A 20-year Ecological Comparison for the Market Dynamics of Minnesota Community Pharmacies from 2002 to 2022

1.1. Background

The purpose of this article is to provide an update to a 15-year ecological comparison for the market dynamics of Minnesota community pharmacies from 2002 to 2017 [1]. The goal for that comparison was to describe the factors that influence the market entry, exit, stability of community pharmacies using environmental attributes drawn from organizational behavior theory [2,3]. Previous findings showed that factors beyond traditional predictors (such as locational convenience) had emerged as being relevant for understanding community pharmacy market dynamics [1]. Community pharmacies are frequently being organized by their capacity to serve as healthcare access points that provide patient care and public health services like medication management services, immunizations, opioid rescue drugs, reproductive health access, drug disposal, health screening, and specialty services [1]. In a recent review by Shcherbakova and Desselle [4], six evolutionary trends in pharmacy were identified for the decade of the 2020s:

• Shift from traditional to specialty drug products
• Growth in pharmacist’s involvement in reimbursed disease management services
• Automation of pharmacy and gradual extinction of traditional dispensing roles
• Transformation of pharmacies into healthy living centers
• Continuing growth of the digital health enterprise
• Rise of analytical pharmacy to test each batch of dispensed medication

In addition to these emergent trends, community pharmacy practice also responded to the COVID-19 pandemic since our last report by providing testing, parenteral antibodies, vaccinations, antiviral therapies, and inpatient care [5]. Thus, there was a need to update our findings using 2022 data in order to monitor the market dynamics of community pharmacies over time.

1.2. Objectives

The first objective of this study was to update the 15-year study [1] by describing the market dynamics of community pharmacies for each county in the state of Minnesota every five years over a 20-year period (i.e., 2002-2022). Methods for this objective were guided by previous work which associated county (a) population density and (b) metropolitan designation with the change in the number of ‘All community pharmacies,’ ‘Chain community pharmacies,’ and ‘Independent community pharmacies’ [1,2,3].

The second objective was to update the 15-year study by describing the number and proportion of community pharmacies for each county in the state of Minnesota every five years over a 20-year period (i.e., 2002-2022) by (1) ‘Business Organization Structure’ and (2) ‘Pharmacy Type.’ These two variables reflect varying approaches to generating revenue and providing health services by community pharmacies in response to environmental factors (i.e., market dynamics) [1,2,3].

The third and fourth objectives were new for the 2022 study. In response to evolutionary trends in the pharmacy market [1,4], objective three described the number of Minnesota licensed pharmacies located in-state and out-of-state between 2002 and 2022. Objective four described the primary type of service provided by licensed pharmacies categorized as out-of-state in 2002 and in 2022. These objectives are new approaches for tracking adjustments by community pharmacies to remain relevant in a new environment of patient care services. The inclusion of Minnesota-licensed pharmacies that are located out-of-state acknowledges the expansion of services provided at the patient’s home, from a remote provider, with nationally-scaled service models [6,7].

2.1. Data Sources

Publicly available data for the names and addresses of pharmacies that were licensed in Minnesota was obtained from the Minnesota Board of Pharmacy for 2002, 2007, 2012, 2017, and 2022 [8]. Population density and metropolitan designation information for each county were obtained from the US Census Bureau and Minnesota State Demographic Center [9,10].

2.2. Data Analysis

Each pharmacy in Minnesota was categorized from state licensing board records by their location (i.e., county), ‘Business Organization Structure,’ and ‘Pharmacy Type.’ Detailed descriptions for these variables are in our prior report [1] and are included in Appendix A for this paper.

For the new study objectives (3 and 4), each out-of-state pharmacy in the years 2002 (n = 283) and 2022 (n = 960) was categorized by (a) Walk-In Pharmacy and (b) Primary Service. ‘Walk-In Pharmacy’ was operationally defined as a community pharmacy that provides general prescription medication dispensing services to any person who physically “walks in” with a valid prescription. The facility’s primary function is to store, prepare and legally dispense prescription drugs under the professional supervision of a licensed pharmacist. It meets any licensing or certification standards set forth by the jurisdiction where it is located. It was coded as ‘Yes’ or ‘No’.

