Business Decisions and Pharmacist Shortage/Surplus

[BidingMyTime]

Maybe this is a dumb question, I don't have business acumen, but I like to think I have a little common sense. But something I've been thinking about lately,

Why, in the late 90's/early 00's when there was a pharmacist shortage, were all the chains expanding left and right (and even some independents) and hospital pharmacies expanding and adding on clinical positions? All pharmacist employers were paying a premium and sign-on bonuses and other negotiated benefits to get pharmacists.

Now, when there is a surplus of pharmacists, chains are contracting and shortening hours, hospitals are cutting down on clinical positions and often only having hybrid positions....even though pharmacists can be easily hired at a standard pay and without any sign-on bonus.

Why would pharmacies contract during the shortage (or at least not grow), when it was least economically favorable for growth, and then contract during the surplus (when it would make the most economic sense to grow?)

What am I missing here?

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[BMBiology]

The "shortage" wasn't as a result of supply. It was as a result of demand.

There was a real estate boom. Chains like CVS and Walgreens expanded in these new areas and expanded nationwide. Regional retails like SavOn Drugs expanded as well to compete with these big chains. Grocery chains and big box retails like Costco, Target also got in the pharmacy business. The Fed's low interest policy not only fueled the housing bubble but it also helped these businesses expand as they were able to borrow for cheap.

Hospitals didn't really expand during those years. They had to increase their pharmacists salary because they were losing their pharmacists to the chains.

Pharmacy also went from a 4 year to 6 year program so that somewhat affected the supply.

By late 2008, it was painfully obvious that the housing bubble was exploding. The chains halted their expansion plan. Rite Aid was being crushed by their debt and had to close down a good number of stores. Regional chains like Longs were also running into trouble because they also had a lot of debt. Longs later sold itself to CVS.

As retails shrink, hospitals did not feel the need to compete with the chains for pharmacists. Meanwhile, pharmacy schools kept on expanding.

Fast forward today. Obamacare became law of the land. It is about doing more with less. Hospitals cut their budget. Drug manufacturers merged so they would have more negotiation power. Express Script and Medco also merged for the same reason. Big box chains like Target got hurt because they didn't have the negotiation power. It sold itself to CVS. Rite Aid did not go bankrupt as many had expected but it still had a lot of debt. Walgreens later gobbled up Rite Aid. Meanwhile, pharmacy schools keep on expanding.


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[BMBiology]

Another factor...in the early 2000s, blockbuster drugs like Lipitor, Viagra, Plavix came on the market. Medicare part D also passed. The baby bloomers were aging. Those things increase the demand for pharmacists.

The problem now is the number of pharmacy schools. The government removed the limit to graduate student loan in early 2000. The need for more pharmacists and easy access to student loans caused the number of pharmacy school to explode. In addition, since the supply is now greater than the demand, employers are being more picky as to whom they hire. They are also cutting benefits like healthcare benefits and are starting new graduates at a lower rate. Pharmacists know a new graduate is itching to take away their job so they are not changing jobs and are working harder. Employers are getting more bang for their buck.

Supply and demand curve. It works every time.


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[BidingMyTime]

Ah, all this makes sense. You are a good historian. I especially hadn't connected that the housing/real estate "boom" had anything to do with expanding pharmacies. Although, I do disagree somewhat with your statement that hospitals weren't expanding their pharmacy departments, new "clinical" positions were being created then, and many of those have since been cut back, or made into hybrid positions....but I can theorize that this growth also came from the "easy" money, and I do know the cutbacks have come from lack of reimbursement.

 

[Sine Cura]

Would people be willing to pump scripts out in chain retail for 75k a year and under increasing pressure to meet performance metrics? Chains would love that especially with concern over star ratings, declining reimbursement, and so on, but it's already hard enough to attract and retain semi-competent employees.

 

[Chalupa_Batman86]

Would people be willing to pump scripts out in chain retail for 75k a year and under increasing pressure to meet performance metrics? Chains would love that especially with concern over star ratings, declining reimbursement, and so on, but it's already hard enough to attract and retain semi-competent employees.

