Des Moines Register
08-07-06
Conrad company writes prescription for survival
VANCE HAWTHORNE
REGISTER BUSINESS WRITER
Conrad, Ia. - T.J. Johnsrud, who started a small pharmacy in this tiny Grundy
County hamlet 33 years ago, is concerned about the future.
"I don't know how long we are going to see pharmacies in small communities,"
Johnsrud said. "There are approximately 100 communities in the state that have
only one pharmacy," according to a study by NuCara.
The seasoned pharmacist spoke of the possible crisis in rural Iowa that would
have severe implications for towns with large senior populations, but his worries
do not extend to his own company. Two decades ago, Johnsrud had the
foresight to recognize the challenge and unite with two other pharmacists to build
seven stores across the state.
Following retirements and a buyout, the company is in the midst of a major
reorganization under a new name, NuCara Management Group Inc. Amid
widespread consolidation in the pharmacy industry, Johns-rud has surrounded
himself with an executive team of young guns who are also part owners. And the
company diversified into four business units as a foundation for expansion into
large metropolitan areas in the upper Midwest.
The business units include:
- Traditional pharmacies.
- Long-term care, in which it serves 40 nursing homes and packages
prescriptions for 2,400 residents.
- Compounding pharmacies located in Waterloo, Coralville and Austin, Texas.
- Home medical equipment.
"Either we were going to lay down and go out of business or sell out to the local
chain, or we were going to figure out: 'This is the playing field, these are the
cards that are dealt us. How do we survive as a company and how do we
prosper as a company?' " said Johnsrud, 63.
In the past five years, NuCara Chief Executive Officer Brian Wegmann said, the
company has more than doubled its revenues. In the past decade, revenues
have tripled.
"Our plan calls for expanding to have a regional independent pharmacy
presence. ... There is a whole generation of independent pharmacists out there
who want to retire but don't want to sell their pharmacy business to a chain," said
Jenny Stensland, NuCara's vice president of marketing. "By layering the profit
centers of compounding and long-term care on top of our retail pharmacy
practices, we will remain financially viable."
The bold strategy is a reversal of the current national trend in the pharmacy
industry that is witnessing major consolidation, with Walgreens and Wal-Mart
ruling the roost.
Walgreens' muscle, with 179,000 employees, is evident: In 2005, its nearly 5,300
stores registered more than $42 billion in sales.
Because chain stores have bought out many of the sole pharmacies in small
Iowa communities with populations of fewer than 5,000, many seniors in those
communities may lack easy access to a health care provider, said Wegmann. He
said many may be forced to drive 20 miles to 30 miles to the nearest pharmacy.
That's one reason NuCara is looking at strong independent pharmacies across
the Midwest.
"We feel that we can provide them an option because of how we are structured,"
Johnsrud said.
Ken Stone, a retired Iowa State University economist and retail expert, said
NuCara's game plan "sounds like a pretty good model," particularly with the
nursing home niche, which he said is an underserved market.
Wegmann said nursing homes are one of the most regulated industries in the
United States. "They are under a lot of scrutiny and pressure by regulatory
agencies to make sure they are following all the rules, and pharmacies are a big
part of that. So what we bring to the table with our services is, we keep them in
compliance, and we also make it easier - providing a level of care that they need
for their residents."
Because the company sprang from the roots of small rural communities, it has
spent considerable resources in marketing. "We have people calling on
physicians in a lot of places," said Bonnie Sadler, vice president of business
development for NuCara.
NuCara has representatives in Iowa, Texas and Chicago. "Basically, the reps are
working with physicians and dentists and podiatrists and veterinarians," said
Johnsrud.
Johnsrud attributed the company's success, in part, to its ability to attract highquality people. "The reason that we're still on this journey is that we've got
tremendous people in this company," he said. "They are young, energetic
people, with many years of expertise."
For example, CEO Wegmann is 30. He has worked with the company since
emptying trash as a youngster in a Dyersville pharmacy.
Another of its key employees is Tom Weis, NuCara's operations manager who
tired of the corporate grind.
"I came to Conrad because the smaller pharmacy concept to give a personal
touch and taking care of residents either in community or nursing home settings
was important to me professionally," said Weis, who spent 15 years at
Walgreens.
He started long-term care pharmacies in Iowa with the chain and also worked
stints at NCS Healthcare and OmniCare LTC Pharmacy in Iowa.
"Money was never the issue with a smaller company because I felt that doing a
job you like is rewarding enough," Weis said. "The people that I work with are
great and that makes the job more enjoyable."
Stensland said Johnsrud has always been an innovative thinker and stays ahead
of the curve. "He's very good at letting people thrive at what they're good at in
this company. He hires very talented people."
Retail expert Stone had words of caution about NuCara's growth plan.
"It's a tough game," he said. "They are up against Wal-Mart, Walgreens and the
big-time operators. You have to be big enough to buy in volume to compete
these days, or be part of a buying co-op to get lower prices."
Wegmann said NuCara is part of a buying group of independent pharmacies
"that gives us similar clout and similar discounts" like the chains.
Johnsrud said the economics of pharmacy has changed dramatically for the
consumer, especially since the Medicaid Part D plan launched Jan. 1 of this year,
"which covers the only population that didn't have insurance, the 65 and older
group."
He said well over 90 percent of its customers have insurance, and almost all
prices are set by the various insurance companies.
"The idea of trying to go to a big pharmacy thinking it might be less expensive that's really gone. Checking prescription prices at various pharmacies anymore is
really irrelevant. ... The real decision a consumer has got to make today is where
can they go to get good service, and is the location convenient."
The compounding niche involves medications that are intricately tailored and
mixed to meet an individual's prescription needs.
"There are different levels of compounding," said Sadler, who heads the
compounding operation. "There are very simple compounds that are like creams
you put together on your counter, but what we're talking about is a different level
of compounding. We do things that typical pharmacies don't do. We specialize in
it. That's what made us different, set us apart."
Sadler said the company makes some medicine from scratch. "We have our
powders and we can ... build each form to a particular patient based on the
prescription of the doctor. So if a person can't swallow and they need an
ibuprofen type of medication, we can put it into a topical form."
In spite of the challenges facing the industry, the NuCara brain trust remains
optimistic.
"For many years we have been three snowballs rolling down a hill," Wegmann
said about the three pharmacy business units. "We made some mistakes, but
we're now working on combining those three snowballs. We are getting our
ducks in a row and should be able to expand quite rapidly."
Vance Hawthorne can be reached at (515) 284-8531 or vhawthorne@dmreg.com