Cathi Lord
24
america’s
Pharmacist | October 2009
Independent
Focus
For John Ortego,
pharmacy ownership
was only a matter of time
by Chris Linville
J
ohn Ortego took a somewhat winding road
to pharmacy ownership. In fact, it took him
awhile to even find the entrance ramp.
In another professional life, Ortego
had a master’s degree in arts administration, but he says when that failed to provide any
promising career opportunities, he began working as a teacher for severely disabled children.
However, Ortego says he lacked passion for the
classroom. “I decided I needed to pursue something
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more satisfying intellectually, professionally, and
personally.” So, at 30 and just married, he went in
a new direction, and says he “has been dedicated
to and passionate about pharmacy ever since.”
Ortego enrolled in the PharmD program at
the University of the Pacific in 2003 in Stockton,
California, and graduated in May 2006. Almost a
decade after changing his career path, Ortego is the
owner of Parkside Pharmacy Compounding & Wellness
Center in his hometown of Sacramento, California.
October 2009 | america’s Pharmacist
25
Prescription counter from
the old Land Park Pharmacy.
“I always knew that I wanted to be an independent
owner,” he says. “I was always looking at things through
that lens.”
The pharmacy, which Ortego, now 39, runs with his
wife and co-owner Michelle, opened in May. The store
site was originally occupied by Land Park Pharmacy,
which opened in 1955. A few years ago, it was bought
out by Rite-Aid, before the Ortegos negotiated a lease
and re-established an independent presence. The old
building was gutted and completely renovated from
the inside out. The pharmacy now occupies 6,300
square feet, with a large front end. The front one-third
is set up in a boutique style, including Papyrus brand
greeting cards and a wide variety of other gifts. The
middle third is the OTC section, and the back contains the pharmacy counter, a consulting area, a skin
spa treatment room, and a full compounding lab.
“It still hasn’t completely sunk in,” Ortego says of
owning a pharmacy. “Every once in a while you step
back and think about it and how satisfying it is.”
Dress Rehearsal for Ownership
For Ortego, his enrollment in pharmacy school turned
out to be fortuitous for his ownership aspirations. In
2004, NCPA established the Pruitt-Schutte Student
Business Plan Competition, to be held at its annual
convention. The competition was established to motivate
pharmacy students to create the blueprint necessary for
buying an existing independent pharmacy or to develop
a new business. It was named in recognition the late Neil
Pruitt, Sr., and the late H. Joseph Schutte, both of whom
were respected leaders within independent pharmacy.
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america’s
Pharmacist | September 2009
In 2005, Pacific’s NCPA chapter entered a team in the
competition, held that year in Fort Lauderdale, Florida,
and under Ortego’s leadership, emerged victorious.
The winning entry was a proposal to open a business
called Pavilions Pharmacy Spa & Wellness Center, to
be located in Sacramento, California. As it turned out,
the plan became an initial blueprint for what is now the
Parkside Pharmacy Compounding & Wellness Center.
“The business plan competition was a great training experience,” Ortego says. “You learn so much about
every aspect of pharmacy business.” (Details of Pacific’s
plan were chronicled in an article in the April 2006
America’s Pharmacist, available online in the membersonly archive section of www.americaspharmacist.org.)
After his graduation, Ortego knew it might be a
few years before he could turn the plan into reality,
so he positioned himself in situations where he could
still be moving in that direction. Two internships at
independent pharmacies turned into jobs—Ortego
basically became an independent contractor—allowing
him flexibility if the right opportunity came along, and
to diversify his experience and knowledge about different aspects of pharmacy. One job was at Grandpa’s
Compounding Pharmacy, a well-known local business
owned by Bill Wills in Placerville, California, about 40
minutes away from Sacramento. Grandpa’s is a strictly
compounding cash-and-carry pharmacy, and Ortego was
able to learn from a well-respected leader in the field.
