Selling drugs to prisons is hot business model

Correct Rx Pharmacy finds profitable niche in corrections

July 14, 2006|By M. WILLIAM SALGANIK | M. WILLIAM SALGANIK,SUN REPORTER

Ellen Yankellow lived through a dizzying decade in the world of institutional pharmacy, the business of filling prescriptions for nursing homes and prisons.

After a few years running supermarket pharmacies, she was recruited in 1992 by Rombro Health Services, of Baltimore. Over the next few years, the company was sold, the new company merged and changed names, then merged and changed names again.

The reconstituted company then sold off its correction division, which Yankellow was running. Yankellow left the successor company and joined a partnership, which broke up in acrimony a few years later.

"All I knew was that I was out of work, and I was too young to retire," she said. "And all I knew how to do was this."

Working at her kitchen table, she and two partners, all pharmacists, put together a business plan for Correct Rx Pharmacy Services, a name chosen to represent both accuracy in filling orders and a target market of correctional facilities. Within a couple of months in 2003, Correct Rx had secured a bank loan and line of credit, and opened for business in Linthicum.

So far, it's working out.

In three years, Correct Rx has gone from 14 employees to 85. The privately held company doesn't publish detailed financial figures, but Yankellow reported that sales grew 86 percent a year for the first two years, and gross profit increased 140 percent a year.

From serving 28 facilities (mostly correctional, but some nursing homes) with 35,000 residents, it now reaches 110 facilities with 120,000 residents.

The company was able to begin with experienced staff, many of whom had worked with and for Yankellow through the various corporate permutations, and with a few customers who were familiar with Yankellow and her colleagues. Yankellow owns a majority stake. Her partners are Jill Molofsky, the company's vice president of operations, and Jim Tristani, vice president of administration.

Given that most of Yankellow's work was in supplying prescriptions to correctional institutions, that market accounted for about 85 percent of Correct Rx's business initially, and the proportion remains similar today.

In the beginning, "We focused most of our marketing on the correctional market," she said. Correct Rx's largest customer, and one of its first, is the GEO Group Inc., a private company that manages and provides medical services to prisons. GEO manages prisons in 16 states with some 43,000 beds.

The company got a big boost last July, when it landed a contract to supply Maryland state prisons, with 27,000 inmates. That deal, valued at $32 million over two years, increased revenue 40 percent overnight.

Yankellow said Correct Rx hopes to distinguish itself in the marketplace through service and clinical programs. The clinical efforts include regular reports tracking drug spending to help clients control costs.

And as part of the Maryland contract, she has clinical pharmacists working with inmates at "chronic-care clinics," helping them understand how medications can help them manage their health conditions. She said she wasn't aware of other companies with similar pharmacist-in-the-prison efforts.

"The model makes sense," said C. Daniel Mullins, a professor of pharmacoeconomics at the University of Maryland School of Pharmacy. Studies have shown, he explained, that clinical pharmacists, working with physicians to manage care, can help reduce costs and produce better outcomes among geriatric patients and among patients with HIV - a significant proportion of some prison populations.

"The role of the physician is to diagnose disease," Mullins said. "They don't specialize in drug therapy."

So far, Yankellow said, the Maryland prison model is too new to see if it's working, but eventually she expects to demonstrate savings. "Once we put a dollar amount on it," she said, "we can market it."

The clinical guidelines used by Correct Rx's pharmacists in the prisons, Yankellow said, would have to be adjusted somewhat for the nursing home population. In prisons, she said, the greatest spending is usually on HIV and psychiatric drugs.

In nursing homes and assisted living facilities, she continued, the clinical challenge is to manage interactions among medications, because the average resident has eight to 10 prescriptions.

While inmates aren't as sick as nursing home residents, they are, on average, sicker than the general population, said Dr. John E. Barnett, associate chief medical officer for Prison Health Services Inc., a Tennessee company that contracts to provide health care to 200,000 inmates nationally.

"People who enter jails and prisons enter with a high disease burden," said Barnett. "They're sicker, and they haven't gotten proper care." In addition to HIV and psychiatric problems, he continued, there are high rates of drug abuse, long-neglected dental problems, obesity and injuries such as gunshot wounds.

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