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Shelley Bailey, MBA, Founder of Famlee Health, discusses lessons she learned from the sale of her independent pharmacy.
https://famlee.com/
Speech to text:
Mike Koelzer, Host: [00:00:00] Shelley, for those that haven't come across you online, introduce yourself and tell our listeners what we're talking about today. So
Shelley Bailey, MBA: my name is Shelley Bailey and I'm the president and founder of Family Health. Family is the nation's first 50 state fertility telehealth solutions, all managed by our mobile app.
I have a background in independent community pharmacy. All of our businesses should be set up so that if some unforeseen circumstance happened, you always wanna make sure you're optimizing value for your
Mike Koelzer, Host: family. 50 states. Is that kind of a pain in the ass? I mean, was that like your biggest For me, once I start thinking about 50 states, I'm thinking about regulations and
Shelley Bailey, MBA: all.
That is the biggest limiting factor as really state compliance related
clinical protocols that family owns and we use to deliver care to our customers. But related to who's providing the telehealth services on behalf of family, we have chosen to partner with a network of physicians with a telehealth company to deliver those services to us because they have their drumming certifications and all sorts of, both federal and state, you know, licensures so that they're able to help make sure that family is legally protected.
Mike Koelzer, Host: You come from a pharmacy background, but family, F A M L E E. You're not necessarily a pharmacy, you're not providing medicines to people. Is that right? Or am I wrong?
Shelley Bailey, MBA: So we have a relationship with a pharmacy partner that sends prescriptions to the consumer if the consumer needs it. So our workflow is our customers have their telehealth visit, the providers review their lab results, they review our clinical protocols.
If prescription medications or supplements make sense, then the clinicians do write orders for those. And our pharmacy partnerships, those medications to the customer's home.
Mike Koelzer, Host: I ain't no genius. But in talking to you right now, it sounds like this is perfect because. You don't have the physicians and you don't have the pharmacies.
You're just sitting back and orchestrating this. Is that right?
Shelley Bailey, MBA: Well, you certainly make it sound easier, it's to be for me. But um, from that perspective, I guess, you know, in a way you're correct. Where, where family is unique with, again, coupling kinda my background in pharmacy and the background of our clinical teams is that we actually have the proprietary clinical protocols that we're using that are, and that our telehealth clinicians also use when they're delivering the care and treatment to the customer.
And so on, in the world of fertility, my journey and a lot of other women's journeys. If you go to the ob gyn, they might write for drugs like Clomid or Electrosol. So a lot of your listeners' pharmacies sell these relatively inexpensive medications. That's kinda the extent of the fertility care and treatment that most ob gyn offers.
So our unique value proposition is that we have, you know, 200 pages of clinical protocols that our providers are using when they deliver the care to our customers. So, um, yeah, you make it sound easy. It certainly doesn't seem so easy. From my perspective,
Mike Koelzer, Host: Whenever I was managing my family pharmacy, I would always walk around with kind of a scowl on my face.
You know, so people thought that you were busy and they didn't pile other crap on you, and they thought that you were focused and all that, but really a good manager is just supposed to have the thing just humming along. You shouldn't have to have that scowl on my face like I do.
Shelley Bailey, MBA: That's true. I would say we're probably not at that point yet since we're new.
And so we are either working through, uh, we have a mobile app. So like I didn't realize launching the startup that I was also gonna be in like the health tech space. Yeah. I see myself as a pharmacy operator. I don't see myself as a health tech leader or an IT person. So as part of my journey I've had to, uh, certainly expand my skill set as we have a mobile app that coordinates our telehealth and our lab results and our medication delivery and kind of building out those mobile apps and the workflow for the customer.
That's been something that has certainly stretched me outside of my typical skill. . So
Mike Koelzer, Host: Shelly, for all those that think you just swooped in and have these great ideas and you're coming from some other industry and so on, you've got a background. In the pharmacy business, What is it? My
Shelley Bailey, MBA: background in pharmacy, you know, started when I was like 10 years old working at my grandparents' mom and pop pharmacy.
They had a rule that as soon as you could see over the counter you could work at the pharmacy. But I'm [00:05:00] only five two, so I wasn't very tall. It took a while for me to be able to work there, but yeah, so I've been in pharmacy my entire life. I chose to go to business school as opposed to pharmacy school, but my partner and I owned a, uh, pharmacy that was in continuous operation for 118 years.
Last 15 years of that, we were really focused on specialty pharmacy, did a lot of three 40 b, government relations and things like that. During that time I served as an advisor for companies like prescribed Wellness Group purchasing organizations like I P C and McKesson. But you're right, unlike a lot of startups, you know, someone comes in, some of these big women's health startups in the laboratory space, had founders that came from journalism or different backgrounds.
For me, you know, coming from a pharmacy background, especially since we have pharmacy partners and the pharmacy component is very much in alignment with what I've, what I've been doing for 20 years. Uh, my focus and pharmacy for last 15 years or so was in HIV and hepatitis C. And you know, I kind of, you think about that continuum of care where you don't just tell someone, Oh, you rapid test someone for hiv and you say, Oh, you have hiv, Like good luck.
You don't do that, right? You have to provide this integrated solution, not just because of the positive outcomes, you know, that people need, but it's, it's illegal to, to test someone and not provide treatment. And I saw those gaps in fertility. There's all these at home labs that say you have very low ovarian reserve.
You don, you don't have a lot of eggs. Good luck with that. And they don't provide wrap arm care. And so I think from my perspective, what I did in HIV and Hep C for so long, it was easy for me to think about bringing that into the fertility
Mike Koelzer, Host: space. When you finally got out of the business at the time, was that a sad tale or a challenging tale, or did you leave like a hot thing to get something hot?