Ortego also worked at Land Park Pharmacy in
Sacramento. A couple of years ago, Ortego saw what
appeared to be an opportunity to put his plan into action.
Joella Mueller, widow of owner Bill Mueller, was looking
to sell the business and was hoping to keep it in independent hands. Though some independents (including
Ortego) took a look, it wasn’t financially feasible at the
time. However, Rite-Aid was willing to pay—not to keep a
pharmacy open on site, but simply to acquire the files and
inventory, and if nothing else, “to eliminate a competitor,”
Ortego says. Rite-Aid bought the business in May 2008.
However, when Ortego learned about the Rite-Aid
purchase, he began talking to the landlord, who was
concerned about a vacancy as Land Park had been an
anchor business.
“I knew he would be motivated about having a new
tenant,” Ortego says, “So I began the process of negotiating a lease.”
www.americaspharmacist.net
NCPA Launches Student Ambassador
Program to Promote Independent Ownership
NCPA recently launched its Student Ambassador Program, which recruits independent
community pharmacy owners to visit pharmacy
students to discuss the benefits of ownership and
offer advice on how to navigate the process.
“The next generation of pharmacy owners are today’s pharmacy students,” said NCPA President Holly
Whitcomb Henry, RPh, owner of a pharmacy in Seattle. “NCPA has many tools to help students become
successful owners. The NCPA Student Ambassador
Program brings our current and future community
pharmacy owners together, educating students about
why community pharmacy is their best career option.”
Already, more than 200 community pharmacists
have signed up to become NCPA Student Ambassadors. They will visit pharmacy schools in their area,
including the 80 pharmacy schools that have NCPA
student chapters, as well as schools without chapters. The goal is to have the Ambassadors conduct
at least one visit during the 2009-2010 school year.
Henry added, “So far the response from our
pharmacy-owner members has been overwhelming.
They understand the quality patient care services
that are a hallmark of independent community
pharmacies will only continue if pharmacy students
Helping Hands
Ortego admits he had basically no experience with business dealings, but says he received guidance and assistance from Gary Thomas, RPh, who had worked at Land
Park for 25 years as a pharmacist in charge (and was
also a former independent owner). Thomas had been
Ortego’s preceptor when Ortego worked at Land Park.
Ortego also gives credit to Jimmy Neil, vice
president of transition strategy and management with Cardinal Health. Neil put Ortego in
touch with a commercial real estate broker, who
helped him negotiate with the landlord.
When the terms were finalized, Ortego received
a 10-year lease with two 5-year options, and what he
describes as “a pretty generous tenant improvement
allowance from the landlord,” in the amount of about
$130,000 to renovate the space. Ortego matched that
with about $130,000 in casework and fixtures.
Unfortunately, just as Ortego seemed to get the
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are willing to explore their entrepreneurial side and
become owners. There is no reason why students’
professional plans should be confined to working in
a chain, mass-merchandiser, or hospital setting.”
Once students become NCPA members,
they can take advantage of other programs. Each
chapter works in conjunction with a faculty liaison
to expand their entrepreneurial learning opportunities. Students can learn about junior partnerships,
which allow them to work in an independent
community pharmacy and have a growing ownership stake. Students can also participate in the
annual NCPA Pruitt-Schutte Student Business Plan
Competition, which provides first-hand experience
about how to establish their own businesses.
NCPA has also created the Ownership Academy,
which comprehensively covers all aspects of the
process, such as how to purchase or open a pharmacy; how to implement the best business practices;
and how to eventually sell a pharmacy. The Academy
includes ownership workshops-a continuing education program that gives aspiring owners the information they need to establish a top—flight pharmacy.
For more information, visit www.ncpanet.org.
wheels in motion for owning his own pharmacy, the
worsening economy in 2008 threw sand into the gears.
“The timing couldn’t have been worse,” he says.
