Family Pharmacy Inc. officials never expected to grow its store count during bankruptcy reorganization. Yet, that’s what happened following the 2018 acquisition out of bankruptcy court by Smith Management Services LLC.
Very quickly into the $16 million acquisition, officials on both sides of the deal say it was clear Family Pharmacy’s existing management was an asset to the new owner, and the local team became director of operations for all of Smith Management Services’ East Coast pharmacies.
“SMS had 11 existing pharmacies, and they didn’t have a support structure to govern those pharmacies,” said Senior Director of Operations Carrie Tennis, who’s worked for Family Pharmacy since 2000. “When they acquired Family Pharmacy, it was apparent quickly that we already had an established corporate management team in place. They saw value in that and early on in the process, it was determined that this team would stay intact and continue to lead not just the 23 stores in Missouri, but the 11 existing stores in the Northeast and Southeast.”
The Ozark office at 4101 N. State Highway NN is now headquarters for Smith Management Services, a subsidiary of South Carolina-based J.M. Smith Corp. In 2017, J.M. Smith Corp. recorded $2.7 billion in sales and is listed by Forbes as one of America’s largest companies in 2018.
Family Pharmacy, under the direction of founder Lynn Morris, filed for Chapter 11 bankruptcy reorganization in April 2018 after accumulating net losses of $7.5 million over a two-year period, according to past Springfield Business Journal reporting.
Four months later, Smith Management Services provided the winning purchase bid – $14 million in cash and $2 million in credit to obtain Family Pharmacy’s assets.
The 22-person management team has been transitioning into the new role for the last year, Tennis said. In February, it began integrating the company’s policies, procedures and support structure into five pharmacies in Vermont, and in June, the same work began at the six southeastern pharmacies. The 11 pharmacies operate under multiple independent brands in Vermont, South Carolina, North Carolina and Georgia.
Family Pharmacy’s management personnel remained intact after the acquisition, Tennis said, and the company has added three positions.
“(Family Pharmacy) has a lot of core skills and capabilities that we could apply to the other divisions that didn’t necessarily have that,” said Tim Booth, vice president and general manager for Smith Management Services, citing facility management, information technology and general operations.
Booth said all of the human resources operations have moved to Ozark, as well.
“I think the proof is in the pudding that we’re still around. We’ve been making improvements where we possibly can,” Booth said. “We’re still around, still doing a good job and we still have the same level of service to our patients.”
The leadership of Family Pharmacy and Smith Management Services now includes Booth, Tennis and Philip Ryan, president of SMS and chief financial officer of J.M. Smith Corp.
Tennis said the company’s long-term care department also will be undergoing changes by the end of the year. Currently located in a 4,000-square-foot unit off Jackson Street in Ozark, the long-term care facility will be moving into the company’s 16,000-square-foot warehouse. Tennis said the move allows the company to continue expanding the bed counts while saving the company around $100,000 a year in rent.
The bankruptcy reorganization came after Family Pharmacy posted net losses of $3.5 million in 2017 and $4 million in 2016. A year prior, it had recorded profits of $686,000.
According to past SBJ reporting, 2017 gross revenue dropped to $60.3 million from $68.3 million two years earlier. At the time, company officials cited a drop in the number of prescriptions filled.
“Lynn filed a Chapter 11 to allow the company to continue on and to restructure,” she said. “As a result of that, he could release himself from any ties to anything that the company had.”
Morris, a Republican state representative, could not be reached for comment by press time.
Tennis said Morris stepped away from the company on April 17, 2018. Mandy Jones, daughter of Lynn Morris, was acting as vice president of the company at the time of the bankruptcy proceedings. Tennis said Jones left the company prior to the ownership change.
Tennis said the company has since made organizational changes to maintain a good financial standing.
“There’s a process to things to which we simply didn’t have a clear, defined process before,” she said, pointing to set budgets.
“That’s the biggest part we didn’t have under the Morris tenure. … Lynn governed every last aspect, but the people didn’t necessarily govern their departments,” Tennis said. “Today, the people have budgets … and they are able to operate within that budget the way they see best.”
Declining to disclose current revenue, she said the Family Pharmacy operation has returned to profitability, also citing a reduction of expenses after the Morris family was no longer on the payroll.
Independent pharmacy industry
Family Pharmacy’s turnaround comes at a time when independent pharmacies are shrinking in the state.
Missouri Pharmacy Association CEO Ron Fitzwater said sales are dropping industrywide for the smaller, independent pharmacy companies, which have also been disappearing from the state for nearly 20 years.
Part of the problem, he said, is that reimbursements originally intended to reward pharmacists for sales provide “unrealistic disbursement targets” and penalize pharmacists unable to meet those targets. The fees, called direct and indirect remuneration fees, have been extrapolated far past the intent of the original language in the Medicare Part D plan, Fitzwater said. And the fees don’t always help independent pharmacies make ends meet.
Fitzwater said the state has around 500 independent pharmacies as of 2019, though he remembers around 800 independent pharmacies in the state in the early 2000s.
“Seniors trust their local pharmacy,” Fitzwater said. “They want to go to it, but as our pharmacists are fighting those reimbursement issues, it’s tougher and tougher for them to survive in the marketplace.”
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