Not the older ones. At that point, they hopefully built up some sort of savings cushion allowing them to live the rest of their lives in peace. It is the newer grads that can't be picky about their salary. Their only option will be to accept these low-ball offers. Employers know they have a wide pool of graduates that are desperate to pay off their accumulating debts (at 6.8%+ interest). They know the applications of a PharmD is extremely limited outside of retail and hospital. It's a big trap. One new grad demands $70/hour with full benefits? Really, the only saving grace for everyone is provider status taking off really quick with absolutely no resistance from physicians and nurses. However, April fool's was last week.

 

[Gombrich12]

I think you're overestimating the pressure that student loans place on people with federal loans these days. I am of the mind that if I came out with 200,000 in debt and chains were only paying $70,000 I wouldn't even bother working there. I'd put my loans on IBR/PAYE and start working towards another career. Remember, if you make $0 you pay $0 with these new student loan programs, what happens 20-25 years down the line when they get forgiven is a guess at this point.

 

[Chalupa_Batman86]

Many of today's current pharmacy students won't even entertain that practical thought, Gombrich. They are too busy putting together some worthless posters for their pharmacy fraternities and clubs just to brag about something at Midyear.

 

[MatCauthon]

When the Rite-Aid purchase gets finalized the push to lower rph wages should accelerate. With so many jobs concentrated in a just 2-3 big companies (CVS, Walgreens, Express Scripts) it will be much easier for the employer to control salaries. Starting salaries at 90-100k doesn't seem unrealistic for retail.

 

[tlh908]

This all sounds scary until you realize for a little bit of money you are able to open your own pharmacy. It is easy to beat the chains - offer delivery and services they don't. Don't forget these chains are locked into prime real estate paying 40k to 50k/month in rent! Just imagine if you rented your space for a 1/10 the cost how profitable you can be. If you are willing to only make 200k to 300k per year then independent pharmacy will kill the chains.

And if you are worried about RA closing, think of it this way - cheap real estate! Then again there are many excess bank buildings available for rent now. They can easily be converted in to retail pharmacies for cheap. These will kill the chains.

 

[WVUPharm2007]

The "shortage" wasn't as a result of supply. It was as a result of demand.

There was a real estate boom. Chains like CVS and Walgreens expanded in these new areas and expanded nationwide. Regional retails like SavOn Drugs expanded as well to compete with these big chains. Grocery chains and big box retails like Costco, Target also got in the pharmacy business. The Fed's low interest policy not only fueled the housing bubble but it also helped these businesses expand as they were able to borrow for cheap.

Hospitals didn't really expand during those years. They had to increase their pharmacists salary because they were losing their pharmacists to the chains.

Pharmacy also went from a 4 year to 6 year program so that somewhat affected the supply.

By late 2008, it was painfully obvious that the housing bubble was exploding. The chains halted their expansion plan. Rite Aid was being crushed by their debt and had to close down a good number of stores. Regional chains like Longs were also running into trouble because they also had a lot of debt. Longs later sold itself to CVS.

As retails shrink, hospitals did not feel the need to compete with the chains for pharmacists. Meanwhile, pharmacy schools kept on expanding.

Fast forward today. Obamacare became law of the land. It is about doing more with less. Hospitals cut their budget. Drug manufacturers merged so they would have more negotiation power. Express Script and Medco also merged for the same reason. Big box chains like Target got hurt because they didn't have the negotiation power. It sold itself to CVS. Rite Aid did not go bankrupt as many had expected but it still had a lot of debt. Walgreens later gobbled up Rite Aid. Meanwhile, pharmacy schools keep on expanding.


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I don't think it's as broad and blamable on the real estate bubble. If you think the rates after the mini-recession in the early aughts that brought on the real estate boom were "low", they are microscopic now in comparison. The companies are expanding more than ever. But instead of buying new corners to open up shop...they are "expanding" via consolidation. It's not like the demand for prescription drugs has flatlined. The "problem" is that they have greatly increased per-store efficiency and per-pharmacist output more than broad economic factors. It's not like demand for prescription drugs has gone down. The same **** would have happened with or without the real estate bubble. If anything, the expanding area of where US citizens settle and need nearby drug stores in their newly minted suburbs postponed it.

