Gary Phillips joins U Save It Pharmacy

ALBANY — Although industry difficulties have forced the closure of Albany’s Phillips Pharmacy, owner Gary Phillips says he is relieved he’s still able to take care of his many loyal clients now that he’s joined the U Save It Pharmacy team on Palmyra Road.

After owning and operating Phillips Pharmacy, which had previously existed as TLC Drugs and Davis Drugs, for nearly 10 years, Phillips recently made what he said was a difficult decision to close his doors amid the mounting challenges of being an independent pharmacist.

“I’d say over the last four, five years, I’ve really seen a transition happening in pharmacy, especially how it relates to independent pharmacy,” Phillips said recently. “Those changes, which are many, are not necessarily positive for an independent pharmacy.”

While he didn’t address all of the issues that helped drive him to his decision, Phillips said one of the primary industry factors that has made running an independent pharmacy difficult is the increasing control of insurance companies, or more specifically, pharmacy benefits managers, or PBMs.

PBMs are third-party administrators of prescription drug programs for commercial health plans, self-insured employer health plans, state and federal health plans, and Medicare Part D plans who use the combined buying power of health care plan enrollees to obtain lower prices for prescription drugs through volume purchasing, which squeezes profit margins for pharmacies.

Because of the sheer number of plan participants connected to each PBM, and because most prescription plans work on a reimbursement basis, as a group PBMs are able to somewhat control pricing and also drive many plan participants toward mail-order prescriptions, something Phillips said greatly impacts independent pharmacies.

“Insurance companies every year decrease the amount they are reimbursing on prescriptions, which means your margin gets smaller and smaller,” the pharmacist said. “Another thing that’s a concern to pharmacies, especially independent pharmacies, is mail order. The insurance companies really make a disincentive for the customer to get it locally. They’re trying to push patients that way, and in doing that, it cuts out your local pharmacy. And, of course, that’s money out the door.”

Phillips said another impact of the increased control of the industry by PBMs is the creation of Direct/Indirect Remuneration fees, which, according to the National Community Pharmacists Association, is a “catch-all” term coined by the Centers for Medicare and Medicaid Services that encompasses different types of fees that are charged to pharmacies that are part of a network of providers for certain health care plans.

Because most pharmacies, including independents, need to participate in preferred networks to maintain a client base, they are again at the mercy of factors outside of their control.

“DIR fees is something that insurance companies are leveling on the pharmacy,” said Phillips. “They actually withhold dollars from the pharmacy.

“Let me explain it this way: You fill a prescription, and already your margin is low, it may just be cents. I’ve already transmitted prescriptions today that we’re just making cents on, 15 cents. It’s unheard of. But what they do, too, they apply this DIR fee, and they withhold sometimes as much as $5. For that $5, I just paid basically $4.50 for the privilege of filling that prescription. That is a real loss.”

Making things even more difficult, said Phillips, is the fact that the DIR fees are often tied to performance metrics, which determine how much of a reimbursement a pharmacy receives based on the behavior of patients.

“They’re trying to let the pharmacist help with the patient in being compliant with the medication,” said Phillips. “In other words, calling up Ms. Jones: ‘Ms. Jones, you know this is for your diabetes. You need to make sure you take this. Your blood pressure, you know you’ve got to keep your blood pressure under control.’ So, they’re putting the onus on the pharmacy to do that. And if you’re numbers look really good, that this patient takes their medication, gets it refilled every month, then they will reimburse you part of that $5 back.

“In my opinion, this is a very unfair practice. But if you don’t sign up for these patients or these contracts with these PBMs, then you lose these customers because they go down the road. And you have relationships that you’ve established all this time. At some point you have to make a decision: Is it economically viable to do it? These DIR fees are just killing pharmacy.”

Although those forces were at work, slowly edging Phillips toward his decision to close, it was actually a more practical matter that finally provided the impetus for him pulling the trigger.

