| 4 min read | by Doug Marrin | firstname.lastname@example.org |
The recent closing of the Dexter Pharmacy shocked the community when the news broke more than a week ago. The sudden move leaves a lot of people wondering, ‘What happened?’ Over a cup of coffee at Joe and Rosie’s, owner Marni Schmid gave me the story.
We got right down to business. “When did you first realize something was wrong?” I asked.
“The first big realization that there was something out of the ordinary was this past June,” Marni said. “It was a cash flow problem, which is normal for pharmacies. We had a credit line to manage that. It’s a tricky business and can get tough if reimbursements come slowly. Over the last few years, this was getting harder and harder.”
Marni explained there are always some cash flow issues with a typical pharmacy. It’s the nature of the business. For example, when a pharmacy purchases 100 pills of something, those 100 pills have to be paid for within 15 days of ordering. At some point, a prescription comes in for maybe 30 of those pills. The insurance then determines payment for those pills. The pharmacy then waits for 30 to 90 days for payment.
“What happened in June was that we had maxed out our line of credit and there wasn’t money to make the next wholesaler payment,” she said.
The pharmacy was in a tight spot, and things were about to get even more uncomfortable.
As a part of their regular bookkeeping practices over the years, The Dexter Pharmacy used a reconciliation company to track payments. The pharmacy began to receive adjudicated amounts by the insurance companies for the prescriptions they filled that were much lower than what was agreed to when the claim was processed (order filled). It was far below what the pharmacy needed for payment – sometimes a penny, a few pennies, or even zero.
Payments were recorded as ‘paid,’ but no money was coming in.
“I was buying drugs and filling prescriptions but not getting paid for those prescriptions,” Marni explained.
Marni knew the deposits were off, but finding out just where payments were reduced in the complicated chain of transactions took a couple of weeks. It was just enough time to tip the pharmacy’s vulnerable position in the wrong direction.
“Once I realized there was no way I could fix that within the time frame I needed to, I quickly decided to sell the pharmacy,” Marni continued. “I started working with an independent pharmacy. They moved quickly to make it work, but the due diligence involved in selling a pharmacy is at least a six-month process. Although I hoped to keep the pharmacy independent, in the end, that just couldn’t be done.”
Dexter Pharmacy already had a working relationship with Walgreens. If the pharmacy couldn’t be saved, at least customer records could be maintained. As most folks know, Walgreens purchased the prescription inventory and Dexter Pharmacy records.
There is a regulation in place that allows the transfer of patient records from one medical practice to another, including pharmacies, without violating HIPAA. The mechanism is in place to provide continuity of care. Both Dexter Pharmacy and Walgreens are entities covered under this regulation, so a transfer was allowed.
Marni directs her anger toward Pharmacy Benefit Managers (PBM), those liaisons who control the payments from the insurance companies.
“It’s a very closed and unregulated private industry,” explained Marni. “They have the power to refuse payment to a pharmacy for a legitimate prescription, and they can get away with it. They’re big and powerful. I’m small with limited resources.”
Through tears, Marni told about those dark days from the end of June to the end of August.
“First, there was fear and dread,” she says. “There was a lot of worry for the employees and how to pay the bills. One employee has been with us for 25 years, several over 15 years. They’re family. But I couldn’t talk to the staff about it. I could only talk to the bank and my parents about it because my dad was still the guarantor of the loan.”
“I was trying to figure out how to get the best deal knowing that everybody has an advantage over me,” continues Marni. “I have no leverage with anyone I’m trying to settle with. I’m the one in the mess that needs to get out, but I also want to protect as many people as I can.”
Marni finally had the finishing deals done on a Wednesday and was told the last day would be Thursday, at least as a pharmacy and only the liquidation to wrap things up. She could now tell her staff, but it was only a 24-hour notice.
“It was horrible,” says Marni. “All this time I have to carry on as if nothing is wrong while I’m dying inside. I would chat with my neighbors in passing and then go in the house and cry. I don’t like lying, but what can you do?”
“I was also trying to respect what my parents were going through because my dad bought the original pharmacy in 1978,” continues Marni.
“Talk about breaking the news to your dad,” I said.
“We started that discussion in June when I figured out there was a problem,” Marni explained. “It got worse when I figured out what the problem was. Worse yet when I realized how truly powerless, I was. And then, I have to tell my dad how truly powerless the two of us are. It’s a hard discussion to have. ‘I have no way to get us out of this,’ I told him. It was quite emotional and painful.
Marni’s father, Fred Schmid, bought the Dexter Pharmacy in 1978 when Marni was in grade school. It was where Hearts ‘n Flowers is today. Dexter had two pharmacies at that time. Fred purchased the other pharmacy in town, McLeod’s Pharmacy, where The Beer Grotto is today. He combined both pharmacies into the new location since it was larger and operating under one roof only made sense in the small town.
In the mid-90s there was the fire.
“That was a horrible day. I was working that day with my dad. A customer came in from Dairy Queen and said, ‘You have smoke coming out of your store.’ We’re like, ‘WHAT!?’ We evacuated the store, but my dad kept going back into the smoke-filled building to get the computer equipment with the records.”
In the year 2000, Dexter Pharmacy moved out to the new strip mall, Dexter Crossings. It was a strategic move to keep a chain pharmacy from taking one of the anchor spots. A dozen years later, Dexter Pharmacy moved to their last location on Baker Rd. near the Dexter Wellness Center.
“Is this a case of big powerful drug companies squeezing out the little guy?” I asked.
“I don’t think that’s what happened here,” answered Marni. “I think we could have kept handling the different competitive issues we faced if we would have just been getting paid.”
“What are your plans to recover from this?” I asked.
“I’ve been fortunate that for the past couple of years, I’ve worked on my personal development,” Marni said. “I’m in the grief stage, but it’s okay. There are other business opportunities for me to explore and develop. I’ll figure it out.”
In conclusion, Marni wanted people to know most of all, “I appreciate the support we’ve had from the community. I knew it would be hard on everybody, and I dreaded that. But for the most part, people have been supportive and understanding.”