Pharmacists Fume as KRMC Enters Retail Drug Business
19-Jun-2008: The opening of a pharmacy by the parent company of Kalispell Regional Medical Center, Northwest Healthcare, has the city's independent pharmacists fuming that competition from a non-profit corporation will soon be cutting into their business - and in one case, already has.
Last week signs at the entrance to the KRMC medical complex advertised "The Clinical Pharmacy" as opening in June. For years, Holly Ford and Andrew Matulionis, owners of Medical Arts Pharmacy, enjoyed a brisk business serving the many patients who liked getting their medicine close to their doctors' offices. Now, Ford and Matulionis look at the new pharmacy being built right next to theirs on Conway Drive and anticipate the effect on their bottom line will be grim.
"The hospital is going to put us out of business," Ford said. "The hospital is supposed to be serving the community, not destroying the community."
Matulionis and Ford are not alone. The owners of Kalispell's other independent pharmacies - Dave Grady of Big Sky IV Care, Greg Stoick of Stoick Drug and Tobey Schule of Sykes Pharmacy - said they appreciate Northwest Healthcare's right to seek new streams of revenue. But, they add, opening a retail pharmacy infringes on an area where the community's health care needs are already being met by existing pharmacies.
These pharmacists have weathered competition from chains like Shopko, Wal-Mart and Walgreen's, but they question whether it is the proper role of a non-profit hospital to directly compete with local businesses, particularly in the specialized areas Kalispell's independent pharmacies have carved out.
But Jim Oliverson, a vice president at KRMC, said the cost savings the new retail pharmacy will provide for the hospital and its more than 2,000 employees is simply too large to pass up. The hospital's health insurance plan currently has employees purchasing drugs via mail from a third party company in Texas. Having those drugs available for sale in Kalispell from a hospital-owned retail pharmacy will save roughly $250,000 annually, Oliverson said, allowing KRMC to keep co-payments and deductibles low for its employees.
"Our health insurance plan was just being decimated by pharmacy costs," Oliverson said. "We've looked at it for some time and this is a real solution."
Acknowledging the anxiety felt by the owners of Kalispell's existing pharmacies, Oliverson said the new pharmacy will be geared toward serving hospital employees and won't advertise, but it will be open to the public.
But one of the Flathead's oldest pharmacies, Stoick Drug, is already seeing business decline with the opening of the Clinical Pharmacy.
"We think the hospital is doing the community a disservice by basically moving into our niches," Stoick said. "This sort of thing could easily put me out of business."
Stoick is currently planning to lay off up to three employees since learning on June 3 he lost his contract to provide prescriptions for one of the valley's largest assisted living centers to Northwest Healthcare. He estimates the nursing home accounted for between 20 percent and 25 percent of his business, and Stoick Drug has been handling its prescriptions for more than 30 years. Stoick is also dismayed he wasn't given the opportunity to re-bid for the account and offer lower prices or enhanced service.
"They went with the hospital for reasons I don't know," Stoick said. "I was flabbergasted."
Because of the time-consuming work involved, filling prescriptions for nursing homes is a niche several independent pharmacies have taken on, particularly Sykes and Stoick, where the chain stores are not interested. It is by taking advantage of specialized areas like these that Kalispell's independent pharmacies have managed to survive and coexist.
"We treat each other as friends and we're all in this together," Stoick said. "The hospital, though, by deciding they want to get into the retail pharmacy business, they could go after any of us, like they are."
At Sykes, Schule said he thinks Medical Arts and Stoick will be hit the hardest by competition from the hospital, and he is unsure what the effect on his business will be. But he said he objects to the concept of a hospital owning a retail pharmacy, for the same reason that it is illegal for a physician to also own their own pharmacy: It's a conflict of interest.
"To me it's no different," Schule said. "I just think it's unethical for the hospital to be doing this."
At Big Sky IV, Grady acknowledges that the hospital has a non-profit and for-profit side, but sees the influence and reputation of the hospital as giving added weight to its business ventures.
"While the retail pharmacy may be on the for-profit side, it's funded by the hospital and shares staff, resources and infrastructure to compete against these small, independent health care providers," Grady said. "The hospital is in a unique position to influence the health care decisions of thousands of patients."
Jim Seifert, chairman of the Montana Pharmacy Association, said in the event of hospital fundraisers and other charity events, the arrangement puts Kalispell's business owners in the awkward position of being asked to support their competition.
"You just wonder about non-profits getting into for-profit activities," Seifert said. "Hospitals, because they have this large cash flow, they're somewhat immune to the free market system."
For now, the opening of the Clinical Pharmacy has Kalispell's pharmacists waiting to see what the effect on their stores will be. The pharmacists met June 9 with Tate Kreitinger, KRMC's Vice President of Finance, to raise their objections to the new pharmacy's opening and figure out a way to coexist. But the pharmacists are skeptical any good will come from the meeting, and most believe that, with the new pharmacy in the works for six months now, they did not act in time.
"We're reacting too late," Schule said. "Nothing's going to happen in the next couple of days that's going to change their mind."
Pharmacists in the rest of the Flathead are observing the new competitive situation in Kalispell. Jim MacKenzie, owner of Haines Drug in Whitefish and co-owner of Haines Medical Pharmacy and Haines Drug in Eureka, said he would not like to see competition from KRMC creeping north.
"It just seems kind of weird that they're out going after these businesses right now," MacKenzie said. "What's going to stop them from looking at all of Northwest Montana, if that's what the goal is?"
Source: Flathead Beacon