At 7:35 a.m., Garrett Smith unlocked the door of Equity Rx in Jay, Florida. He was no stranger to South Alabama Street, as he spent his childhood decorating and cleaning his grandfather’s pharmacy before the building became his own.
He was busy filling prescriptions before opening for a patient who needed to pick them up promptly at 8 a.m.
By the time the patient left with five routine medications, Smith had already lost $4.37 within five minutes of opening.
“Why get to work early if you get there early to lose money?” Smith said.
Smith’s community pharmacy serves a rural town where most patients walk or bike to pick up prescriptions because they have no other transportation. He delivers when needed, patiently explains medications to patients, overplays Kelly Clarkson and often refers patients to another Clarkson, a small golden doodle, who is “the best medicine we have in the pharmacy.”
However, the economics of the pharmacy industry have made it increasingly difficult for community pharmacies, such as Smith’s, to stay alive. Insurance companies and pharmacy benefit managers reimburse pharmacies less than the wholesale cost of the drug almost half of the time, making profit margins, if any, negligible, said Smith.
“These are generic drugs which we should be making money on because they’re cheap,” Smith said, “but no, the insurance companies know how cheap they are, so they pay you even less.”
Pharmacies make 72.4% of their revenue from branded prescription drugs and generic drugs, according to IBISWorld, so the losses are hard to overcome since they drive the vast majority of profit.
Losses can range from cents to as much as $100 per order, and pharmacies are not allowed to tell patients when this happens.
While these losses may seem marginal, they don’t include the pharmacist’s time, the vial, the label, the electricity, the building’s rent or any other operating costs, Smith explained.
“It’s like selling steak for $10 when you bought it for $15,” Smith said, “That doesn’t make any sense.”
The problem is widespread, affecting all pharmacies, but especially community pharmacies. The total number of retail pharmacies in micropolitan areas declined 4.4% from 2003 to 2021, while independent retail pharmacies declined 9% in the same time.
Theresa Tolle, Smith’s mentor, experiences the same issues at her pharmacy, Bay Street Pharmacy, in Sebastian, Florida. Many people wrongly assume pharmacies make significant profits, she said.
Tolle is a member of the Community Pharmacies Enhanced Service Network, a nationwide network of almost 3,400 pharmacies, which tries to use its collective power to approach and bargain with insurers.
Likewise, Carl Allison, Smith’s former residency supervisor at Baya Pharmacy, believes the only solution is systematic reform through universal healthcare.
“With universal health care, like the rest of the world has, nobody pays for health care directly,” Allison said, “right now, it's just strictly capitalism and profit.”
Despite the economic challenges, Smith remains proud of the community value of his work. The face-to-face nature of independent pharmacy has allowed Smith to develop a relationship with many patients and treat them more effectively. Equity Rx is in the same building as five prescribers, which allows for efficient troubleshooting.
Recently, a longtime patient came in, and Smith could tell something was wrong.
“He was slurring his words, he could barely stand up, and I just knew that something was very, very, very wrong,” Smith said.
Smith rushed him to his father, the patient’s primary care physician, who immediately agreed that the patient needed to be sent to the hospital.
A week later, the patient thanked Smith for saving his life, but Smith brushed it off.
“I didn’t feel like I saved his life at all,” Smith said, “but there's no way that he would have been able to go into Walgreens and have that same service.”
Even with his business frustrations, Smith sees that the value his care provides to the community is priceless.
“Those are the kind of things that you're able to do as an independent owner,” Smith said, “there's no price on that, and there's no fee that you could put on that.”