“What brought it to a head was about a month ago, my main tech, who had been with me the whole time — and I was in business 10 years almost — she gave notice that she was moving out of the area,” said Phillips. “It was a very hard decision, but she was very much a part of that business. It was a tough thing to get that news, as well as it was tough for her to make that decision.

“With that, it just made me reflect on the trend that I’m seeing, being concerned about profitability down the road. We were still profitable, and I could have continued to make a good living. It was just the trend that concerned me. So I made that decision and was able to merge here with U Save It Palmyra. ”

While it was difficult for the pharmacist of 39 years to close his doors, making the decision to merge with U Save It, itself an independent pharmacy, albeit one with 36 locations in five state, was fairly easy. Phillips had first-hand knowledge of the solid reputation of the Albany-based company, having worked with U Save It prior to starting his own pharmacy.

“I’ve got a history with U Save It,” he said. “Before I bought Phillips Pharmacy, I worked at some of the U Save Its. I’ve done a lot of things in my life. I’ve worked at the hospital, I had my own company — In Home IV Specialists — where I did home IVs. I did a lot of things, but I had a history with U Save It.”

That past experience with the company also meant Phillips was fully aware that he would be able to guide his customers to a pharmacy he believed would take care of their needs.

“It was (also) important to me to be able to steer my customers to an independent pharmacy. Because I loathe chain pharmacies,” he said.

That fact that Phillips had a history with U Save It didn’t just mean Phillips had somewhere to steer his customers, it also meant that the leadership at the pharmacy knew what kind of pharmacist they’d be bringing on board.

“We know each other and (so far) it’s worked out really well,” said Fred Sharpe, owner of U Save It. “I like Gary very much, and I’m glad to have him back.

“I felt like it would be really good. We’ve got a good store on Palmyra Road, and merging with him makes it a really strong store. It was a no-brainer, really.”

Sharpe said he was also pleased that, because Phillips was bringing customers with him to the U Save It location, everyone who worked at Phillips Pharmacy would be needed at U Save It.

“We talked about that, and we’re going to need his staff,” Sharpe said. “This little merger was good all the way around. Nobody lost their job, and we’ve taken on a good business.”

The new pharmacy taking on Phillips’ associates means a lot to him as well, Phillips said, and it helped make the decision to join U Save It even easier.

“I want to say too that with the exception of Kim, that I talked about earlier, my employees have been given positions down here,” said Phillips. “That was an important thing to me in making this decision, that they had a place to go.”

Although the industry forces that put pressure on Phillips’ business are still in play, he said he feels confident U Save It is better equipped to navigate the landscape, a feeling that is shared by Sharpe.

“It’s kind of like the Obamacare legislation with pharmacies is kind of squeezing out the independents,” Sharpe explained. “It’s kind of hard for a one-man store. It’s not that you can’t compete, it’s just a little overwhelming. It’s a lot of paperwork, and it can be overwhelming for one guy.

“We’ve got office staff that handles all the paperwork, so it’s kind of nice when you can just be a pharmacist and somebody does the paperwork for you. It allows our pharmacists more time for dealing with pharmacy issues and helping customers.”

Which is what Phillips says he is excited to be focusing on again. In the short time he’s been at U Save It Palmyra Road, he’s become more convinced he made the right decision.

“It’s been extremely positive,” said Phillips. “I would say 99.5 percent of my former customers are interested in making the transition with me. I’ve only probably transferred out a couple of customers because they were closer where they were in the city to another pharmacy.

“I will say that I feel at peace with my decision to make this change. What I feel good about, which I already knew but it’s been reinforced, is the personable service that the crew here gives. Lisa Smith (who has been with U Save It for 25 years) has a good following here. She has a good pharmacy clientele. I’ve just come in here to augment and to help with the pharmacy staff as a pharmacist, and to help with the transition of my customers. The crew that’s here, they are very personable with their customers. They are very capable, very warm and I feel like I made the best decision to join forces down here.”