Increased worker productivity is pretty much my biggest worry in general going forward. Not just in pharmacy, but in general. Technology is making the value of a human being decrease literally every day. Sure, we've seen the loss of jobs in every major revolution in human history. The industrial revolution put millions out of work. The internet revolution put every travel agent and video rental store out of business. And, soon, automation, robotics, and AI will put every human laborer and brain out of business. Unless you are an artist or a sex worker, honestly, long term, your prospects sort of suck.

 

[Caffeine QAM]

Increased worker productivity is pretty much my biggest worry in general going forward. Not just in pharmacy, but in general. Technology is making the value of a human being decrease literally every day. Sure, we've seen the loss of jobs in every major revolution in human history. The industrial revolution put millions out of work. The internet revolution put every travel agent and video rental store out of business. And, soon, robotics and AI will put every human laborer and brain out of business. Unless you are an artist or a sex worker, honestly, long term, your prospects sort of suck.

Pharmacists of the future are probably going to either be more focused on creating and monitoring the rules for computer decision-making or on interacting with patients to detect and resolve medication-related issues. "Checking that the medication is correct" is no longer a responsibility that can only be handled by pharmacists, nor a cost-justifiable responsibility for pharmacists to handle in many cases.

 

[Humble Sloth]

Not the older ones. At that point, they hopefully built up some sort of savings cushion allowing them to live the rest of their lives in peace. It is the newer grads that can't be picky about their salary. Their only option will be to accept these low-ball offers. Employers know they have a wide pool of graduates that are desperate to pay off their accumulating debts (at 6.8%+ interest). They know the applications of a PharmD is extremely limited outside of retail and hospital. It's a big trap. One new grad demands $70/hour with full benefits? Really, the only saving grace for everyone is provider status taking off really quick with absolutely no resistance from physicians and nurses. However, April fool's was last week.

resistance from physicians and nurses

i think we get more resistance from NPs and PAs.

 

[Humble Sloth]

When the Rite-Aid purchase gets finalized the push to lower rph wages should accelerate. With so many jobs concentrated in a just 2-3 big companies (CVS, Walgreens, Express Scripts) it will be much easier for the employer to control salaries. Starting salaries at 90-100k doesn't seem unrealistic for retail.

The lower salaries are already coming into existence. The stores lower the salary by only giving rph's part time hours. If a pharmacist only gets 20 hours a week, they are effectually earning 60,000 USD a year. I know several new grads who were only able to get 20 hours or so. This is the new reality for pharmacists. Part time hours for many.

 

[Humble Sloth]

Pharmacists of the future are probably going to either be more focused on creating and monitoring the rules for computer decision-making or on interacting with patients to detect and resolve medication-related issues. "Checking that the medication is correct" is no longer a responsibility that can only be handled by pharmacists, nor a cost-justifiable responsibility for pharmacists to handle in many cases.

The real, true value of pharmacists was never verifying scripts. Sure a really good pharmacist may be able to reduce insurance premiums for CVS by reducing the number of patient deaths by overdose/underdose or incorrect meds but this amount of money is trivial. The reasons pharmacists get paid so well is because the street value of opiates is extremely high and if CVS paid rphs less many rphs would steal and sell opiates on the street to make up the difference. If opiates and other addictive drugs became legal in the US for recreational use the pay of pharmacists would drop 80%. The true value of pharmacists in society is that of a glorified bank teller.

 

[samuricool]

Then again there are many excess bank buildings available for rent now. They can easily be converted in to retail pharmacies for cheap. These will kill the chains.

Could you imagine having a c2 vault?! It would be awesome!


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[awval999]

Pharmacists of the future are probably going to either be more focused on creating and monitoring the rules for computer decision-making or on interacting with patients to detect and resolve medication-related issues. "Checking that the medication is correct" is no longer a responsibility that can only be handled by pharmacists, nor a cost-justifiable responsibility for pharmacists to handle in many cases.

