Standing firm against Goliath

Posted on May 12th, 2010 by Erin McCarthy in Flatbush, Brooklyn, Pharmacies

Mom and Pop Pharmacies Survive Despite Competition
by Ines Bebea and Carl Gaines

In a recession, many dreams are put on hold – some for practicality’s sake and others merely because anxiety takes over. Last January, though, Phil Bubis decided the time was right to follow his. It didn’t matter that the odds were long against him.

Bubis, 40, is the co-owner of a new pharmacy in the Flatbush section of Brooklyn – one of hundreds of independent pharmacists here in the city struggling to carve out space for their business in the face of a changing landscape.

“It was always our intention – our dream – one day to open a pharmacy,” Bubis says. “We liked the place so we decided to go and do it.”

Click here for a photo slideshow of local pharmacies

Click here for a photo slideshow of local pharmacies

Around the same time that Bubis and his partner, Zoya Pritsker, were starting their business in a modest space on Church Avenue, a massive Duane Reade was opening a few miles away. Built on a footprint that encompasses half of a city block, the Duane Reade at 127–137 Eighth Avenue in many ways symbolizes what Bubis and other independent pharmacists are up against.

“The big chains have a different business model,” says John Norton, the associate director of public relations at the National Consumer Pharmacists Association. “Ninety percent of our revenue [independent pharmacies] comes from prescription drug sales.”

Meanwhile, at that Eighth Avenue Duane Reade, rows of groceries greet customers as they walk in to the first of two floors at the store. Downstairs, on a recent afternoon, skin care consultants gave makeup and skin advice. The pharmacy, at the back of the store’s basement, seems almost an after-thought.

Norton says that there are roughly 2,098 community pharmacies across New York State, though he didn’t know the exact number for the New York City area.  An executive at the Pharmacists Society of the State of New York who declined to give his name, estimates that there were 1,000 at last count in the city.

Those independent pharmacies face stiff competition, not only in terms of the diversity of inventory that large chains offer, but also, according to Norton, in terms of the practices of large chains.

“The big chains can do a lot of manipulative things,” Norton says. “For instance, there is a push for mandatory mail-order – sometimes even by the government – and we’re trying to fight against that.”

Norton also cites CVS Pharmacy’s partnership with Caremark, a pharmacy benefit management company, or PBM. These companies handle prescription drug benefits and include CVS/Caremark, Medco Health Solutions, and Restat. They set the prices for prescription medications and are extremely influential throughout the industry.

CVS/Caremark was recently involved in a multi-state probe into PBMs and business practices that allegedly were harmful to consumers as well as unfair to independent pharmacists. This probe is ongoing. CVS/Caremark settled in an earlier case brought by the Federal Trade Commission, agreeing to pay $2.25 million to address charges that it violated consumer privacy.

According to a Walgreen’s spokesman, the chain currently has 328 stores in the New York City area. These include Duane Reade stores, as Walgreen’s bought the New York-based chain earlier this year for just over $1 billion. CVS reports 114 locations in the area.

“Bigger drug chains affect the smaller ones because they have the clout to buy much cheaper than we do,” says independent pharmacist Panam K. Rajaram.

Rajaram, 62, is struggling to make a living running his pharmacy – Kornwaler Drugs – in the midst of the booming chains. Rajaram, 62, opened his first pharmacy 17 years ago and once owned two in the same Flatbush neighborhood where Konwaler Drugs is located today.

Merely surviving has meant being more than just a pharmacist.

“First I’m a pharmacist and then I’m a business man,” Rajaram says.

Rajaram says that his only way to compete is by offering a level of personalized service larger chains cannot. His customers, many of whom have been coming to have their prescriptions filled with him for over a decade, seem to agree that service is key.

“They know so much personal stuff about me – I feel they’re my friends,” Mike Montanez, a customer at Kornwaler Drugs for the past 15 years, says. “With the online pharmacies and the big pharmacies, you don’t get that – you’re just a customer with a number.”

Another Kornwaler Drug customer, Yolanda Pearce, agrees that convenience and friendly service are the key reasons she keeps coming back to the pharmacy. She’s been shopping at Kornwaler since the late 1970s – before Rajaram bought it.

“You don’t have to go through no hassle with them,” Pearce says. “And it’s in the neighborhood, too.”

Despite the loyal patronage of customers like Montanez and Pearce, though, Rajaram has been feeling the pinch. He says that the chains have had an effect on his business, primarily, he believes, because of the wide range of products and services they offer above and beyond prescriptions. His sales are slow and he worries about the future.

“We’ve been through rough times before and managed to survive,” Rajaram says. “But now it’s kind of scary, to be honest with you.”

Check out our feature on another Brooklyn industry: the changing face of the shipping industry and Red Hook’s waterfront

2 Comments on “Standing firm against Goliath”

  1. Craig Robinson

    We also stand firm with independent Pharmacies our free order placement service provides greater competition, less order placement work and drives down their cost of goods everyday every order.

  2. The revival of a waterfront | Industry NYC

    […] Check out our feature on another Brooklyn industry: mom-and-pop pharmacies that are still surviving … […]

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