Shelley Bailey, MBA: I would say the latter, but actually my journey with the pharmacy is I had started at my grandparents' pharmacy and it was a medicine shop pharmacy that actually closed in 1999, so, Gotcha. Our specialty pharmacy that we sold to the specialty division of CVS in early, we definitely sold from a position of strength as opposed to a position of weakness.
Um, the due diligence process related to selling that store actually took about five years. Hmm. You know, all of us with our businesses should always be building something to sell. Right. Maybe there's a tragic accident or, or yeah. Whatever might happen in someone's life that's unexpected. You always wanna make sure your company's in a position to get the best outcome, you know, if you need to sell.
So we def so yeah, we weren't pushed out in any way, shape or form. We just had some good opportunities to exit and my partner was 63, early sixties at the time, and, you know, he. Kind of got tired of working seven days a week for 40 years. Yeah. So it was, it was an opportune time for us to, you know, start to work on other things.
So
Mike Koelzer, Host: Shelly, you weren't just a high school stock kid. You had enough skill and your schooling and your MBA, which came later, but you decided to stay there and have these pharmacy dreams at the time.
Shelley Bailey, MBA: That's correct. And I kind of did start as a high school stock girl at the pharmacy that my partner and I sold central drugs.
I actually started when I was 16, but because I had years of experience working at my grandparents' medicine shop, I actually came in as a pharmacy technician when I was 16, you know, worked at school and such. And then I guess the pharmacy kind of shifted as my personal education and background shifted as well.
So we were a regular mom and pop independent pharmacy. And then as I had the access to more information from both my undergrad and to, you know, into my masters. I guess what I could say is, I like strategy. Mm-hmm. and I like operations. And so specifically the focus on strategy and how to really niche down your pharmacy.
So we couldn't be everything to everyone, but we were phenomenal at providing HIV and hepatitis C services and government affairs and advocacy. So, as I learned more, that really helped support the pharmacy and so we grew and expanded too. And actually a lot of them. People that we hired after me starting as a 16 year old, we would hire more high school age students who also didn't become pharmacists, but stayed in pharmacy.
So for example, one of the guys I hired in my, you know, early twenties as a 16 year old, he actually didn't even tell his mom and daddy was interviewing with us. He now does three 40 B services for a large disproportionate share hospital. So they stayed in the industry, but maybe they weren't as narrow as you know, being a pharmacist specifically.
Mike Koelzer, Host: How do you think your past would've changed if you went into pharmacy? In other words, you spent six [00:10:00] years in pharmacy school versus going to business school. Do you think that your route would've been a lot different now, or do you think it still could have progressed? You would just have different skills, but you still would've maybe have gone in the direction you went?
I
Shelley Bailey, MBA: could say I'm definitely not smart enough to go to pharmacy school, so I wouldn't have got in anyways.
Mike Koelzer, Host: Smart is a very general thing, right? Cause nowadays you can say you're smart at art, you know, you just weren't smart in that
Shelley Bailey, MBA: field. Well, thank you. Yeah. Science and mathematics. I would not suggest to you my strong, um, suits.
So let's say I had got in, you know, got into pharmacy school. I think I probably would've always maybe not gotten to where I'm at right now, but got to some point in the middle because I've had an interest in business and also always had the benefit of growing up around small business operators. So my grandparents own the pharmacy, and my dad owns a steel foundry.
My uh, business partner who's. I'd like to say he's definitely one of the smartest pharmacists and people out there. His family came from a small business, so I always had small business operators in my family. So I think I would've always had an interest in the business side of how we could have better outcomes for our customers, but also maintain, um, you know, a viable business that was financially profitable.
I guess another answer I'll say is, why did I go to business school at all? I was 16, I was working at the pharmacy as a pharmacy technician after school, and I actually had a full ride scholarship as a bassoonist at one of the state schools here in Oregon.
Mike Koelzer, Host: I never knew there was such a thing. There's a Bassos major.
Shelley Bailey, MBA: Yeah, and if there's even an instrument named that, Cause a lot aren't a year, I always say I play the bassoon and everyone will say, Oh the ovo. No, not ovo, the bassoon, but I was working at the pharmacy, was gonna go to music school at
Mike Koelzer, Host: five two. The bassoon is almost bigger than you are,
Shelley Bailey, MBA: right? You're correct.
I had like a backpack that I wore my bass suit on and it was more than half as tall as me, that's for sure. . So I wasn't your traditional bassoonist. I. All. So you
Mike Koelzer, Host: were offered a bassoon major? A
Shelley Bailey, MBA: scholarship is a music major.
Mike Koelzer, Host: Music major? Mm-hmm. . Gotcha. But you didn't do that?
Shelley Bailey, MBA: Yeah, I'd worked at the pharmacy, you know, for a few years at Central Drug and before that at my grandma's grandparents pharmacy.
And I guess I always just knew I like business, family owned and operated businesses. And I also knew deep down I wasn't good enough as a music major to really have a successful career. And so the day before school started, I decided I would go to business school as opposed to as a music
Mike Koelzer, Host: school. All right.
So you go to business school, and then how long after graduation from business school do you go get your mba?
Shelley Bailey, MBA: Um, I guess for my personal journey, I continued to work at the pharmacy the entire time I was getting my undergrad at business school and everything I learned. What was really great about actually working and going to business school, both for undergrad and masters is at the pharmacy or any small business.