I agree with being more involved with the computer decision-making rules (there are already pharmacists involved in pharmacy IT). However, I personally think the opposite in regards to patients. Wasting pharmacist labor on educating a patient at a 6th grade level is a complete waste of time when a pharmacy technician, and APPE student, a damn nursing student can do the same thing. Now I will agree that doing patient profile reviews, reviewing labs, rounding with medical teams, etc., there is value there to find drug errors. But please, I don't buy that load of crap about educating patients by reading off of drug information printouts and asking them if their constipated is worth pharmacist labor.

The lower salaries are already coming into existence. The stores lower the salary by only giving rph's part time hours. If a pharmacist only gets 20 hours a week, they are effectually earning 60,000 USD a year. I know several new grads who were only able to get 20 hours or so. This is the new reality for pharmacists. Part time hours for many.

CVS is paying the same hourly rate to run the store whether there are 1 pharmacist working 40 hrs week or 2 working 20 hrs a week. To be fair, they do save in insurance/benefits but that is not the same as cutting the RPh wage by 50%. Wages are sticky. I've said this time and time again. No profession has wages drop by 50% of current employees. Our wages will go down in inflation adjusted terms. They already are. We'll just keep starting new grads at $100-$110k in retail for the next decade.

The real, true value of pharmacists was never verifying scripts. Sure a really good pharmacist may be able to reduce insurance premiums for CVS by reducing the number of patient deaths by overdose/underdose or incorrect meds but this amount of money is trivial. The reasons pharmacists get paid so well is because the street value of opiates is extremely high and if CVS paid rphs less many rphs would steal and sell opiates on the street to make up the difference. If opiates and other addictive drugs became legal in the US for recreational use the pay of pharmacists would drop 80%. The true value of pharmacists in society is that of a glorified bank teller.

Pharmacists get paid the salaries that they do because we have a legal monopoly on the dispensing of all prescription drugs. It's not just opioids.

 

[Caffeine QAM]

a pharmacy technician, and APPE student, a damn nursing student can do the same thing.

Seriously? Nursing students and pharmacy technicians don't know anything. No one is suggesting that patients should have drug handouts read to them. It takes interaction with patients to actually figure out medication-related problems. You think a nursing student or technician can figure that out? Granted, competent pharmacy students can do this, but we can't exactly fill all position with pharmacy students. You might as well argue that since pharmacy students can practically do anything that pharmacists do, why graduate any students at all? The point of being a pharmacy student is to become a pharmacist. I'm all for having students be involved, but eventually, they are going to become pharmacists, and ultimately they're been overseen by pharmacists anyways.

By the way, why do you think large healthcare systems use transition of care pharmacists? A good number of patients get readmitted to hospitals for medication-related problems...these readmissions are expensive because hospitals don't get reimbursed if they happen within a certain length of time. Conditions like COPD and CHF are notorious for having high readmit rates. Pharmacists have been shown to be cost-effective and pay for themselves when they are involved in high-risk patient discharges because it prevents hospitals from having to provide care that they are not going to be reimbursed for. Ever heard of value based purchasing? Really...This is not new...

 

[WVUPharm2007]

The real, true value of pharmacists was never verifying scripts. Sure a really good pharmacist may be able to reduce insurance premiums for CVS by reducing the number of patient deaths by overdose/underdose or incorrect meds but this amount of money is trivial. The reasons pharmacists get paid so well is because the street value of opiates is extremely high and if CVS paid rphs less many rphs would steal and sell opiates on the street to make up the difference. If opiates and other addictive drugs became legal in the US for recreational use the pay of pharmacists would drop 80%. The true value of pharmacists in society is that of a glorified bank teller.

lol...no.

 

[mikejones123]

The real, true value of pharmacists was never verifying scripts. Sure a really good pharmacist may be able to reduce insurance premiums for CVS by reducing the number of patient deaths by overdose/underdose or incorrect meds but this amount of money is trivial. The reasons pharmacists get paid so well is because the street value of opiates is extremely high and if CVS paid rphs less many rphs would steal and sell opiates on the street to make up the difference. If opiates and other addictive drugs became legal in the US for recreational use the pay of pharmacists would drop 80%. The true value of pharmacists in society is that of a glorified bank teller.