“The banks were
all imploding,
and the mortgage
loan fiasco was
in full swing.” He
tried to convince
lenders that his
home still had
Land Park Pharmacy was a Sacramento
plenty of equity,
fixture for more than 50 years.
as he lived in
an area that was still fairly stable, but to no avail.
Ortego thought he caught a break when he met
with UPS Financial, a branch of the delivery giant that
specialized in loans to pharmacies.
“They were impressed with my business plan,” he
says. “They were looking at the area where we wanted to
September 2009 | america’s Pharmacist
29
build, and saw that it had done well for more than
50 years.”
But soon after, UPS put a moratorium on loans for
the rest of 2008. “That was an ‘oh ----!’ moment,” Ortego
admits. “We were ready to go but had no money.”
That’s when Neil stepped up. He and Ortego are
neighbors and friends, and Neil went to bat for him,
going directly to Cardinal’s upper management to
seek assistance.
“Jimmy told me not to worry about it,” Ortego says.
“He said to prepare as if everything was still on track.”
Ortego says that Cardinal will offer loans for
acquisitions, but historically did not do so for startups such as his. But, due to Neil’s efforts, Cardinal
provided Ortego $350,000 with a seven-year
amortization at about 9 percent, which he says is
comparable to a Small Business Administration loan.
He was also given a $150,000 loan for an opening
order with 12 months dating. That meant Ortego
could obtain $150,000 in prescriptions and OTC
merchandise, with no payments for three months,
after which he would then pay it off in nine installments. “It definitely helps your cash flow,” he says.
Neil says he believed strongly in Ortego’s
vision. “He knew early on in his career that he
wanted to own,” he says. “I admire his passion.”
He explains the reluctance to assist start-ups, saying,
“They are more risky than acquisitions of existing
pharmacies. There are a couple of reasons why most fail.
One is a lack of proper planning—not picking good
locations and not recognizing the proper demographics to support the prescription volume that you need.
But John did his homework. He knew the location and
knew that it had supported the previous independent.”
Neil says that another reason for struggles is what
Ortego was facing—undercapitalization. “You just
don’t have enough money. You might save enough to
get started and keep going for a few months, but if
you’re not doing enough prescription volume, often
you run out. John had a good business plan and knew
what he wanted to do, he just needed financing.”
Building a Pharmacy
With the financing completed, Ortego was ready to
build his pharmacy, and construction began in February
2009. The $260,000 that had previously been committed
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america’s
Pharmacist | October 2009
(including $130,000 from the landlord) for renovations
covered construction costs, including new electrical and
plumbing systems, allowing it to be move-in ready. A
hitch did occur during the process, however. Ortego had
hired a design firm, but when it submitted its plans for
approval, the city said it wasn’t adequate. Ortego ended
up paying $30,000 extra for an engineer and an architect
to verify the building’s structural integrity, as no major
work had been done on it in more than 50 years.
Despite that setback, John and Michelle were glad
that they could design the building in their own vision.
Michelle is especially pleased with the finished product.
“The old pharmacy was kind of dark inside,” she says.
“I wanted things to be brighter and have a sense of calm
and comfort. So we took that into account for everything—
from the floors, to the windows, even to the music we play.”
John Ortego wanted the pharmacy to be state of the
art in technology as well, and after shopping around
found a pharmacy management system and point of sale
system that, he says, “Works together seamlessly. We love
it.” He also has installed an IVR system and is fully on
board with e-prescribing.
Parkside opened for business on May 21, and held
its grand opening in late June. That was by design. “We
quietly opened our doors,” he says. “We wanted to slowly
transition into things, make sure everything was up
and running correctly.”
Along with Ortego, there are two other pharmacists
who work two days per week (his former preceptor Gary
Thomas, and former pharmacy school classmate Jarrod
Mills, PharmD, also a member of the Pacific team with
Ortego that won the 2005 student business plan competition). He also has a pharmacy compounding technician,
and four part-time clerks. Michelle is an esthetician who
runs the pharmacy’s skin spa, which offerings include
eyebrow shaping and waxing, and microdermabrasion.