You almost kind of have your own little laboratory. You can immediately deploy what you've learned for sure and see what worked for us, what didn't work for us. And that was a very fantastic thing for my own individual growth as well as, you know, for the pharmacy's tread victory. And I guess, you know, I graduated, I got my undergrad degree and then I waited about two years before I got my Masters.
During that time the pharmacy, you know, continued to grow. We weren't as naked as we obviously were when we exited, but I think we were starting down that path a little bit. And then once I started, uh, getting my mba, I went to a school that really focuses on entrepreneurship and strategy. That really just shifted how I thought.
And then again, because I was doing that while I was at the pharmacy, it gave us the great advantage to be able to start deploying what I was learning
Mike Koelzer, Host: immediately. Why did you go for your mba?
Shelley Bailey, MBA: Honestly at the time to, to help the pharmacy really. I knew that there was, yeah, there was a lot I learned as an undergrad, but I knew there was just so much more we could, you know, that I could be learning, that we could use at the pharmacy.
Mike Koelzer, Host: How many employees did you have when you started your mba?
Shelley Bailey, MBA: When I started my mba, I mean, we probably only had two. I mean myself and my partner, well, myself and my partner and another pharmacy tech, and then a pharmacy cashier. When we exited we had about
Mike Koelzer, Host: 14. It's cool that you went for your mba.
That's a neat thing that you went to. I think a lot of MBA people, including myself, I'd thought about an MBA and I was trying to get my accounting and all this stuff needed to maybe go into an mba. I never did though, but that's interesting that you got it to. Help [00:15:00] your business and yourself. Cause I think a lot of people go into it either because their bigger company wants it or is gonna pay for it, or they don't really have the direction of where they want to go and stuff.
So that's cool that you actually chose that and dedicated yourself for that in your at the time, smaller business.
Shelley Bailey, MBA: Well, thank you. And I can say, you know, it wasn't just me, my partner's a pharmacist, he had to work that much harder when I was out at school or the people you know at the pharmacy, we probably kept people on hold a little bit longer than normal, didn't have, you know, as much the capacity.
So it really was a team effort, but it also very much ended up benefiting all of us as well as benefiting the community. As we continue to shift and modify, you know, the value proposition that we were able to bring, um, you know, to people throughout Oregon. Do
Mike Koelzer, Host: You think that was a good decision? What percentage of your classes do you think you could have thrown out and still got the value of the mba?
Shelley Bailey, MBA: Oh gosh. probably, hopefully no one from Babson's listening, but it is a great school. But you probably could have omitted a lot of, um, a lot of the classes, but I guess sometimes it takes a little bit of everything. To kind of get you where you need to be. I, I could say though, I definitely, I come, you know, from a background of a father in manufacturing and such, I certainly don't feel that everyone should go to college or everyone should get an mba.
Mike Koelzer, Host: I imagine a lot of the classes were like accounting and stats and all that kind of business science kind of stuff. Is that right?
Shelley Bailey, MBA: For a person? Yeah. Who's not as quantitatively minded? You're right. There's a lot of finances, a lot of accounting. I did my best, but I certainly would not suggest that I'm an expert in any way.
I guess what it does show you though is that you need to learn enough so that you have a little bit of a base so that when you outsource, I'm a, I'm a huge proponent of division of labor, right? Mm-hmm. I know what I'm at. Let me do that. You know what you're good at. Let's work together. And so from that perspective, I do think you always wanna have a foundational knowledge of things and then you can work with people who specialize.
Mike Koelzer, Host: I imagine working in your position now and having to do that division of labor, it's probably pretty good to have the MBA behind your name, isn't it? Especially working with a bunch of the, uh, medical fuddy duddies that have like the letters behind their name. It's gotta be kind of nice to come and say, Well, I don't have those medical ones, but I've got enough letters behind me.
Shelley Bailey, MBA: You know, early on in my career, and I think a lot of other people's careers, it's helpful, especially when you're working, you know, people that are phar and such that you can show that level of knowledge. It might not be, but it's so different. Helpful at this stage in my career, I guess I believe just in general that I, I just appreciate what someone knows and can offer however they learned it, whether they learned it on the job, how, however they got to the skillset that they have, that's what I value.
But, you know, in reflecting on the mba, one thing that is helpful, I think, and I, I remind myself of this with my new company as well as the central drugs, is B, use what they call the case study method, which is what Harvard does and a lot of business schools do. So instead of just reading books and like taking tests, someone's in the book, you're reading what's happening at someone's business.
That's cool. And then as an outsider, you are saying, Oh gosh, this is where they messed up. This is where they did good. And you know, how could what we've learned relate to them in that environment? I remind myself of that all the time. Like, Shelly, step away. If you were reading this as a case study, what would you do?
Not what are you doing right now? Cause you're kind in the, we screwed around with stuff that you feel is important, but what if some MBA student was reading what you're doing this quarter? Would they actually say, You're doing a good job? You know, and most of the time it's No, because as founders and you know, pharmacy owners, we're all bogged down in the details.
So an outsider would come in and say, Wow, you're focusing on the wrong thing. And I have to remind myself of that all the time. What if this was a case study? What would someone say about what I'm doing?
Mike Koelzer, Host: If you as an mba, were using central drugs, that process of getting it ready for a sale, finding the buyer actually making the sale.
How well did you take care of your mental health during that time? Were there struggles? What did you learn? If you could look at that as an MBA student and that was your project, how did it go? Looking in from the
Shelley Bailey, MBA: outside, I would say we did a phenomenal job, but because I'm a perfectionist, I would like to share, to benefit others what we could have done better.
