Is Cost Plus Drugs Really the Big Bad Wolf?

There’s no sure answer as to the long-term impact of this type of increasing pharmacy competition. But… early indicators are that if Cost Plus Drugs really is the Big Bad Wolf, independent pharmacies are certainly made of sturdy enough stuff to withstand the onslaught.

We recently sat down with Charlie Hartig, the CEO of Hartig Drug, an independently-owned chain headquartered in Iowa. Charlie shared some insight into how Hartig Drug is responding to Cost Plus Drugs and what he sees as the concerns, and even some opportunities to be on the lookout for. You can watch the full 30-minute interview any time. If you’re short on time now, keep reading for a few quick takeaways that will hopefully put your mind at ease.

The wheel hasn’t been reinvented.

With a huge marketing budget, celebrity backing and lots of media attention, Cost Plus Drugs certainly represents disruption. That doesn’t make it new. Pharmacies have been successfully withstanding companies like Pill Pack and Amazon who work in the same space as Cost Plus Drugs, along with a few other online competitors including the Wal-Mart $4 list. This doesn’t make it less dangerous or competitive, but it does make it a little less intimidating.

Need exists.

Opinions aside, credit is due that Cost Plus Drugs exists because there’s a need. While there are certainly issues with the business model, there’s also viability. The idea for a simple, cash-based mail order solution isn’t a bad one. Recognizing this is pretty important as you look to responding to, and educating, your customers.

This isn’t a pharmacy replacement.

The list of available drugs is small. The model is cash only for around 100 different NDC’s, specifically targeting drugs that have a high list price. Also important to remember is that 85% of the US population is insured, and the cash price is generally going to be higher than your average co-pay obligation for those meds. It’s a great solution for many Americans, but not a pharmacy replacement.

Cash pricing isn’t unique to Cost Plus Drugs.

Does this sound familiar? A customer is looking at a $200 copay for a drug that you paid $80 for. So, you offer them a cash price of $100. Many pharmacies are already dealing with this situation on a regular basis and not getting any fanfare for it. Hartig Drug also offers a discount card program to combat the $4 or $6 prescription list. These aren’t the solution for everyone but can be manageable for even 1 or 2 location independent pharmacies. Opening the door to these types of options can actually be a positive thing for your pharmacy business.

You should still have a strategy in place.

Whether Cost Plus Drugs represents a major threat or a tiny nuisance, it’s still important to have a strategy in place to address and prevent attrition. There are a number of different approaches you can use. From coordinating patient care with local physicians to educating patients on the dangers of fragmented care, and the things that they’ll miss out on if they make the switch to an online pharmacy. For more on these strategies and how to pick the right one for your pharmacy, check out the full interview with Charlie Hartig and our follow up discussion on reducing customer attrition with business coach Emily Cannata.

Let’s keep learning from each other.

What impact are you seeing from Cost Plus Drugs and other similar business models? How is your pharmacy adapting? What creative approach have you developed to prevent attrition? Comment below and share your success to help others!