Executive Interview: Q&A with Barry Perzow, Co-Founder, President and CEO Pharmaca Integrative Pharmacies

Mr. Perzow, who has 38 years of broad experience in retailing, was President of Capers Natural Food Markets until 1997. Expanding from a single store in West Vancouver to three large format supermarkets and two natural restaurants, Capers became Canada's most innovative and leading natural health retailer before merging with Alfalfas Markets of Colorado prior to Wild Oats acquiring the company. In June 2000, Mr. Perzow founded Pharmaca, a growing chain of integrative pharmacies which some have predicted are a crucial piece of fixing the health care puzzle. The company has just completed a $7.5 million financing round. Pharmaca operates pharmacies that offer conventional and natural health solutions.

NPI: The concept behind the Pharmaca stores is to integrate prescription and OTC medicines with dietary supplements and homeopathics, with practitioners on site. Where did you get the idea and how does it work

I don’t like what I see happening with health care in this country. After years of working in natural food retail, I thought I could apply my experience to doing something about how people seek out personal health care solutions.

Our staff is the greatest point of difference… imagine, paid personnel in a pharmacy who actually listen to you and provide compassionate counsel!

Pharmaca hires highly trained health professionals to provide advice on everything from prescription drugs to drug/herb interactions, supplement solutions, natural personal care and more. Staff is on-site and appointments aren’t necessary. The goal is to provide on-the-spot health advice in a convenient, compassionate and timely manner.

NPI: You currently have 11 stores in Colorado, New Mexico, California, Oregon and the state of Washington. What are your growth plans?

We have a fairly aggressive growth strategy but nothing impossible. Our current business model calls for us to acquire existing independent pharmacies and renovate them to the Pharmaca model. This gives us a built in consumer base that we can build on. However, the most exciting lesson from our ’04 openings is that we proved that we can open ‘green’ stores, which are completely new stores that were never previously an independent pharmacy. We’re learning as we grow, and we now have more criteria that we examine before opening new stores.

In the next year, we will open 5-6 more Pharmaca stores in a combination of acquisitions and ‘green’ store models.

NPI: How is the ‘integrative’ concept working? Is the vision being diluted?

No dilution what so ever. If anything, it is being amplified by distinct community needs. What we provide in Sonoma, with a more elderly population, is different than what we provide in Boulder, with a more youthful and family focus. We continue to remain dedicated to the concept of integrative health and feel that it is still the cornerstone of what we do at Pharmaca. While some of our customers will always need prescription medications, we can work with them to find integrative solutions to lower their doses, lessen side effects or generally feel better. Integrative health at Pharmaca means providing an open environment of health choices for consumers.

NPI: What are the biggest challenges you are facing? What do your customers like about the stores and what don’t they like?

Pharmaca is facing exciting times in terms of continued investment and growth. Our biggest challenges are found in determining the best locations for Pharmaca to grow, all the while remaining true to the vision of building our stores as neighborhood health resources. In addition, we have to continue to educate consumers about what Pharmaca has to offer, what “integrative” really means, and why the health advice that we provide is far superior to what you’ll find at a local Walgreen’s.

Our customers overwhelmingly tell us that they come to Pharmaca for the relationships they have with our pharmacists and practitioner staff. We even have a few “rock stars” with loyal followings of customers!

Because we have stores in several tourist destinations, we get a lot of comments asking when Pharmaca will open in new cities and states. And we unfortunately can’t open up stores in new areas as fast as customers are finding out about us. We opened up mail order service for our outlying fans!

NPI: The Pharmaca Board of Directors is heavily weighted with investment people. How did you find investment experts able to embrace your vision?

Our board is comprised of individuals who know how to grow companies, particularly companies in the natural/alternative health sector. It’s quite similar to the early days of organic food manufacturing, when ‘organic’ was still seen as out in the hinterlands and not to be taken seriously. Still, there were pioneers who guided CEOS and management to take small organic companies to mid-size and beyond. Now, organic is seen as much more mainstream and less weird. It’s also viewed as a smart investment.

Integrative medicine, like it or not, is still misunderstood and seen as somewhat fringe. That said, consumers will drive our growth just as they did for organic. I want those board members who are strategic and savvy so that we grow this company in a sound and smart manner. By the way, most people on my board do use healthcare products on ‘both sides of the fence.’ I just had an entire Glucosamine discussion with my board at the last meeting.

NPI: Your background involves building businesses for eventual acquisition. Is that in the plan for Pharmaca?

We’re staying laser beam focused on growth and margins right now. There is no formal acquisition strategy at this time.

NPI: One of the problems Whole Foods faced with rapid growth was finding seasoned managers and buyers. As you continue to grow, how will you address this and what characteristics and experience will you be looking for in store managers and in regional managers?

Access to talented store managers and other key personnel is always a challenge. In addition to managers and buyers, we also need access to homeopaths, naturopaths, herbalists, etc. Part of our site selection strategy helps us, in that we tend toward LOHAS markets where there is an abundance of alternative and experienced health care practitioners. And, we are seeing store managers from the natural supermarket chains show a keen interest in our company. If I have it my way, every employee in our stores will have a health practitioner background of some kind so that even when you check out at the cashier, the supportive counsel approach is embraced.

