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Back to Prescription for disappointment: Inside a city pharmacy Prescription for disappointment: Inside a city pharmacy May 01, 2010
Dana Flavelle
| Neil Bornstein, owner of independent West Hill Pharmasave in Scarborough, Ont., with customer Norma Tuttle. COLIN MCCONNELL/TORONTO STAR |
It’s just after 10 in the morning when a couple of regulars drop by the West Hill Pharmasave in Scarborough to pick up their prescriptions.
Owner-pharmacist Neil Bornstein is steering retired nurse Norma Tuttle toward the cheaper private label brand of baby aspirin while summoning a staff member to address a problem with her Glucometer, a device that measures blood sugar levels.
“I come here because he knows me,” Tuttle, 70, says of Bornstein. “I want my pharmacist to know my name.”
Bornstein says a lot of people choose to deal with independents because he may not be able to provide that level of personal service in future under the province’s proposed drug reforms.
The Ontario government plans to slash $750 million in professional allowances pharmacists receive from generic drug makers, part of a plan to cut the price of those drugs in half.
The cuts, which the government says will bring Ontario’s drug prices in line with other jurisdictions, will hit pharmacies across the province, whether they’re independently owned, part of a national chain, or housed in supermarkets or discount department stores.
The industry says independents like Bornstein, who account for 51 per cent of the Ontario market, will be hit hardest.
That’s why Bornstein agreed to open his books to explain how the drug plan will hurt his business – and his customers.
Sitting in the patient consulting room in the newly renovated pharmacy he bought 20 years ago, Bornstein says he is $400,000 in debt. His revenue last year was $2.5 million. But after paying himself, his staff, his rent, utilities and other expenses, the store cleared just $30,000 in profit.
That’s all going back into the business, to pay down his debt and upgrade computer equipment. “It’s not going to buy a boat.”
His biggest expense is labour. He declined to say how much he pays himself. A survey in 2006 found pharmacist-owners in Ontario paid themselves the same hourly rate as they paid their staff pharmacists. The owner could also pay him or herself a dividend out of profits, if any.
The cost of becoming a pharmacist is at least $77,000, the association said, once you factor in six years in school, plus textbooks and licensing fees.
Bornstein employs 15 people, including two other pharmacists and four technicians. A pharmacist in Toronto earns $45 to $50 an hour on average, or nearly $100,000 a year. Technicians earn less than half that, or $16 to $20 an hour, he says.
Under the government’s drug reform plans, the average pharmacy will lose $300,000 – roughly 10 per cent – of its annual revenue, the Ontario Pharmacists Associations says.
That’s more than they earned last year. Average net profit at an Ontario drug store was $204,000 on sales of $3.2 million, according to Community Pharmacy 2009, an annual survey of the industry.
The impact varies with the size of the drug store and its clientele. Bornstein’s profits were lower last year because he renovated his store. But even in a good year, his store earns between $60,000 and $80,000 in profit.
“With a major business focus on long-term care, our labour costs are probably significantly higher than average. And my pharmacy is located in an economically depressed area, which translate into the inability to charge higher prices,” he said.
Bornstein says his pharmacy will lose $170,000 – or 6.8 per cent – of its annual revenues under the proposed plan. Any amount is difficult to make up in a highly regulated and competitive environment, he says.
Prescriptions, which account for 80 per cent of his sales (and 90 per cent for some independent pharmacies), are highly regulated.
Though he’s allowed an 8-per-cent markup, that margin quickly dwindles if the drug goes through a wholesaler and the customer pays with a credit card, he said.
On brand-name drugs, which account for 75 per cent of the prescriptions he fills, he earns just $2.50 on every $100 sale. (The wholesaler takes 3.5 per cent. The average cost of processing a credit card is 2 per cent.)
The price of everything else in his store, from Band-Aids to Aspirin, is determined by competition from far bigger retailers.
Unlike supermarkets and mass merchants, he can’t use his pharmacy as a loss leader to sell more shampoo, candy or jeans, he says. “I compete against the largest retailer in the world,” he says. (Don’t say Wal-Mart, he asks, mindful of the industry’s desire to appear united against a common foe.)
And it’s not just the immediate financial impact of Premier Dalton McGuinty’s proposed drug reforms that worries Bornstein. It’s also the impact on his future retirement income.
“The value of the pharmacy, what I thought was my nest egg, has gone down to nothing because of Mr. McGuinty,” says the 53-year-old Bornstein.
That leaves him with two options: Cut his costs or start charging for services.
To save $170,000, Bornstein says, he’d have to fire one of his two full-time pharmacists and two of his four technicians.
To fill the gap, he’d have to spend more hours behind the dispensary counter and less time running his business. And he’d still have to close his doors earlier on weeknights and weekends. His store is now open 66 hours a week and at peak times he likes to have more than one pharmacist on duty.
His only other option is to start charging for services, the one thing he says differentiates the independents from larger rivals.
In addition to the personal attention and service his customers get, Bornstein says he provides free delivery even for non-prescription drugs. “I have some shut-ins. If they want a bag of chips and a pop, I deliver it,” he says, with a shrug.
“I really get to practice pharmacy and health care the way I think it should be practiced,” Bornstein says. “People deal with us because of the quality of healthcare we provide.”
Pharmacists are one of the few front-line health care professionals you can see immediately without an appointment, he notes. They take the pressure off the rest of the system, Bornstein says, trying to stick to the careful script he’s prepared on the subject.
But not far below his oft-repeated phrase that “pharmacists are the glue” that is holding a shaky health care system together, he’s clearly mad as hell.
Beside the cash register, Bornstein has posted signs explaining the problem to his customers. They’re invited to protest by emailing their MPP or signing a petition he plans to present to his local MPP, Margarett Best, who also happens to be the minister for health promotion in McGuinty’s government. “How could she stand by and let this happen?”
“Could I have made more money doing something else? Sure I could,” Borstein says. “But I get to do what I love every day.”
PORTRAIT OF A PHARMACY West Hill Pharmasave
Lawrence Ave. E., Scarborough
Owner: Neil Bornstein
Revenue: $2.5 million a year
Employees: 15
What drug reform will cost: $170,000.
What a pharmacist earns: $45-$50 an hour ($80,000-$90,000 year)
What a pharmacist technician earns: $16-$20 and- hour ($35,000-$40,000 a year.)
How drugs are priced:
On a prescription of $100:
- Regulated markup to cover the cost of distribution is 8 per cent. Retailer can charge $108.
- Wholesaler takes 3.5 per cent, or $3.50
- If the customer pays with a credit card, processing fee is 2 per cent, or $2
- What’s left for the retailer: $2.50
