by Dave Wendland, vice president, strategic relations, for the Resolutions blog series

I recently had the opportunity to present this topic at the Nicholas Hall OTC North American Conference, and confirming my suspicions, there were several key “aha” moments among the participants representing a host of consumer healthcare companies. I’d like to summarize three of the key points that helped these manufacturers gain a better understanding and deeper appreciation for this segment of the pharmacy market.

They are everywhere

Recognizing that the number of independent pharmacies in America is more than three times the number of Taco Bells is eye-opening. Of course, the challenge is because of their independent, entrepreneurial ownership, they are sometimes hidden from the naked eye. However, the total number has remained quite stable over the last six years with about 22,000 outlets (keeping in mind that independent pharmacy comes in all shapes and sizes).independent pharmacist

That said, with more than 200 prescriptions dispensed at each pharmacy every day (Source: National Community Pharmacist Association annual study 2017) – about 40% of all prescription volume – their customers have no difficulty finding and supporting them. In fact, the $80 billion annual sales represented by this group of independent retailers makes their sales similar to those generated by Walgreens.

They are focused

Examining the categories contributing to the sales performance within independent pharmacy speaks volumes to their focus. It is generally the inverse of what is seen in chain drug performance. As an example, and as referenced in Walgreens’ 2017 annual report, the company generates approximately 69% of their sales from prescriptions, 23% in general merchandise, and about 8% in non-prescription medicines. By contrast, independents often generate 90+% from the Rx department and their top seven front-end categories comprise the following: Cold & Allergy, Vitamins/Dietary Supplements, Digestive Health, Pain Relief, Incontinence, Skin Care, and Eye & Ear Care (Source: HRG proprietary warehouse withdrawal data, April 2018).

On average these pharmacies devote 60% or more to wellness-focused categories (Source: HRG compilation of 360° Store Assessment projects). Chain drug, not surprisingly, devotes approximately 40% to general merchandise/grocery, 20% to beauty, 10% to seasonal, and the balance to non-prescription drugs and vitamins & supplements. It is this unique focus on wellness that for many, position independent pharmacy as the go-to resource when it comes to health and wellness recommendations, guidance, and counseling.

They are growing

Perhaps not in physical size nor by number, but within specific categories and subcategories, independents are outpacing their food, drug chain, and mass merchant rivals. In particular, HRG’s category Growth Driver research, the following subcategories were expanding faster than the competition:

  • External ointments & gels in the Pain Relief category
  • Hemorrhoid wipes & washes in the Digestive Health category
  • Acne creams, gels, lotions, and patches in the Skin Care category

As pressure mounts on prescription margins (long gone are the days of 45-50% margins; welcome to the single digits), emphasis by drug wholesalers, buying groups/consortiums, and independent pharmacies themselves are shifting to non-prescription categories and emerging trends such as natural remedies, unique lines of products, and prevention-oriented solutions. In addition, independents are broadening existing service offerings (e.g., vaccinations and other point-of-care solutions) and experimenting with new technologies such as tele-health and personalized medicines.

For manufacturers looking to navigate the independent pharmacy channel, it is neither for the faint of heart nor those looking for a flash in a pan. It requires persistence, dedicated resources, and consistency. Aligning with the right partners to reach, influence, and gain the trust of independents is paramount.

For independent pharmacy operators, it is imperative that attention be given to the non-prescription categories and that new product solutions are sought to serve the need of an empowered and wellness-focused shopper.

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