short amount of time in order to take on an opportunity and capitalize on an opportunity. I think lines of credit are essential to capitalizing on these opportunities.

Travis Covey (09:05):

And I’ll second everything Brian said. Having that relationship with your bank and beforehand would be a good idea just so they know what’s coming. If you’re bumping on your credit, they know why they’re not asking you a bunch of questions about that. You’re going to have a few weeks there where as Brian said, timing, your PBMs pay you every two to three weeks, but your bill may be due, so there could be a bit of a crunch there. You’re getting all these people in and your perpetual inventory that you have stuck in your current system, you’re probably going to be short on stuff about every day for a while until you get everything ramped up, and those are all things that’s just communication with the patient and the physicians and so everybody understands what’s happening.

Nick Secrest (09:55):

Yeah, I would say even too, even if you don’t have a line of credit today and there’s a chain in your market and you may not think it’s going to close, probably would be a good idea just to get a line of credit. You don’t have to use it, but you just have to have access to it in the event that it happens. So

Brian Wilson (10:12):

Yeah, I just actually renewed my line of credit here in Ogallala just this last week and to renew a $200,000 line of credit, it costs me $200 for the paperwork and it’s there. If I use it, great. If I don’t use it, it doesn’t cost me another penny. It’s just really good have in place. Exactly.

Nick Secrest (10:34):

Yeah. Along with that, I think to kind of take a step further as far as getting strategic with your inventory when those patients are coming to you, and again, kind of getting back to step one, having an idea of what the mix of those patients looks like, so how heavy is the brand concentration? I think especially when we think about GLP ones and maybe how sometimes we struggle with the profitability of those prescriptions, knowing the right resources, I think a line of credit can be helpful certainly, but the pay term component of your wholesaler, I’ve seen a lot of times where owners kind of struggle to understand the 10th, the 25th or maybe they’re on a different pay term cycle. How have you guys handled understanding that component of it? Obviously you guys have a pretty good handle on your cash flow, but what would be some advice for owners to get a better handle on their wholesaler pay term?

Nick Secrest (11:33):

I’ll

Nick Secrest (11:33):

Kick it to you, Travis first

Nick Secrest (11:35):

On this one.

Travis Covey (11:39):

Well, McKesson has multiple pay terms. Obviously they have pay on the tent, they have daily draws, they have many ways to do that, and I definitely have a conversation with McKesson on how they could work with you on that. The GLP, as I’m sure most of us have done, we probably sent some of those patients over to the chains because they were losing money. So you’re going to get some of those back and it may be where you have to send them off again, and that is just the reality of it, and that’s how you’ve running your business and you shouldn’t stray from that. Like we’ve said, it’s a great game or business. However, you don’t want to hurt the current business model that you have, so whether it’s IPC or McKesson or any other secondary wholesalers, I think getting a firm grasp on their pay terms before you get deep into this is very important.

Nick Secrest (12:43):

Brian, everything to add to that or

Brian Wilson (12:45):

Yeah, absolutely. Just agree with all of that. I think there there’s different things that you can do within the framework of what your current situation is with McKesson. Maybe there’s a conversation with McKesson over a short term change. Some secondary wholesalers are pretty unique in how some of their pay terms are. Some are if you invoice from the first through the 15th, you might not have to pay until wait first through 15th. You pay on the 15th of the following month, 15 or 16th through 31. You don’t have to pay until the 31st of the following month. Just knowing all those pay terms can buy you time with cashflow. It’s really important to know those pay terms.

Nick Secrest (13:34):

Yeah. With IPC, for example, our branded pay terms 21 days, our generic pay terms even longer can be up to 45 days. It just depends. The other thing I would add is sometimes the wholesaler, they’ll do something called dating where you can push out a payment or two over a certain period of time with a longer payback. It’s not as common as it used to be. It depends on a lot of different things, but it’s another Erwin quiver that people can use. So I would say the fourth step may be the most important, believe it or not, but the biggest thing is when these chains close, the people that work at those chains have a relationship with those patients and a lot of those people can be super valuable, especially if you want to retain a lot of that business. When we think about recruiting the people that work there, how have you guys navigated that when the chain closes? I’ll start with you first on this one, Brian.

Brian Wilson (14:34):

Yeah, I think that’s a really critical piece of all of this is people go to a pharmacy a lot of times for the relationships they’ve built over time, and so every pharmacy, no matter where they’re at, what they do, they have key people, and if that pharmacy is going to close down, it’s a really good idea for you to try to target and recruit those key people because if you can recruit those key people to come to your pharmacy, the likelihood of people coming there and feeling more comfortable, at least at the start, everybody’s familiar, likes to see that familiar face. I think it’s really important to try to make it feel as normal as possible as it can for people. It can create quite a bit of disarray and just having the comfort of a relationship that’s already there to bridge the time it takes to build relationship with other people in your pharmacy, I think is critical.