‘Primary Service’ was operationally defined as the primary service function offered to Minnesota residents as described in publicly available records. Five codes were used:

• Mail-order and medical supply service (use of common carriers to deliver goods)
• Specialty pharmacy distributor (low volume/high cost/specialized delivery or administration)
• Compounding pharmacy (combining/mixing/altering ingredients tailored to an individual)
• Medication management support services (to achieve planned, therapeutic outcomes)
• Specialized packaging services (customized packs/devices for improving access/adherence)

Each out-of-state pharmacy in 2002 and in 2022 was coded for the ‘Walk-In Pharmacy’ and ‘Primary Service’ variables using an “online virtual visit” approach. These visits were accomplished by visiting the pharmacy’s website, social media, advertising, customer portals, client portals, maps, news coverage, and publicly available government agency records. Two authors (J.C.S. and S.L.) independently coded 20 pharmacies to assess inter-judge reliability using the Perrault and Leigh reliability index (I): I = {[(F/N) – (1/k)] [k/(k – 1)]} ^½, where F = the observed frequency of agreement between judges, N = the total number of judgments, and k = the number of categories [11]. The Interjudge reliability scores were 0.95 and 0.94 for ‘Walk-In Pharmacy’ and ‘Primary Service’, respectively. In light of a reliability score well above the recommended level of 0.90 [11], coding was completed by one researcher (J.C.S.).

Descriptive statistics were used for tabulating and summarizing the findings for the years 2002, 2007, 2012, 2017, and 2022. Statistical associations between independent and dependent variables were described using Pearson Chi-square analysis. A p-value of less than 0.05 was the significance threshold used for each test and was computed using IBM SPSS version 27.0. Likelihood-ratio and Fisher’s exact tests confirmed that all study comparisons were stable, with none altering the interpretation of significance.

4.1. Update for the Market Dynamics of Minnesota Community Pharmacies

Findings from this study provided an update to our previously published ecological comparison for the market dynamics of Minnesota pharmacies [1] and confirmed the shift over the past 20 years from traditional retail convenience models to healthcare access models based on population health needs. Traditional models aimed to maximize the sale of products to customers with inventory generating revenue and success measured by the number of prescriptions dispensed and other products sold [12]. The new healthcare access models strive to connect service providers and patients, with service provision creating revenue [12]. Success is now achieved by attainment of population health outcomes [12]. We propose that pharmacies are becoming less reliant on space that is organized to display and sell products and are organizing their work systems and processes for patients to receive services [1,13,14].

4.2. The Emergence of Nationally-Scaled Service Models

For 2022, we added study objectives 3 and 4 in order to learn about the market dynamics of pharmacies licensed in Minnesota, but located outside of the state. Over the past 20 years, the proportion of Minnesota licensed pharmacies that were located out-of-state rose from 19% in 2002 to almost half (46%) in 2022. The services provided appear to need national scalability in order to have profitable margins. Examples include mail order/virtual pharmacy services, specialty drugs, compounded medications, medication management support, and tailored packaging services. Furthermore, we propose that national scalability is feasible through advances in communications, automation, internet technology, smart home technology, remote monitoring, digital health, machine learning and artificial intelligence algorithms. A survey conducted in 2022 revealed that over 70% of healthcare consumers are open to having medications prescribed by a specially-trained pharmacist instead of a physician, are willing to provide blood samples for genomic testing, and would prefer to have medication sent directly to their homes [15]. Businesses that are developing nationally scaled service models seem to be taking advantage of these trends.

4.3. Recommendations for Future Research

The findings raise questions for future inquiry. What do these findings mean for existing pharmacies and their current business models? What scope of practice changes are needed that relate to provider status, collaborative practice agreements, and pharmacist prescribing? What changes are needed to patient confidentiality laws? Do the new market dynamics create internet, technology or access deserts for some populations? Are current state-level regulations of pharmacies sufficient for consumer protection in light of the new market trends? Are healthcare access models that are based on population health metrics and the development of nationally-scalable models that are in reaction to economic pressures creating good models of care for individual patients? Can health care providers meet the expectations of these new models without suffering burnout?

4.4. Study limitations

The findings of this study should be interpreted within the limitations of the project. First, analyses were performed for only one state (Minnesota) and might not apply to other states. Second, only licensed pharmacies were considered, rather than all locations where patient care services are provided such as managed care organizations, medical centers, hospitals, community centers, and dental clinics. Finally, there may be other characteristics pertaining to pharmacy organizations and the populations they serve which can explain the market dynamics in this study.