Dumbest post of the year.....either you are trolling or you are 14 years old

 

[Caffeine QAM]

Dumbest post of the year.....either you are trolling or you are 14 years old

I think it was a joke... Though not certain...

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[Humble Sloth]

Dumbest post of the year.....either you are trolling or you are 14 years old

I find it interesting that you respond to my articulated idea with not an intelligent and well thought out retort but instead fail to respond to any of the sentiment and positions i have outlined.

 

[Humble Sloth]

"CVS is paying the same hourly rate to run the store whether there are 1 pharmacist working 40 hrs week or 2 working 20 hrs a week."

It is the exact same as cutting the pay. There are a finite hours available at every store. Say there are 100 man hours available at a CVS store per a week. Before they might have had two pharmacists working the store each getting 50 hours and making over 120k a year. Now that the store hours are the same and the massive increase in pharmacists that same CVS store will hire four pharmacists, each of them getting 25 hours where they will effectively earn 50k a year. More floaters/pharmacists are good for CVS because they give the store more flexibility.

 

[wagrxm2000]

"CVS is paying the same hourly rate to run the store whether there are 1 pharmacist working 40 hrs week or 2 working 20 hrs a week."

It is the exact same as cutting the pay. There are a finite hours available at every store. Say there are 100 man hours available at a CVS store per a week. Before they might have had two pharmacists working the store each getting 50 hours and making over 120k a year. Now that the store hours are the same and the massive increase in pharmacists that same CVS store will hire four pharmacists, each of them getting 25 hours where they will effectively earn 50k a year. More floaters/pharmacists are good for CVS because they give the store more flexibility.

I think your math is off.

 

[owlegrad]

Do you really not understand the difference between cutting hours and cutting pay?

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[BidingMyTime]

Just curious, HumbleSloth, what pharmacy school do you go to? Or if that is to personal, could you tell me if your pharmacy school opened up within the past 10 years or so?

 

[bfr.alex]

Back to the business idea, has anyone looked into getting in on the mobile/online pharmacy side of things? I realize it's probably a little late since giant pharmacies like CVS/Walgreens are already established, but I wonder if there is a niche for smaller online pharmacy operations? Outside of getting the permits and things, it's actually not too hard to get setup and a lot of the shipping and logistics can be automated. Basically you just need to hire a lawyer, accountant, and a pharmacist to process orders. The other area, which I want to see what you guys think, is if there is a way to get in on monetizing data in a similar way that google/fb have done. Basically provide a online venue http://phrmreviews.com/r/generika1-com-review-promissing-source/ to track user demographics and have a data scientist look through it and see if there is any useful statistical information that can be of value to companies. Maybe not so much ad revenue, but actually looking at browser demographics. Thoughts?

 

[wagrxm2000]

"CVS is paying the same hourly rate to run the store whether there are 1 pharmacist working 40 hrs week or 2 working 20 hrs a week."

It is the exact same as cutting the pay. There are a finite hours available at every store. Say there are 100 man hours available at a CVS store per a week. Before they might have had two pharmacists working the store each getting 50 hours and making over 120k a year. Now that the store hours are the same and the massive increase in pharmacists that same CVS store will hire four pharmacists, each of them getting 25 hours where they will effectively earn 50k a year. More floaters/pharmacists are good for CVS because they give the store more flexibility.

Your math is still wrong.

 

[confettiflyer]

Because employers don't respond to labor markets as much as they respond to the business climate. Revenue growth is the top line item investors look for, which in turn drives stock price (which is a claim on future earnings discounted to net present value anyway), and not necessarily labor costs. Non-profits/hospitals run in a similar fashion, reimbursement mix and acuity will drive revenue, and labor will follow accordingly.

Revenue is the dog, labor is the tail. Tail does not wag the dog.

Or put another way, investors don't care if you can find employees who will work for $5 today, who worked for $10 yesterday, when your revenue tomorrow is going to be $1.

 

[confettiflyer]

Jesus who bumped this thread and how did I miss it the first time?

 

[Humble Sloth]

Your math is still wrong.

the concept is correct the math used rough numbers. stop pointing out trivial points of my argument to misrepresent the whole response as false