In early June, the Ortegos started promoting the
grand opening, with newspaper advertisements and
through circulars. John describes the market area as fairly
well off, with a mix of older residents and steady influx of
younger families. The Sacramento Zoo is across the street.
Parkside is located in a shopping strip mall, with a café
on one side and a Chinese restaurant on the other. A large
part of the property was occupied by a supermarket, and
Ortego has heard that Trader Joe’s, a chain of somewhat
higher end grocery stores, is considering locating there,
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which would be an ideal complement to his business.
Parkside’s grand opening June 27 exceeded expectations, “especially as it was about 100 degrees that day,”
Ortego says jokingly. A radio station broadcast live from
the site, ice cream and other treats were provided, health
screenings were offered, and a ribbon-cutting ceremony
was held.
Reaching Goals
Ortego takes pride that many of the old Land Park
patients returned when Parkside opened—about 350 in
the first eight weeks.
“The response has been overwhelmingly positive,” he
says. “People say, ‘we’re so glad you’re back. We missed
the old pharmacy.’”
Michele, married to John since November 2000,
echoes her husband’s sentiments, saying, “People seem
to be excited. They come in and say it doesn’t look
like a pharmacy. They like how it looks, they like the
smell. We just wanted to give it a clean, modern look.”
Even though things have started promisingly, the
Ortegos know that success is not guaranteed. They are
targeting about $1.5 million in revenue for the first year.
John says they need to average about 150 prescriptions
a day to break even. On the first day of business in May
they dispensed 12 prescriptions. On the first full day
after the grand opening in June they did 86, and they
recently hit 100 for the first time.
Ortego says, “I was nervous about front end sales,
but they have exceeded expectations.” For the first full
month of operation (June), front-end sales were running about $1,000 daily. And with a profit margin of 50
percent, that can help offset a lag in prescription sales,
where margins are about 20 percent. That’s probably in
part due to Michelle’s selection of eclectic products, such
as a soy whip body cream, a makeup line consisting of
crushed minerals, and other “outside-the-box” offerings.
“We wanted to offer nice gifts, but at a good price
point,” she says. “We’ve had a lot of fun with it.”
Ortego says he may have been a bit overly optimistic about compounding prospects. He was hoping
to do about four per day, but early on was doing
about 1-1/2. “Compounding is driven by physicians,”
he says. “They have to write the prescription. I think
that will improve as we become more established
and develop relationships with the physicians.”
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“We want to carry on the
tradition of the
independent pharmacists who
served here before. My goal for
everyone who comes here
is that they feel and
appreciate the
difference that comes
from a ‘mom and pop’ type
business that strives to treat
every visitor as a special guest.”
Parkside is also offering compliance packaging. Land
Park had done a steady business in that area with a local
assisted living center, but it went elsewhere when RiteAid took over. Ortego hopes to gradually reclaim
that market.
Ortego admits that flying solo can be a bit unsettling at times. “It’s kind of scary—it’s like, ‘Wow,
look at what we have,’” he says half jokingly. “There’s
some pressure for sure, I can’t deny that. They were
doing about 260 prescriptions per day at the previous
store. But I think we can get there. I’m confident.”
So, even with some of potential bumps that any new
business faces, the Ortegos are exactly where they want
to be—in their hometown, raising their three sons (a
6-year-old and 3-year-old twins), and owning their
own pharmacy.
“This community is very tight, very close,”
says Michelle. “I like that.”
As for John, he says, “We want to carry on the
tradition of the independent pharmacists who served
here before. My goal for everyone who comes here
is that they feel and appreciate the difference that
comes from a ‘mom and pop’ type business that
strives to treat every visitor as a special guest.”
Chris Linville is managing editor of America’s Pharmacist.
October 2009 | america’s Pharmacist
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