Independent pharmacists optimistic about survival in the shadow of big chains

PHOTO/Matt VOLPINI Hopkinton Drug is at the center of a dispute with the parent firm of the CVS pharmacies that could impact the store's business.

Scott Najarian of Park Avenue Pharmacy in Worcester: CVS Caremark manages at least one-third of his patients’s prescriptions.

PHOTO/Emily Micucci Najarian, of Park Avenue Pharmacy: “If you’re mad at one chain, you’re mad at them all.”

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By Emily Micucci

For now, Hopkinton's Main Street pharmacy, Hopkinton Drug, will keep its business afloat, thanks to a preliminary injunction issued by a judge that will keep customers whose benefits are managed by CVS Caremark coming through the doors.

But litigation between the family-owned pharmacy and CVS Caremark is ongoing, and if CVS Caremark has its way, it will end a provider agreement with Hopkinton Drug that could cause it to lose up to 35 percent of its client base, the independent pharmacy argues.

It's easy to see how such a decision by CVS Caremark, the pharmacy benefits manager that merged with CVS Corp. of Woonsocket, R.I. in 2007, could deliver a catastrophic blow to an independent pharmacy. According to many local independent pharmacists who do business with CVS Caremark under similar provider agreements, an independent pharmacy can't survive without a contract with CVS Caremark.

One of them is Park Avenue Pharmacy in Worcester. Its owner, Scott Najarian, who is also a pharmacist, said CVS Caremark manages at least one-third of his patients' prescriptions, and if something happened to his contract, his business could be destroyed.

Like Hopkinton Drug, Najarian questions CVS Caremark's post-merger structure that linked the retail business with Caremark, a leading pharmacy benefits manager. Najarian said, essentially, that the pharmacy giant owns the insurer responsible for covering prescriptions filled at competing pharmacies.

“They're the ones who say 'yes' or 'no' to filling our prescriptions,” Najarian said of pharmacy benefits managers like CVS Caremark.

Hopkinton Drug alleges that CVS Caremark's move toward the provider agreement was a calculated one, aimed at putting the pharmacy out of business so it could move in. CVS Caremark has flatly denied that allegation, which was included in a lawsuit filed in U.S. District Court in Boston in June.

Christine Cramer, senior director of public relations at CVS Caremark, issued a written statement saying the agreement was terminated because Hopkinton Drug was filling prescriptions over state lines in violation of the agreement, and had nothing to do with wanting to boost the retail side of the business.

“Any suggestion otherwise by Hopkinton is entirely unfounded,” Cramer said.

But Lawrence Green, the Boston-based attorney that has represented Hopkinton Drug for 12 years, believes otherwise. Green said CVS Caremark approached his client, Hopkinton Drug president and lead pharmacist Dennis Katz, multiple times, including through letters and in-person visits, to ask whether Katz was interested in selling his business. The most recent inquiry came in January. Katz declined.

“He doesn't want to work for CVS, and he also has a lot of pride because it is a family business that his father founded back in 1954,” Green said.

Green was unaware of other Central Massachusetts independent pharmacies that have lost their provider agreements with CVS Caremark, but he believes the company is a real threat for independent pharmacies. He criticized the Federal Trade Commission (FTC) for not blocking CVS Corp. and Caremark from merging seven years ago, given the potential for this kind of conflict. While the FTC reviewed the merger, it did not conduct an antitrust investigation, allowing the deal to close without incident.

“That was totally wrong,” Green said. “[Pharmacy benefits managers] should not be tied into major chains that are competitors of the very pharmacies that [they're] monitoring.”

Chains halting growth plans?

But Todd Brown, executive director of the Massachusetts Independent Pharmacists Association (MIPA) thinks major chains like CVS and Walgreens have lost some of their interest in expanding after maxing out their growth potential.

“It used to be that the chains would pay a premium for independent pharmacies … but my perception in the past year is that those activities have stopped,” Brown said.

Still, the inquiries by CVS Caremark and other major chains to acquire independent pharmacies appear to be ongoing. In addition to Hopkinton Drug, Najarian, the Park Avenue pharmacist, and Brian Bouvier, chief operating officer at Bouvier Pharmacy & Home Medical Solutions in Marlborough, said CVS Caremark is frequently in touch to gauge their interest in selling their businesses.

Marketplace has 'enough room'

Colin McNabb, operations director at McNabb Pharmacy in Townsend, said it's been a couple of years since he last received such an inquiry in the mail, though they're not uncommon.

“Those go into the shredder,” McNabb said.

McNabb, who is part of the fourth generation of his family running McNabb Pharmacy, said major chains like CVS Caremark that are interested in acquiring independents will find it difficult to woo family-run businesses like his into selling. Those that have survived despite large chains' market power are generally strong, McNabb said, and he's intent on keeping an edge while facing competition from Rite Aid, which operates a store in Townsend.

“There's enough room in the marketplace for us all to get a share of the business,” McNabb said.

Najarian agreed and said he would not trade the security of working for CVS or another major player for the satisfaction of running his own business, which, he said, has actually grown since CVS opened a store directly across the street about five years ago. Najarian thinks that's a result of increased foot traffic for pharmacy services in the neighborhood, which has given Park Avenue Pharmacy greater visibility. There's also a Rite Aid and a Walgreens nearby.

“If you're mad at one chain, you're mad at them all,” Najarian said.