When Gingrich took over the property and opened his own business, the store went from zero to $10,000 net profit a week rapidly, which led to acquisitions and even more success. Now there are 24 Lifechek Drug stores throughout Texas, after having recently sold 10 stores to CVS.
In the beginning, Lifechek Drug grew so fast that Gingrich was barely able to control it and keep up with it. But he put his nose to the grindstone and solved the problem by making sure he was growing his business with the right people. “If you have the wrong people, it’ll sink you,” he says.
Lifechek Drug faces other challenges thanks to the shrinking margins of the prescription drug business. The company cannot dictate its own prices as the insurance companies force their prices upon the store. Now the store makes about 22 to 25 percent gross margins from prescriptions.
“There are many prescriptions today that sell for less than they cost to make, which is ridiculous,” Gingrich says. “It’s a tough business now. Two years ago, 80 percent of compounded prescriptions were covered [by insurance?]; now it’s only about five percent. Plus, a lot of stores will sell prescriptions for less because 100 bucks is still 100 bucks.”
Lifechek Drug combats the insurance companies’ hold on the business by placing stores in strategic locations. For some areas, Lifechek Drug is the only pharmacy around, which is extremely advantageous for the business, while in other areas it has to compete with CVS, Walgreens and grocery store pharmacies.
Without the branding or advertising of big-name pharmacies, Lifechek Drug has to make a name for itself through other avenues. And it does that through its people. “There’s only one factor between them and us: employee service,” Gingrich says. “It all comes down to people coming into my store and getting treated well and the relationship they end up having with the pharmacist.”
Not to mention the fact that the employees enjoy working for Lifechek Drug, and that trickles down to their customer service. Gingrich gives his employees – whether they are managers, pharmacists or sales associates – a lot of autonomy with their roles and responsibilities. The employee service all boils down to good communication and Gingrich’s personal business philosophy of just using common sense. There are far fewer corporate demands, rules and procedures than with a bigger pharmacy chain.
“Typically, the volume that CVS does is a greater volume than we do, but more importantly, we have more technicians and more help for our pharmacists on a prescription basis,” Gingrich explains. “They’ll have one pharmacist filling 600 scripts by themselves with two technicians, but we have two pharmacists with six technicians in our stores.” However, if you’re a new pharmacist that wants to break into the business and work for a company like Lifechek Drug, you’ll be among stiff competition. Several years ago, pharmacists were in high demand, but now there are too many – many without work now – thanks to an abundance of pharmacy schools popping up throughout the country. “Finding a pharmacist today is easy because of the market,” Gingrich explains. “We haven’t had to raise our salary in four years because the job is in such high demand. The market just doesn’t dictate raising that.”
Plus, the company can’t seem to get rid of the employees it does have to hire new graduates. “I’ve got a guy that’s 73 who worked at WalMart forever, and has now worked with me for 10 years and thinks this is the greatest place in the world,” Gingrich says, laughing. “He won’t quit!”
Gingrich considers Lifechek Drug a big account for many of its vendors because prescription entails 95 percent of the company’s overall business. The company’s key vendor is McKessin, which is its primary drug and front-end supplier. In coordination with McKessin and the Independent Pharmacy Cooperative, Lifechek Drug is able to negotiate excellent deals and attempts to pass them down to the customer when insurance companies allow for it.
For the other five percent of its business, Lifechek Drug works with other suppliers, especially beer suppliers in a few of its strategic locations. “We do sell a lot of beer in a few locations, particularly where we’re the only guy in town as far as drug store business,” Gingrich explains. “It does drive the crowds and we make about 15 percent margin.”
Despite some of the challenges and turning his attention to other business ventures, Gingrich is extremely proud of the company he was able to build from one store to 24 in a short span of time. “The stores I have are pillars of the community,” Gingrich says. “Everyone recognizes them. Between being proud for the business’s achievement and providing a nice income and work environment for 275 people, it feels good and it’s a responsibility.”
A New Venture
Perhaps inspired by the beer sales in some of his Lifechek Drug store locations, Gingrich recently purchased a failing building in a superb location with a large reflecting pool and turned it into an extremely successful bar, restaurant and mini concert hall called The Pub Fountains. Musicians like Puddle of Mudd and the lead singer of Journey have come to play. The venue went from making $16,000 per week in sales to $400,000 per month in less than a year.
Today, The Pub Fountains is one of the top five venues in alcohol sales throughout the Houston metro area. This past June, his business sold more beer and alcohol than any establishment in Houston, except for the Toyota Center, where the Houston Rockets play.
“We have a good ambiance,” Gingrich says. “Our biggest differentiator is the live entertainment and quality live entertainment. Every night we have some kind of live music. I love this business, it’s so fun.”