NPI: As your company becomes bigger and more influential, getting a product into your stores may well become a significant part of manufacturers’ sales strategies. What are the characteristics of a product that will make it successful in your operation and what do you require of manufacturers to put a product on your shelves?

Our goal is to be the trusted editor in selecting quality products for our customers. The vast product selection available to the consumer can be overwhelming, and we cull down to specific brands based on product integrity and efficacy. Because we are integrative, however, we offer multivitamins that range from professional brands such as Metagenics, to what we see as introductory brands such as Centrum.

Our purchasing criterion is category specific and I would need an entire binder to give you all those details. Each national buyer is charged with keeping our purchasing standards current and of the highest integrity. For example, we have really been focusing on natural cosmetics in our Beauty section (skin and body care). Just defining the criteria for ‘natural’ isn’t enough. We back it up with educational seminars and events for our customers.

NPI: What resources (internal and external) does your organization rely on for information and education? Are there any post-secondary programs that have been helpful?

The very nature of Pharmaca is a learning environment. At any given time, we have pharmacists, homeopaths, naturopaths, estheticians and herbalists working together, many of whom are drawn to Pharmaca to learn from each other. We additionally offer a yearly education reimbursement for our staff to use to attend seminars, lectures, etc.

To formally capture this peer-to-peer training, Pharmaca has instituted a Lead Practitioner Program. Each of our stores has a Lead Practitioner who attends weekly conference calls focused on health protocols, new research, etc., and takes that leading edge information back to their stores’ staff to share.

Our first major company-wide training program focused on drug/nutrient depletions and was based on the work of Ross Pelton, R.Ph. and James Lavalle, R.Ph. Certain prescription medications can deplete vital nutrients from the body. For example, statin drugs deplete CoQ10 which can result in cardiac damage. Taking a CoQ10 supplement can offset those harmful side effects. Our training focused on educating our pharmacists to counsel their patients on the best supplementation for long-term use of these nutrient-depleting drugs.

Several of our pharmacies have launched prescription compounding in the stores in the last three years and all of our new stores will offer this service. Because it is a very specialized art, our pharmacists undergo intensive training in compounding through PCCA (Professional Compounding Centers of America) or Spectrum Gallipot.

I could go on and on about training in our stores. Because we are a new concept retailer in an emerging field of medicine, it is vitally important that Pharmaca is an informed and educated resource for our customers.

NPI: What expectation do your customers have of your staff and their level of knowledge/expertise?

Our customers continue to tell us that the reason they choose to shop at Pharmaca is our staff. Our goal is to welcome each and every customer and provide them with helpful health and wellness advice. We employ highly trained and certified herbalists, naturopaths, estheticians and, of course, registered pharmacists to make sure that our advice comes from credible and knowledgeable employees.

NPI: Are there any other competitive pressures that you are aware of?

We continue to differentiate ourselves from our competition by providing a store and environment that is unique. Large pharmacy chains are competitors for our prescription clients. However, once we can get consumers to try us, they are unlikely to go back to these large-scale pharmacies that take an assembly-line approach to health.

Likewise, health food stores and even grocery stores these days offer some similar supplements and body care products. However, access to our practitioner staff for questions about these products sets Pharmaca apart. We are also able to carry certain professional lines of supplements (Metagenics and Thorne, for example) and spa skin care (Sanitas and Jurlique) because we have trained staff on hand to appropriately discuss the products with customers.

NPI: Pharmaca has stayed under the radar in terms of industry exposure, with no visible industry leadership roles and relatively little involvement in the trade associations. Given your heavy supplement emphasis, it makes sense for you to have a seat at the table in industry leadership, particularly those involved in preserving DSHEA. Do your plans include becoming involved in NNFA and other industry groups working in Washington DC?

That is a very good question -- people often say that we are the pharmacy industry’s best-kept secret. We have been hunkering down focusing on our business model, focusing on staffing, on strategy and on locations. National visibility hasn’t been our top priority. Don Summerfield, our VP of Integrative Medicine, has some industry involvement, but it is probably time to become more engaged. We just brought on William Parker as COO, a seasoned retail executive, which will allow me more time for strategic outreach, including industry involvement.

NPI: Ideally, what support from ‘industry’ would help you build your organization or would in general build credibility for ‘integrative medicine’? Anything else you’d like to add as a message to industry?

Science, science, science. For our complementary medicines and remedies, the more peer-reviewed science, especially by esteemed academic institutions, the better. Like it or not, there is still a credibility gap for alternative healthcare products, treatments and practices. Our job is to stop complaining about that gap, and start doing what we can to fund credible research. We also need to leap-frog over any hurdles to conventional healthcare practitioners, like pediatricians, family practice doctors, surgeons, and promote a more holistic approach that just makes common sense for their patients. This approach includes diet, exercise, and other practical ‘tools’ that should be in every health care worker’s counsel.

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