Indie pharmacy modeled after Happy Harry’s

Photography by Brian Harvath
Photography by Brian Harvath

By Kathy Canavan

Atlantic Apothecary, a nine-year-old pharmacy in a small town straddling Kent and New Castle counties, does almost double the average annual sales for an independent pharmacy.

The owner has a decidedly Delaware approach: “I modeled this after Happy Harry’s – our customer service, our staffing, our sports team sponsorships, our community screenings, all the things Happy Harry’s used to do,” Kevin Musto said.

Musto worked for Happy Harry’s for 20 years and Walgreen’s for one before he opened his own Atlantic Apothecary in Smyrna. His annual sales are $7 million, and he has 15,000 names in his patient database even though he’s operating in a town of only 10,960.  He opened a second branch in Middletown last year.

Things didn’t look so cheery when Musto was seeking a loan to start his business in 2007, the year of the credit crunch and the housing crash. “Everyone was in upside-downness and here I am asking for money to open a pharmacy. The banks thought, ‘If the big pharmacies were having trouble, how in the world could a little pharmacy be profitable?’ ” Musto said.

Musto needed a Small Business Administration loan to get started, but now his business employs 14 in Smyrna and another five in Middletown. Smyrna is his home base and also his hometown.

To help his older patients and increase his customer base, Musto invested more than $300,000 in a computerized pill-packing system that prints out individualized pill packets for morning, noon and night. Patients pay the same price as they do for pill bottles, but they just rip the cellophane packets off a roll in a dispenser box.

The ApothePacs system gives the patient one pack of prescription-and-over-the-counter pills for each period of the day. (Photography by Brian Harvath)
The ApothePacs system gives the patient one pack of prescription-and-over-the-counter pills for each period of the day. (Photography by Brian Harvath)

The easy-to-open packets, printed especially for each patient, include all their prescription meds, over-the-counter items like coated aspirin, plus vitamins. Each packet is printed with the patient’s name, the names of each drug, the time they are to be taken and the date. Patients just tear off a packet at the appropriate hour. If a patient is also prescribed an inhaler, the packets are modified to include a reminder to use it.

Musto thought the packets, which he dubbed “ApothePacs,” would be popular with older patients, but he’s finding fans among busy young families and frequent fliers.

Only 50 patients are currently enrolled, but more are joining each week, he said. There’s a domino effect as patients hear about it from friends.

“I know with my own mother, if she hears it from a pharmacist she may not do it,” Musto said, “but, if she hears it from a friend, well, then, that’s freaking gospel.”

Both Atlantic Apothecary pharmacies are located inside large medical office buildings. As doctors learn that Atlantic can package over-the-counter drugs along with prescription ones, they often refer patients, technician Nora Rennewanz said.

So, while the maintenance and supply costs for the ApothePac system exceed $10,000 a year, Atlantic is selling more prescription drugs and more over-the-counter drugs that patients used to buy at big-box stores. “We look at the big picture,” Musto said. “The machine has not paid for itself yet, but I feel this will help our community get better health outcomes and it will increase our sales as well.”

Non-adherence – patients’ failure to take prescribed medication, costs $100 billion to $300 billion in avoidable health costs in the United States each year, according to “Risk Management and Health Policy,” a professional journal.

Atlantic Apothecary staffers work preparing prescriptions for customers. They have 15,000 names in their database, even though they are operating in a town of 10,960. (Photography by Brian Harvath)
Atlantic Apothecary staffers work preparing prescriptions for customers. They have 15,000 names in their database, even though they are operating in a town of 10,960. (Photography by Brian Harvath)

“If we can try to fix that and have patients take their medicine the way they’re supposed to, you’re basically looking at cost savings because they won’t be at risk for health outcomes,” Musto said. “If a patient is on hypertension medication and they take the medication property, they’re less likely to have a heart attack. If they are diabetic and they are compliant, they won’t lose a leg or lose their sight.”