And, the only reason why we didn't do it [00:20:00] better was because we were so busy being busy. You know, we had 400 scripts a day. We were filling, we had nurses, we had all of our accreditations, and, and we really did do the best job we could with. The resources we had at the time. Um, so yeah, so I think, I think we did a phenomenal job.
One thing we did well was we found a good broker who was willing to work through things with us for the long term. So not a broker who wanted to turn and burn, find a buyer, get his commission and move on. Our broker works with us for like seven years. Wow. I guess I'm a big fan of the book, The Emo.
Mike Koelzer, Host: Yeah, I love that book.
Michael Gerber.
Shelley Bailey, MBA: Yeah. So , if you read the E Myth and then looked at what we were doing, you would certainly say we were just so busy being busy that there were other things we just couldn't focus on because we just didn't have the steps. Yeah. So like one of the things, if we could have. And again, everyone can always improve on what they're doing.
We certainly should have brought in more employees earlier so that my partner and I could have really focused on building to sell. So there's a book by John Voler named Built To Sell. It's kind of like the emo, it's a cross industry. It's written as a story. It's very easy to listen to or read. I suggest anyone with a business read this book and, and one of them.
Takeaways that we actually naturally did as a pharmacy is to really niche down. Like, so if, you know, if your business can't run without you, do you really have a business or do you just pay for a job? Yeah, right. And um, I think, you know, certainly some of the things I could have done better was, as you addressed earlier in our conversation, micromanaging is something that I personally struggle with.
So micromanaged a little less, brought in more people, and you know, maybe before we exit, put us in a better position. But there's a lot of things we did really well and I think, you know, for what point in time that things were with the volume we were doing with the risk associated with the drugs we were dispensing with the government affairs and things, I do think we did a good job, but there's always so much that you don't think of when you're selling that just as much as you prepare, you almost can't possibly know of until something happens after the fact.
Mike Koelzer, Host: It's easy to kick yourself. Later after something and say, We could have done those two things better. It's like, fair enough. You could have done 'em better, but here's the problem. There were a thousand things like that that could have come your way, that now you could be looking at and saying, Oh, we picked two out of those thousand.
It's like in retrospect, you can always look back and say, We could have done better on a couple things, but that's two out of a thousand. Now that you know what they were, of course you can look at 'em and refine them, but at the time you didn't know what they were. Well,
Shelley Bailey, MBA: yeah, and something like I always like to share with owners is like, no one cares.
More about your transaction and in the liabilities after the transaction than you, right? Like we had great attorneys with good brokers, but they're in, because I'm an optimistic pessimist by nature. Thankfully, we really focused a lot on what are the potential liabilities post transaction that could come up.
And we really did try to plan for those to the best of our ability. But again, things always come up, but I, I just remind anyone, you know, talking to brokers or even, you know, looking to sell in 10 years, no one cares like you, so don't believe someone's answer when they say, Oh, don't worry about it, whatever.
No. Worry about it and try to plan for it.
Mike Koelzer, Host: What emotion during that time period of getting ready to sell and selling was the most difficult for you to deal with? So
Shelley Bailey, MBA: during the period, one thing we did phenomenal at was because we sold to a specialty division of cvs, we worked with them to keep our store.
So they kept our location exactly, you know, where it was. They also kept all of our staff and they kept our staff at the pay that we had been paying them. So I feel like we did a phenomenal job of taking care of our employees while we were exiting. Not everyone has that opportunity, but for us it was something that was very important to us.
We actually had the option to have a file by type of sale instead, and we probably would've, it would've been much easier, little more money, but we actually chose the much harder route so that our team could stay together once we, um, um, It was an extremely emotional process, you know, related to selling.
I think when you're doing it and you're going through it, you're so exhausted cuz you're trying to keep the level of care as good as possible. You're still filling prescriptions, you're, you're doing everything and then [00:25:00] your emotions almost come after the fact because you can't process it all while you're doing it.
I can see for me personally, I couldn't go by the pharmacy for over a year. Wow. After we called, like, I dunno, you're probably gonna make me cry since I'm pregnant and everything, but, My partner had spent over 40 years there himself. I spent 20. And so for both of us, I mean, I looked at the pharmacy as a family member.
Yeah, it sounds weird to say, but, um, it was an extremely emotional process. I think we did a good job during the negotiation and the due diligence of not making it an emotional process, but once it happens, you know, I, I felt lost. I mean, I'm a pharmacy operator. I don't know what else I am besides that. It was a very difficult transition
Mike Koelzer, Host: And it would've been harder.
You're saying to do all that and then go into your staff of a dozen and say You're all fired.
Shelley Bailey, MBA: I know that that's the case for lots of pharmacy owner operators and I just, I have so much sympathy for them on having those discussions as I'm sure employees would've much us. You know, they didn't go to work that day thinking that that was gonna be, you know, what happened.
Yeah. But we felt that we tried our very best to make it as positive of a transition for our employees as possible. And then with that said, I do feel the care division of cvs, which is who we sold to, I think they tried their best in the corporate environment that they have to operate in to try to make that transition for our employees as positive as possible as well.
But yeah, my heart goes out to pharmacy owner operators, especially with the economics since 2018, um, how they're struggling with closing because they had to, right? Mm-hmm. as well as laying off staff. Um, especially in the small communities where there's not as many available good jobs. You know, as there is in an urban area.
Yeah. My heart really goes out to these pharmacy owner operators. Put
Mike Koelzer, Host: yourself out about 72 hours from really being done with your pharmacy. What is the one word you could describe your feelings as three days out?