Travis Covey (15:42):

Yeah, I think this portion of it is maybe the most important part of it, and you can start that recruitment process of those employees before they close. I mean, and you probably already know some of these people that are working there, maybe try to hire them. Hopefully they’re not people that you had hired before and are, they’ve now gone to the other side, but there’s nothing that says you can’t go in there and talk to those guys before they’ve closed and they’ve heard the rumors if they haven’t already heard it firsthand. So to get your foot in the door right away because if you’ve got any other competitors in town, they’re probably doing it. So to get your foot in there and to get those key employees to your store, like Brian said, that familiar face is everything. You’ve got people that are very confused about what’s going on, and so for them to walk into your store and see somebody that they’re used to seeing, that is huge.

(16:41):

The other part of that is your advertising. You need to have some ads in the can ready to go. I mean, you could even put some things out before that closure happens, but you’ve got to have that ready to go to let people know, Hey, we’re over here whether you bought the files or somebody else bought the files or whatever happened with them, you can come here to get your prescription filled. Let them know how easy the process is. Give us a call, bring your bottles, but it doesn’t need to be ready to go day one. You can’t lag on that or else those patients will stray off to different directions. So those two pieces are key to this.

Nick Secrest (17:21):

Yeah, I think the thing you said about talking to those employees well ahead of time, I’ve seen in certain instances where it stretches out the transition period quite a bit, so maybe the chain hasn’t decided to close yet. You got that key tech that they have to come over and it’s kind of helped push the closure of that chain pharmacy a little bit faster, but it makes it more gradual for you to absorb all those patients maybe over a longer time period so that the cashflow challenges that we just talked about are lesser of a problem. So yeah, I love that. That’s perfect,

Jeff Aden (17:59):

Nick. I would just add to the obvious factor here that we’re not talking about, it’s not probably necessary, but you’re going to need some extra staff to do it, right? So beyond the key people to maintain relationships from the chain store, you already run a pretty efficient staffing situation. I’m sure you’ve had to learn how to do that, but you’re going to need some extra help to keep that efficiency up and not to upset people in the first couple of shots with you. That’s

Nick Secrest (18:23):

Right, Jeff. Excellent. Good point.

Nick Secrest (18:30):

All right. Fifth point I think that’s important is really to help educate the physicians in your market. We’ve seen a lot of times over the years where a chains closes rather and it’s kind of a free for all on how to get that script into that pharmacy. How have you guys handled that talk with the providers before that happens? I’ll start with you on this one, Brian.

Brian Wilson (18:58):

Yeah, I think this is a really important piece of all of this. I think in these smaller communities that most of us are in, not all of us, but a lot of us are in these smaller communities, these pharmacy closures, they create chaos for the prescribing offices also, and they’re going to need your help. They’re going to need that relationship. They’re going to need good communication to help them navigate this as well. And so when we talk about building provider relationships, I think we probably for the most part already have really good provider relationships, but that’s going to be half. To take even a step further, when I look at my situation and that I work at most of the time, I mean every single one of the main providers that I work with I have a good relationship with. I can text them, I can text their nurse or med assistant.

(19:52):

I can do a lot of those things to make it easier on them and even just letting them know, need to discuss this patient, have some problems trying to navigate their med chart, getting an update med list, those sorts of things. I think having that great relationship, having that previous relationship and even making it stronger makes all of this quite a bit easier. I look at some of the closures that have happened and it is kind of chaotic, and so helping the providers does nothing but even strengthen that relationship, and that’s good for business too,

Travis Covey (20:37):

And to build on that, these patients are going to be asking their doctor where they should go just because their files came to us doesn’t necessarily mean they’re going to come to us, but they’re going to be asking their physician, and if you’ve got that relationship with a physician, you want them to be top of mind. You want your pharmacy to be top of mind. Now, legally they’re not supposed to do that, but you know what happens, and if you’re first in line there, that’s obviously a key thing to have besides all the things that Brian mentioned, just to make it easier on them because they’re inundated with PAs and everything else from these insurance companies, and so to let them know that we’re all kind of in it together is just beneficial for everybody.

Nick Secrest (21:29):

Love it. I think step

Nick Secrest (21:32):

Number six here to protect your time, energy and business health. Moral of that story or that line is what’s the plan? How do we communicate the plan with the employees in the event that a chain closes? How do we think differently about refills? How do we delegate time for certain people? Travis, how have you handled that in the past with your own staff, not so that they don’t get overwhelmed and burnout in the event that this happens?

Travis Covey (22:02):

Yeah, well, depending on the volume that’s coming over, but that’s just a conversation you have with your employees. It’s going to be a rough two to three months to get all these transferred over to get all that going, but it’s just having that good relationship with your employees and just let them know we’re all in it together. We’re going to get through it. It’s going to be a little rough. You’re going to have some testy customers probably, but we’ll get through it and it’ll be better in the end. I think that’s just key, and it’s just communication with your staff, with the customers that come in. They’re aware of all the changes going on too to be patient with us and we’ll take care of them and get through it.