Another new service the pharmacy offers is medication synching – technicians deal with doctors and insurance companies to sync all of a patient’s prescriptions so they are issued at the same time and the patient can make just one monthly trip to the pharmacy.  Some patients, who get checks on the first of the month, pick that date to sync.

It takes man-hours to make that work, so Musto employs four to six technicians on staggered shifts each day, while the industry average is fewer than four.

“We’ve all worked in the chains and we know there is a very limited amount of coverage in the chains,” said Rennewanz, who often calls patients to sync their medications. “Having the additional time here gives us the time to really get to know the patient. After they enroll in the sync program, most times that person who calls them every month is going to be the same person, so they will know them. If they are late on their medications, we can ask why. Were the in the hospital? Did the doctor prescribe something else? Could they not afford it? You learn so much information when you have the time to have these interactions with the patients.”

Musto’s staff has more time to spend with patients because he was the first in the state to invest in a $200,000 Parata Max computerized pill-counting machine.

It counts the pills, drops them in vials, labels the vials, caps the vials and sorts them by patient name. “The automation enables our pharmacy staff to take care of more patient-centered needs so we don’t spend our time counting,” he said.

The Atlantic Apothecary is located on the first floor of a large medical office building in Smyrna, so many doctors refer their patients there. (Photography by Brian Harvath)
The Atlantic Apothecary is located on the first floor of a large medical office building in Smyrna, so many doctors refer their patients there. (Photography by Brian Harvath)

Changes in the marketplace

Musto said rising generic drug costs and lagging insurance payments are tipping his business and his patients’ pocketbooks, though.

Generics account for 80 percent of the drugs prescribed in the United States, according to the Food & Drug Administration, and one study showed 222 generic drug groups cost more than 100 percent more in 2014 than they did the previous year, and 17 generic drug groups cost 1,000 percent more, according to Elsevier, a medical publisher.

Manufacturing issues and tighter FDA standards affected price, and so did major drug industry consolidation that led to much less competition. “Many generics that used to be pennies a tablet have been raised to $200 to $400 a bottle for the same product,” Musto said. “There’s no way manufacturers can justify that. It’s absolute greed.”

He said he is concerned that people will skip pills to save money or buy from the Internet where, he says, some pills may have no active ingredients at all. “People tend to see drugs as not a necessity,” he said. “Health care is often put on the back burner as far as financial importance.” To keep patients on their meds, Atlantic technicians work with doctors to find less costly drugs that do the same job.

The issue that affects Musto’s pocketbook is more difficult to solve.

Staffers at Atlantic Apothecary say they have more time to spend with patients because the staff is larger than the industry average and pill-counting and other tasks are automated. (Photography by Brian Harvath)
Staffers at Atlantic Apothecary say they have more time to spend with patients because the staff is larger than the industry average and pill-counting and other tasks are automated. (Photography by Brian Harvath)

Just as with A.I. duPont Hospital for Children’s much-publicized battle for reimbursement, pharmacies are getting smaller reimbursements and, in some cases, he said, losing money filling their patients’ prescriptions.  Musto finds it ironic that he loses up to 20 percent of his costs selling some drugs to his patients who use Medicaid, but he is still required to pay capital gains tax  on the sales. “All of a sudden, there’s  a lot of debt you accrue by being busy,” he said.

Slow payments from insurers also affect the pharmacies’ bottom lines. He must pay his drug wholesaler in 15 days, but some insurers’ reimbursements take six to eight weeks.

Musto said he’s waiting to see if reimbursements change, but he’s contemplating dropping two insurance plans. “I’m a Libra, so I’m always weighing the alternatives,” he said. “But, if I don’t keep the plans, I’m basically turning my back on those patients.”

Musto said patients who cannot get their prescriptions might eventually wind up hospitalized. “Hospitals are the place everything rolls downhill to,” he said.

Even if he loses money, Musto has another factor to weigh.

“I’ve grown up in Smyrna and everybody knows me,” he said. “They’re putting their lives in our hands.”

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