Shelley Bailey, MBA: Yeah. The one word to describe my feelings three days out was just grief.
Mike Koelzer, Host: Grief.
Shelley Bailey, MBA: From my perspective, that was the first feeling I felt when we sold the pharmacy, which is interesting because we were at a position where we had decided it was most optimal for us to sell.
So we weren't pushed out. We were. Yeah, You know, economically strained where we had to sell. But still the pharmacy, I think of the pharmacy as like a family member, and I felt like I lost a family member. Sometimes
Mike Koelzer, Host: when you're cornered, if you have to fire someone because of finances or you have to leave another company you've worked with a long time because they no longer are able to do this for your business objectively and so on.
Those are easy ones when you have to say, We decided this, and so the feelings that I'm feeling now are my responsibility because I brought them on because I didn't have to sell. That's a good way to live your life in that offensive way versus defensive all the time, but it's harder then you're responsible for your feelings.
Shelley Bailey, MBA: He can't blame 'em on anywhere else. Yeah,
Mike Koelzer, Host: You can't blame 'em anywhere else. Not that we ever should blame our feelings more than anybody else, but especially when you brought 'em on yourself and you could've delayed them maybe another two or three years and maybe they never would've come up.
Shelley Bailey, MBA: Yeah. I will say in hindsight, the post sale period of my life was the, Well, I am young, but has been the hardest part of my life thus far.
You think working seven days a week, a hundred hours a week, you think that's the bad part. But from my perspective, it was the post sale period that was a bigger emotionally taxing period of my life because, and then I guess we, we all get caught up in this, or maybe not everyone, but the pharmacy was my identity.
It should, I shouldn't leave my life like that, but, but that's very much, You know who I was, that
Mike Koelzer, Host: was what year
Shelley Bailey, MBA: we sold in January of 2018.
Mike Koelzer, Host: So not talking about your new business, but the grief or the identity did that. Start to go away at some
Shelley Bailey, MBA: point. This is a bad comparison because it's not the same as losing a family member, but I would say it never goes away.
Wow. When I tell someone who I am and what I do, I do, I do consulting in the healthcare IT space, I have my own startup. Um, but I always start with, I was a former specialty [00:30:00] pharmacy owner, operator really, you know, co-owner operator. So I would say it'll always be my identity. I can't part with that for some reason,
Mike Koelzer, Host: even if you talk to someone kind of out of the blue, that still feels like a big part of your identity.
Yeah,
Shelley Bailey, MBA: yeah, absolutely. That is who I am. Whether I'm talking to someone at the pizza shop or Oh, what do you do? I still say pharmacy cause that's who I am. It's just, I guess where my interests are. It's, you know, I'm sure you know, you know, with your background, your customers, they, I'll become like your family and Right.
I think that in other industries you might interact with. Vendors, right? So you have vendors you work with, you have customers like a few B2B clients that you work with, but you don't have that personal connection with them that you do at, At a pharmacy. At Pharmacy we had, because we were 118 years old when we sold them.
I mean, we had generations of families that were customers. And so it's, yeah, I don't, I think maybe when you're in it, you don't appreciate it or see it, or you don't realize how it impacts you at your core until, until that part of your life is, is gone. But your customers are really part of who you are.
Mike Koelzer, Host: So you're on your way with your family and you're gonna grow into this huge monster of a company. Are you concerned that you'll never find that personal joy that you had in community pharmacy? I wouldn't be, I'd say screw it. I'm so sick of some of that crap that goes on. I'm out.
Shelley Bailey, MBA: I can say with family where we're actually supporting women and families who have not been able to get pregnant.
So they're coming to us as their last hope. You know? Cause a lot of people don't have the income ability to do IVF or they have religious limitations that, um, makes it. Prohibited for them so far. So the people that we've had so that we have been able to help get pregnant and one had their first baby in February, that is, that is an emotional benefit to me.
Like I tell people, even if we just helped that one family have their baby, this was completely worth it. Um, but with that said, it's still because I'm not seeing people and grandma comes in to pick up their script or like, it's, it's different I guess. And that's maybe more because of the online nature of things.
Obviously Zoom helps and you're able build a rapport, but that kinda. Teen family we had at the pharmacy where first of all, all of us working together were a family. You love each other. You sometimes don't agree with what someone did or whatever, but like you're a family, just like any other family and are a broader family.
I don't know if I have the skill set to just actually, or to purposely build what kind of naturally happens in the community pharmacy setting. I can say that like one thing about community pharmacies that people always say if it wasn't for community pharmacies and for Meals on Wheels, so many people in our communities would end up in assisted living so much earlier in their lives, and so there's this natural.
Community that's built with community pharmacy that I just, I don't know if I can recreate that in other things. I can do other things that create a lot of joy and value. And again, helping people have babies is a huge joy. But it's still different.
Mike Koelzer, Host: There's a certain joy and beauty about community pharmacy, but like we talked about with your music choices, I mean, you would've loved to have booned your way into the future, but you've gotta think about what the market is demanding along with community pharmacy.
You know, you'd love to maybe build something that does the same exact thing with the comradery in the family and things like that, but that doesn't necessarily equate to financial success. And so unfortunately, sometimes, You have to kind of move on from your loves and hopefully like with the family and giving new life and things like that, you're finding it, but it's probably not always the same.
Shelley Bailey, MBA: Yeah, I mean, that's a really interesting analogy that you share because I mean, the community obviously going through that transition and have been for a long time, but increasingly so since D IRS became so much more robust in 2019, I, I really have. No idea how a single owner operator, one location pharmacy is, is even able to do it.