Nick Secrest (22:48):

Yeah. Brian, anything to add

Brian Wilson (22:51):

On that? Yeah, no question. Travis is dead on. You want to make sure that you want to make sure you’re communicating with your staff, making sure you’re keeping them up to date, making sure that you’re letting them know they’re doing a good job and that it’s a difficult situation and doing all those things to kind of keep morale up because it is a very challenging time. One thing I think that helps is to have a plan to the best of your ability. Sometimes things happen last minute or whatever else, but to have a plan and to communicate that plan to your staff I think is absolutely essential. Sometimes when these pharmacies close, you have this inundation of people and people are even coming in that aren’t due for anything to be filled, and they’re just there because they’re concerned about what the pharmacy situation is.

(23:44):

I think having a plan as far as, okay, Mrs. Wilson, I understand that you’re going to be using our pharmacy and we’re going to take really good care of you. When do you need your prescriptions? It’s probably not today. So what we’ve done is we’ve had kind of a folder, an alphabetical folder and date folders to where, okay, you’re going to be getting a bunch of transfers or you’re going to have new files or whatever else. All that work doesn’t have to be done on day one, and I think that’s a big key to keep your staff from getting burnt out is trying to treat triage and figure out, okay, when does this work need to be done by to where we can actually handle it, but we also meet the customer’s needs. I think just communicating how to plan, giving your staff praise that they deserve, making sure everybody understands that, Hey, it is difficult. We know this. We’re going to do the best we can communicate and execute. This plan is going to make everybody a lot happier and more understanding that it can be accomplished.

Travis Covey (24:54):

To Brian’s point, that is correct. You’ll have people immediately when that their current pharmacy closes. You’ll have people calling with questions about everything and they want to transfer. So for example, recently here that happened quite often and we would print out all their transfer sheets, they’d be in a stack whenever anybody had time, they’d grab some put them on hold, so we had that patient’s profile as complete as possibly could when they came in, we were ready to go for him, refill and out the door. But yeah, it’s communication with the staff and letting them know you’ve got their back and it’ll be better in the end.

Nick Secrest (25:42):

That’s great feedback guys.

Nick Secrest (25:44):

So the last and the final step clearly put is make noise. The moral of this one is to advertise, to yell from the mountaintop, if you will, that you’re there in the event that a chain closes and that you can help those patients. How have you guys effectively when this happens, advertised or got your name out there so that all the patients in your community knew you were there? Travis, I’ll start with you.

Travis Covey (26:10):

Yeah. I think with this, this is where you probably need to spend more money than you usually do. Whatever means you advertise, whether it’s social media, radio or your local newspaper, hit them all and hit them frequently and keep that up for several months. Let them know that they just need to bring their bottles in. We’ll take care of the details. You need to make it as easy as possible for them because confused, they don’t know where they should go, where they’re supposed to go. They’re very confused about all of this, and you just need to let them know that give us a call. We will handle it. We’ll take care of the details for it. Just call us or stop in. But you can’t replace this period of time for your advertising. If you don’t get them now, you’re probably not going to get them.

Nick Secrest (27:04):

Anything to add, Brian, that you’ve done?

Brian Wilson (27:05):

Yeah, I think everything he said is absolutely dead on. The one thing I would maybe add to that is it seems like when we see these new customers come over, or even sometimes when these situations occur and somebody comes over, it’s almost sort of surprising that they haven’t already been a customer. I think one of the things that we need to do a better job at when we are advertising is advertising all the things we can do, the technology that we might have. A lot of people like the apps or they like the online ability to manage their own profile. They like the ability to punch in their own numbers as opposed to talk to somebody. A lot of times, we’re the only people that do adherence, adherence packaging. A lot of times we’re the only people in town that do specific things, and I think we don’t always do really pointed advertising, and I think it’s a good time to be more specific with your advertising and letting those consumers know exactly what your capabilities are and also letting them know that, Hey, I know you’ve been going to a chain and maybe they have some bells and whistles.

(28:13):

Our bells and whistles are pretty darn similar, and I think making sure that they understand that the experience is going to be the same, probably even better, and then getting the chance to prove to them that it’s better is really key. I think with that, that comes maybe with a little bit more pointed advertising about the specifics of what you can’t do

Travis Covey (28:36):

And as independence, we do need to really emphasize the things that we can’t offer that a lot of the chains don’t like delivery if you do delivery, but there’s a lot of things like that that customer friendly things that I think a lot of chains, they’re just not staffed to it for the most part, the Med D enrollments, any of those things that we do and we probably do better than the chains we need to not be concerned about. Boasting a little bit about those things,

Nick Secrest (29:13):

Leveraging the value that you guys bring. That’s different than the chains. I think sometimes owners are pretty humble and they don’t like to brag, but you got to brag. That’s how you bring them in. So that was great, guys. I really appreciate it. Great feedback. Thank you for watching this. If you have any questions or thoughts, please feel free to reach out to us on our [email protected] and look forward to talking soon. Thanks.

Jeff Aden (29:40):

Thank

Nick Secrest (29:40):

You. Thank you.

Jeff Aden (29:42):

Thanks

Nick Secrest (29:42):

Everybody.