Prescription For Success?

October 22, 2004
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GRAND RAPIDS — There's no way to ensure that a new business will make it through the first year, and that realization may even be a tougher pill to swallow for an independent pharmacy that doesn't accept insurance than for another type of enterprise.

Yet Bill's Pills, one of only two insurance-free pharmacies in the nation, has not only made it through its first year, but is also planning to expand in its second.

William Overkamp opened Bill's Pills in the West Michigan Center For Family Health, at 1425 Michigan St. NE, one year ago almost to the day. Overkamp, with more than 30 years in the business, decided not to negotiate drug prices with insurers and not to do third-party billing. He believed by not doing either he could offer his customers lower prices.

"I never doubted we'd make it," said Overkamp, who paused and then let out a hearty laugh. "Fortunately, we positioned the business well."

When asked what he learned during his first year, Overkamp didn't talk about rising drug prices, importing prescriptions from Canada or any other business-related issue. Instead, the first words out of his mouth were, "There are a lot of people hurting out there."  He was, of course, referring to those that many only read about — people who have to choose between taking their medication and eating.

"Even though I have been able to reduce a lot of their costs, there are still a lot of people that are skipping doses in order to make their dollars meet at the end of the month," he said.

Overkamp said not working with insurance companies or third-party payers has limited his customer base, as most consumers have some sort of drug coverage or discount card. He guessed that 90 percent to 95 percent have a co-pay or a discount program. That leaves him with the 5 percent to 10 percent who pay cash as his customer base. And those who pay cash sometimes pay higher prices at other pharmacies because insurers set those levels.

"I can only appeal to a small percentage of the patients. But, then again, I'm small with a low overhead and I have the ability to make some money on that group of cash patients," he said, while adding that he has gotten plenty of patient referrals from doctors.

The fact that Bill's Pills doesn't accept insurance means little to his clients, at least on the surface, as they aren't insured. But looking deeper at the issue shows that because Bill's Pills isn't forced to accept anyone else's prices, he is free to lower his. In some cases, he admits to having dropped his charges even further for customers in really dire financial straits.

"The difference here is my cash prices are typically lower than everybody else's. If they're not, I'll make an adjustment to get the sale," said Overkamp, who owns, operates, and staffs the pharmacy. "I get to make all the decisions."

Overkamp told the Business Journal that he has never considered adding insurance or third-party contracts and never will. But he wants to expand his mail-order business and if Michigan changes its regulation of the industry, he will be able to do that. Right now the state doesn't allow first-class postage to be used on a mail order in both directions. So if he gets a prescription through the mail, instead of over the phone or from a fax, he has to send it back by another delivery method.

"I can't go first-class mail both ways, which is an asinine law. But a bill to change that has been approved by the Senate and is in the House," he said.

The change would be just what the doctor ordered for Bill's Pill's. The pharmacy started getting mail orders from all over the country after Fox 47 in Lansing did a story on the business that was shared with, and aired on, other Fox TV affiliates across the nation. So Overkamp feels changing the state law would lower his costs and boost his mail-order business nationwide.

A couple of things have surprised Overkamp during his first year. First, he felt he would have done more of a volume business. It's not that he is dissatisfied with his sales, as doctors are writing prescriptions for longer terms and in bigger volumes to save patients money, but the volume is just not as large right now as he thought it would be.

"A patient got a six months' supply of her medication; her doctor was comfortable with that, and because we had only one dispensing fee she saved five dispensing fees. She said the price I quoted her was less than it would have been from Canada," said Overkamp.

Second, he didn't realize how utterly complicated drug pricing has become.

"There is no rhyme or reason for that. There is no formula, no single formula that I could plug in that could tell me if I added this much, this is where the ballpark is. Prices are all over the board," he said.

"For some expensive medications, I'm still able to save my patients from $100 to $200 and make a profit on the product. But for diabetes medication or birth-control tablets, the market is very tight and I had to really squeeze down my margin in order to be competitive."    

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