They're, they're doing it and they're providing value to the community. But like, if you look at the recent N cpa, Cardinal [00:35:00] Digest that talks about, you know, the economics, the community pharmacies, honestly, most of the owner operators could make more working at CVS or working at Walgreens. And I know they're not doing that because they do.
Kind of believe in like what I shared about this sense of community and family. But it's really sad because, a smart pharmacist that's hardworking, has a great team, shouldn't have to decide between staying in the black every month or, you know, being in the red, but providing services to the community.
And right now that's really what most of 'em are deciding. They're deciding to be there delivering medications, you know, on their way home from work and doing all these things. And, but they can't pay themselves even a wage that they would otherwise make at a chain and, and. You know, it's much, I believe in family and I love what I'm doing for family, but because I always have a heart for community pharmacy, you know, I'm also interested in ways to help pharmacies with things like remote treatment monitoring and all sorts of additional revenue streams to bring into a pharmacy.
Just because, you know, I want to make sure that pharmacies are able to exist long term. It's easy to talk about those things though when you're out of the pharmacy. It's so hard when you're in it. I think every owner operator in their team is like, Oh, that sounds like a good idea, but like, do it for me because I got all my phones ringing and 12 people lined up and I can't imagine right now with vaccinations and the toll it's put on pharmacies that, um, to do everything else they're used to doing and vaccinate has gotta be such a strain on operations.
Mike Koelzer, Host: You brought it up about DIR fees and that is one of them. most damaging things to pharmacy because if you're running a business and you can see what's happening, your business is slowing down, you have something out there for sale, and it's not selling kind of what we all thought was business. You know, kind of like out front you could see it.
Then you're able to say, Hey, we're not as busy anymore. There's not as many customers coming in. I'm gonna make some changes in my business and decrease staff, maybe use some staff over here to do this. Those kinds of things. Those are kind of a natural flow of a business, shrinking and then maybe doing something else.
The problem with pharmacy though, the problem with DIR fees and the problem with not only lower reimbursement, but fake reimbursement that comes to screw you seven months later through the back end with the DIRs, is that just what you said is that pharmacists are still so damn busy, they're even busier.
They're busier than ever, yet they're profits going through the big hole in the bucket and they don't really realize it. Those DIR have taken away the natural occurrence that happens when you see that there's not as many customers coming through the door, so you better do something. But with the DIR is, it's this mirage of like, things are getting busier, but they're getting much, much worse and you don't even know what's happening hardly.
Shelley Bailey, MBA: Yeah. And, and what's even worse is, you know, a lot of pharmacy workflow management systems even let, like, like for us, we wanted all of our staff to see pricing because we wanted everyone to see what we were making or losing. But even, you know, even when you're going through pharmacy workflow, you think, Oh, I'm making, you know, $8 on the script or whatever.
So, if you could see the losses every day, you're right. That would naturally help you adjust operations. The challenge is the pharmacist looks and says, ok, we're making three or $4. Not to suggest, you know, cost to is like 18, at least above acquisition costs. But the challenge is, you're right, there's this seven month.
And, and you can't, you, you don't even think there's a problem because you're busy filling 400 scripts a day. You've got your Prada in the back helping you fill scripts and it makes it so challenging. And then when you think about selling a business, that's something that I really wanted them to make sure to highlight when you talk about what we did well, what we do?
Bad room myself is a huge piece of that. Trying to keep track of what DIRs really should have been subtracted from my pharmacy. Right? Versus what would've been associated with, Depends on if you sell your NPI or transfer your NPI or what, but that's a huge. I hear the story that CMS says about how, you know, the DIRs are redirected for more services for dual eligibles and things like that.
But I guess at a minimum, if they're gonna exist, then just cut the network. Great. So then the pharmacy can decide, yeah, do I want to participate? Do I not participate? And again, not suggesting that I want that to happen, but at least make them front [00:40:00] loaded so that someone you know can decide whether or not to participate in those networks.
And you see that with different, uh, pss, right? Some pss or the pharmacy services, you know, administrative organizations like HealthSmart Atlas and Elevate Leader net and things, are starting to kind of make the decisions to pull out of some of those ND networks because of those. But, um, You know, I, I, it's, it's been going on for so long.
I don't anticipate now that much is gonna change. Even though we all ask our legislators and, and things, it's, it's very difficult to lobby against those. You had
Mike Koelzer, Host: alluded to, when you're done selling the pharmacy, you're not actually done. I, we know emotionally you're not done. But actually financially and legally you're not done.
We mentioned the DIRs can come back and bite you in the ass, and there's audits and what else is there that, not just emotionally, but what else is there? Beyond the sale date that you think you're free and clear and sitting on the beach, and you might be, but you might have a few things twirling in your mind.
What are those?
Shelley Bailey, MBA: Yeah, I mean, so I can say one that thankfully we planned for, but a lot of people don't, is related to those PDF audits. So we had a case after the pharmacy sold where Medicaid audited us and said, Hey, we were the payer of last resort. You charged us, you know, fee for service, Medicaid for a certain number of claims that you otherwise should have charged Med D.
Thankfully, this goes back to how you store and maintain your data. Thankfully we were able to go into our pharmacy management system and actually show the back and forth adjudication to prove, Nope, we tried midd. They said no. So we built you, we actually had to print that, send it to the state Medicaid, and um, we, we, we ended up winning that.
But I guess the bigger point is how are you accessing, storing and maintaining all of your data post sale? So I focused on that a lot. Because we sold very expensive drugs. You know, Hep C drugs at the time were 33,000 per dispense. HIV drugs were, you know, about 3000. So that was a very important piece to us about maintaining data access and rights. Now, A lot of your listeners, there's companies out there that want the biggest, it's called two points.
