Host the pharmacist; do not try to become the pharmacy

I think a discount chain that serves small towns should respond to the loss of local pharmacies by hosting independent pharmacist-owners inside its stores, on terms close to cost, rather than by opening pharmacies of its own. I also think its board should judge that decision by whether people in those towns can fill a prescription without a long drive, and only secondarily by what the arrangement does for store sales. Both positions have cost Marrick Variety Stores money and a measure of control. I hold them because I have seen the alternative from the inside.

Why the counter closed in the first place

In 2017 and 2018, as senior vice president of store operations at Brannock Food Stores, a family-owned supermarket chain in Kansas, Oklahoma and Nebraska, I ran the closure of fourteen of our fifty-eight in-store pharmacies. Each of the fourteen filled fewer than 900 prescriptions a week. Reimbursement for most of those prescriptions was set through pharmacy benefit managers acting for insurers and employers, and in the smaller stores the margin on dispensing no longer covered a pharmacist, a technician and the inventory. We sold the prescription files to other pharmacies, wrote to every patient and kept the stores open. In six of those towns, the nearest remaining pharmacy was more than twenty-five miles away.

The decision was defensible on the numbers, and I would struggle to argue that Brannock should have kept losing money on those counters indefinitely. What stayed with me was the letters. A woman in one of those towns wrote that collecting her husband's insulin now took a fifty-minute round trip, which she could make only on her day off. The arithmetic that closed the counter was correct. It simply measured the wrong thing for the town.

When national chains and independent owners closed pharmacies across Marrick's footprint from 2022 onwards, our store managers began to hear the same stories. In 2024 we mapped every Marrick town against the nearest open pharmacy. In 214 of our 1,140 locations, a customer had no pharmacy within a twenty-minute drive. Our private equity owner, Stonebeck Capital Partners, saw an opportunity: open Marrick pharmacies in sixty of those stores, bring in visits and build a health business. The case was persuasive on traffic. On dispensing economics, our finance team's analysis showed something I recognised from Brannock: a counter filling 600 to 800 prescriptions a week in a town of 4,000 people would lose money for most of its first four years, and its profitability would depend on reimbursement rates we did not set. The plan needed US$34 million of capital and projected cumulative operating losses of about US$19 million.

A chain that cannot make a counter pay in a small town has two honest choices. It can subsidise the counter openly and indefinitely, as a cost of being in the town, or it can find someone whose economics work differently. An independent pharmacist-owner's economics often do. Owners typically pay themselves less than a chain pays a pharmacist in charge, run leaner hours, know the local prescribers and add services such as compounding, immunisations or medication reviews that a chain counter may not offer. They also carry the licence, the inventory and the contracts with benefit managers, which are risks a variety store is badly placed to manage.

What a landlord owes a tenant who carries the risk

From January 2025 we began offering space to independent pharmacists in towns without a pharmacy. The terms are deliberately unexciting. We provide 650 to 900 square feet beside the health aisle, a fit-out allowance of up to US$150,000, a nominal rent for three years and then a rent set to recover our costs rather than to earn a margin. We take no share of dispensing income and receive no patient data. The pharmacist sets the pharmacy's hours, hires its staff and holds its own licence and contracts. We widened the over-the-counter range in host stores, which is where Marrick earns its return.

Being a landlord rather than an operator still creates obligations. The first is patience about money. Our second hosted pharmacy closed after eleven months because its owner ran out of working capital while waiting on reimbursements, a timing problem we had underestimated. We now offer a working-capital bridge of up to US$60,000, repaid from the fourth year. The second obligation is restraint. Several store managers wanted pharmacists to stay open until 9pm to match the store. A pharmacist working alone cannot do that safely or profitably, and we stopped asking. The third is honesty about our own interest. A hosted pharmacy brings people into our stores. We should not pretend the programme is charity, and we should not let that interest dictate terms that make the tenant fail.

Count the drive, not the basket

Thirty-one hosted pharmacies were trading in September 2026; thirty-three have opened and two have closed. At twelve months a typical one fills about 610 prescriptions a week. Sales in host stores have risen 5.9% against matched stores, and our capital outlay has been US$4.6 million rather than US$34 million. Those numbers matter to our board and to Stonebeck. They are not the main measure.

The measure I report first is the one the programme was designed to change: the number of our towns where a customer has no pharmacy within twenty minutes. It has fallen from 214 to 186. That reduction is modest against the scale of the problem, and some of it would have happened without us as other operators opened. Our second measure is whether hosted pharmacies survive. A tenant that closes after a year can leave a town worse off than if it had never opened, because patients have moved their prescriptions twice and some have given up on the habit of a local pharmacist.

The arrangement is not right everywhere. In towns too small to support any pharmacist, the answer may be a remote dispensing site or a delivery service under state rules that differ widely, and a variety store can host a kiosk without pretending to run a clinical service. In a few larger towns an owned pharmacy may work, and I would not argue a chain with the scale to run one well out of it. My objection is to the reflex that treats every health need in a small town as a store opportunity to be owned.

For a board considering the same question, I would put three tests. Can the company name the operating model whose economics actually work in a town of this size, and is that model ours? If the company hosts rather than owns, are the terms designed for the tenant's survival or for the host's return? And does the board's report lead with the people who no longer drive fifty minutes for a prescription, or with the basket size of people who already shop with us? The answers will not always favour hosting. They will at least show the board what it is buying.