Whose Drugstore Is It?

By: - September 24, 2010 12:00 am

Photo illustration by Getty Images

In most of America, the issue of who should own pharmacies is not a burning political question. But North Dakota has been talking about it for the past 47 years.Alone among the states, North Dakota requires that pharmacies must be majority-owned by licensed pharmacists. Advocates say the 1963 law has allowed mom-and-pop pharmacies to survive in small towns instead of being swallowed up by big-box retailers such as Wal-Mart or Walgreens. Critics counter that the law places too much of a burden on potential drugstore owners and hurts consumers.

This year, advocates of changing the law spent the summer gathering petitions for a referendum. They almost succeeded. By August, they had collected enough signatures to qualify for the November ballot. But the measure ultimately failed to make the ballot on a technicality.

Even so, the episode has returned the drugstore question to a prominent place in North Dakota political debate: Who should own a pharmacy, anyway?

“Most of the pharmacists I talk to, they think the law is great,” says Mike Schwab of the North Dakota Pharmacists Association, an advocacy group. In other states, he says, “they’re seeing the profession getting monetized, they’re seeing more and more having to operate under a corporate structure that’s about volume and profit and not about the care of the patient.”

But Jerry Jurena, president of the North Dakota Hospital Association, counters that the state law makes it almost impossible for new pharmacies to open when a longtime pharmacist serving a small town decides to retire. “When kids are coming out of pharmacy school now, there is more money to be made as an employee than as an employer,” he says. “You don’t have to buy a store, you don’t have to buy the merchandise, you don’t have an inventory to worry about.”

Instead of moving to a small town to launch a fledgling business, he says, new graduates find they can earn “,000 to $100,000 right off the bat” by going to work for one of the big pharmacy chains.

Legal challenges

North Dakota was the not the first state to enact this kind of pharmacy law. Others, concerned about the spread of corporate drugstores, put similar legislation on the books during the early part of the 20 th century. But a 1928 U.S. Supreme Court ruling overturned Pennsylvania’s pharmacy ownership law, leading other states to scrap theirs when challenged in court.

Legal challenges to North Dakota’s pharmacy law reached the U.S. Supreme Court in 1973. The court, in a 9-to-0 decision, reversed its 1928 opinion and allowed the North Dakota law to stand. Since then, no other state has put pharmacy ownership laws back in place, making North Dakota the only state with such a requirement still in effect.

It’s not quite a universal prohibition. National retailer CVS and regional drug chain Thrifty White were grandfathered in and continue to operate drugstores in North Dakota, even though they are not majority-owned by pharmacists. But other chains are locked out of the state.

After the court’s 1973 ruling, those who wanted the law repealed turned their attention to the state Legislature, hoping to convince lawmakers to overturn it. But legislators so far have voted consistently to keep the law in place, most recently last year when repeal efforts failed in both houses.

That has left a ballot initiative as the last resort. This summer, a group called North Dakotans for Affordable Healthcare, partially funded by Wal-Mart and Walgreens, circulated petitions. The secretary of state and the state supreme court ruled that the petitions were invalid because the sponsors of the measure were not prominently listed. So the issue likely won’t be voted on until 2012.

Jurena says the state’s hospital association supports changing the law to make it easier for hospitals to open outpatient pharmacies. Right now, hospitals can’t operate such pharmacies although they can dispense prescriptions to overnight patients. Hospital administrators are having an increasingly difficult time finding pharmacies to whom outpatients can be referred. Jurena, who for 15 years ran a hospital in Rugby, a town of about 3,000, recalled how the town’s three pharmacies dwindled to one, operated by the Thrifty White chain.

Census figures show that the number of North Dakota pharmacies has dropped by almost 10 percent between 1997 and 2007. North Dakotans also spent more on prescription drugs than their counterparts in neighboring states, according to a Kaiser Family Foundation study in 2004. Per capita spending on prescriptions was higher in North Dakota than the U.S. average, although lower than in several East Coast and southern states.

Jurena says the law has led some people to buy their drugs in neighboring states or in Canada. “It’s become tougher and tougher to provide services in the rural areas, he says, “and then to throw up a roadblock and a barrier and a law that is prohibitive, it just adds to the decay of rural America.” 

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