They do a lot of data conversions. Even if you haven't sold seats, you might use them to have an old system and upgrade to a new one. A lot of people think, Oh, I've got my two point data. I'm, Well, it's one thing to have the RX image and signature log and things like that, but that kinda like back and forth, even adjudication data, if I had, if we hadn't had that, we would've lost that Medicaid on it.
And so really thinking about I need all of my data, the random D codes that we put in to override something, right? Patient notes. We need all of that because it's gonna come up after a transaction and you need to be able to defend yourself as a pharmacy owner operator. So that was this huge thing we thought of and planned for, but still comes up.
Mike Koelzer, Host: Back in the day, back when I started Pharmacy, you had a cash register and you. Punching, you know, a bottle of Aspirin and you'd have to hit it with your hand to make a register work. It was like an old manual one, and it's like if the state came and did a sales tax audit, you would just say, All right, in 1985, we bought X thousand dollars in tax bill merchandise.
They'd say, Okay, you know, now because computers can allow it, they're like, What size toothpaste did you sell? 9:30 AM on this date, you know, and you better give us a damn flavor too. You know, I'm joking, but I mean, because it's there, they can ask for more. Now, throw in the malevolence of a PBM that wants to screw you, and then five years later, if you don't have the system that you're talking about, Shelly, that can do all those things, they're gonna look for stuff that they know that two point doesn't have just to screw.
Yeah,
Shelley Bailey, MBA: I, I hate to say this, but you're pretty much guilty until you can prove you're innocent. Of course. And I mean, my parents always said that growing up you are always guilty until you have challenges with pharmacy, it ends up kind of being the same way. Yeah. But what everyone forgets when they talk about provider reductions, you know, the medical community obviously always says doctor, you know, reductions with Medicare payment.
Medicaid, Well, people forget about pharmacy for the most part, there's no professional services fees. So [00:45:00] a 5% reduction is not a 5% of your time. And Labor's five off the top dollar amount that a pharmacy paid for the, and that's the piece that when you talk to legislators and, and even back to audits, it's not even a PBM doing audit, it's a third party contracting agency who take the percent of what they identify and you know, they get a cut before they share it, but pharmacies aren't just.
Losing profit. People forget you get chargebacks because you use the wrong doctor location because you have four of them, and you get back for 12 months of dispensing that med, you lost the entire cost of the drug. I care about the professional services fee cuz you don't get it, it's the cost of the drug and somehow that message gets lost.
Mike Koelzer, Host: You can give a million examples, but it's like buying a new car and you bring it back and you say there's a little scratch down here and instead of them paying you, you know, $200 to get it buffed off or something like that, it's like, No, just gimme the whole damn car. You know, there's a scratch. So I get it all and gimme back my $30,000 in, in all future cars you buy, we're gonna extrapolate and see how many cars we're gonna charge you for all those too.
That
Shelley Bailey, MBA: that's what it is. And, you know, I used to talk to legislators about it, like the chair of health committees and things. And one looked right at me and he said, Well, Shelly, you're an idiot. Why do you sign these contracts? And, and I'm like, Well, I'm not an idiot. And if PS chooses to sign it, I, by default, you have it.
If you don't participate and a PS you're all the life. But for some reason, these legislators, they just think it's as easy as better contracting, having a better team to help you, you know, negotiate. They don't understand that that's not the reality. All
Mike Koelzer, Host: right, So audits, what else are you thinking about post sale?
Shelley Bailey, MBA: Yeah, so again, obviously trying to make sure you can track your d so that post sale, you know, you're only paying for DIR that were associated with your pharmacy and not whoever acquired you. That that probably is actually much trickier with, um, like selling an independent to an independent, you know, than it is with chains.
But even in our case, it was really the chain given, again, I just closed it with, um, the burden of proof was on us to prove, well, yours were mine, you know, this is, this is how we're gonna do it. You know, something else when you're selling a business that everyone needs to think about. And maybe our process was different, but I really don't think so.
It's whatever dollar. You get it for your sale. Usually the fine print also suggests that the exact amount that you got, even though you didn't net that, because you pay taxes, right, is at risk during the duration of the contract. So people have to make sure A, to try to negotiate that down to at least what you met, not what you gross, because you pay tax on that.
But to keep in mind, Don't be out spending all that money because you might have things come up with who you sold to, and most people's contracts suggest that everything you were paid is at risk for a certain period of time. So putting that money in a separate bank account that you don't ideally need to touch for a period of time until some of those liabilities pass is something that I like to make sure to share with people.
The
Mike Koelzer, Host: liabilities of auditors and audits
Shelley Bailey, MBA: and just any business continuity challenges that might happen between you and the seller.
Mike Koelzer, Host: The seller might sue you for a portion
Shelley Bailey, MBA: of something the seller might say. We were audited cuz we took over your npi, you know, we were audited. Gotcha. You didn't have all the documentation.
So we had a $400,000 charge back from Optum that was taking that from you. Yeah. Right. And so I'm not saying that that didn't happen to us and that, again, I don't wanna put any bad energy out there, but those are the types of things that owner operators need to really think about and contract for while they're going through the sales process.
Mike Koelzer, Host: We talked about the sale, we talked about the audit, and being prepared for that post sale. How about you being the former. Owner, Was there anything there non-compete or anything you had to do, or where do you fit into that?
Shelley Bailey, MBA: Yeah, so I think with most transactions there's a, there's a lot of back and forth related to what are your roles and responsibilities personally post as well as what are your potential limitations.
So in the specific case of my partner and I, we had been very clear from the beginning that we were not looking for an earn out and we were not looking to stay with the organization for a period of time. And that's something people should really think [00:50:00] about. At the time, we were very drained and tired and just kind of thought a cleaner transition would be easier, but you're often leaving a lot of money on the table.
So that's a very personal decision. What you wanna do. I tell people, if you do have an earn out, you should anticipate that you will never get any of that money. Cause you'll probably get frustrated and leave. So you better be happy with that first amount of money you get. You know, because the earn out just might not be there.
The
Mike Koelzer, Host: earnout might be some carrot to keep you there, but, A lot of times something gets argued and doesn't go right, so don't plan too much on that. Be happy with the first amount. Yeah.
Shelley Bailey, MBA: I personally would not, yeah, I would not bank on my earnings, but some people might be more open-minded than others. Um, because one of the benefits is if you're willing to take an earn out, you might get a higher multiple off your, you know, when you're selling your store or a higher price per prescription.
So it's personal.
Mike Koelzer, Host: The earn op then would be like, stick around for two years and we'll give you a certain percentage of these sales or whatever, some mathematical thing to kind of help the customers have that crossover. Yeah,
Shelley Bailey, MBA: absolutely. Because anyone, if I was buying your pharmacy or you're buying mine, you want retention, right?
So any, yeah, the buyer can do to help with retention is what they're going to do. But it could be a very significant amount. So that's why I'm not telling anyone, don't do an earn out. But I guess in our case we had decided it wasn't for us, but we did that. We did accept a much lower valuation, which, you know, three years later I'm thinking, well, maybe we should have stuck around for a little bit
But um, yeah. Related to specifically what our limitations were and things post sale. So in our contract, they did want both my partner and I to stay on for 30 days after the sale of the store. However, we weren't compensated employees, so we weren't able to get prescriptions or, um, from a workflow perspective day to day, I was a pharmacist and was the main pharmacy tech.
So I kinda talked about that earlier in the interview. But, um, yes, I did the government fair and all the contracting, but day to day typed in the script. We liked that we'll, for 30 days greeter, I guess we wouldn't like to fill scripts, but we thought of a way to, to customers and, you know, help them feel better, say goodbye.
And so even though we negotiated that to us as narrow of a window as possible, And maybe we didn't like it. We did think it would be beneficial for us personally as well as, um, for our customers. Come to find out, even though that was in our contract, uh, it wasn't the desire of CVS to keep us for those 30 days.
So we were actually a little bit shocked that night, you know, we closed up and or ended up saying that we actually weren't ever asked to come back or do anything. So we didn't have the opportunity to say goodbye to as many people as we would've otherwise preferred.
Mike Koelzer, Host: They said, We get you for 30 days if we need you.
And you kind of just felt that you'd be having this kind of slow goodbye over 30 days but they never asked you back.
Shelley Bailey, MBA: Correct. And, and and again, it probably really was best for us just cause that would've been a very, I'm you've talked to a lot of owners had to participate in that and it probably is very, um, challenging.
Sure. So that was one thing to negotiate was how long they, or the owners, were gonna be there for. But the other piece that comes up when anyone sells a store is what is, what does your non-compete look like? So a lot of pharmacies, it depends if your rural or urban or you know, kind of what it is. But there's usually a mile radius at a minimum around your pharmacy that you can't practice as a pharmacist or a pharmacy tech.
Cause someone's afraid, you know, if you go work at Kroger, that you'll pull all your old customers and they'll go there. So usually there's a mile radius. In our specific, um, arrangement, because we were very disease state focused, we were actually limited in the states that our pharmacy had licensure in.
My partner and I, So my partner and I could not owner operate, really participate in a pharmacy in Oregon or Washington, that, that, um, focused on HIV or he, So that's, that's kind of what our unique part of our, um, non-compete was so that we couldn't, like, um, we couldn't participate in things that would potentially pull prescriptions or customers from our location, you know, to another one.
For how long? Five
Mike Koelzer, Host: years. All right. Now I ain't no genius, but three years ago you sold and you got two more years than that. What's coming in year five?
Shelley Bailey, MBA: Well, um, I would say what's coming at your fifth is I'll still be probably quite in the [00:55:00] weeds with family because of, you know, with the nature of a startup and things.
But I also am never against going back into community pharmacy and specialty pharmacy. It's, it's who I am and what I do. I just have to make sure I can try to figure out a solution to participate that's economically feasible for all the liabilities that a pharmacy owner, operator, encourages, there's a lot of things like medication synchronization, some mtm, some, you know, remote treatment monitoring.
There's a lot of exciting things that I think if someone had time on the front end to kind of build out, you could deploy and have a very compelling value proposition to, to own and operate one. Um, But I think that really has to be very much mapped out and planned for because the economics are so tight right now in pharmacy.
Mike Koelzer, Host: Whatever you do, Shelly, I'm gonna put a lot of faith in your success. If you came back into pharmacy, you wouldn't be coming back with just a dream. You would have a dream, but it would be very well thought out and very practical because you've been there. Done.
Shelley Bailey, MBA: Yeah. And I think that's the, I guess that's the benefit of going through struggles, right?
As you know, our pharmacy, I mean every, you know, pharmacy kind of has rides like this. Um, and for us, one of those rides was in 2006 when Medicare Part D went live. Thankfully, we were knowledgeable that Medicare D was gonna happen for like four years. So we saved every penny we had to help us weather 2006, right?
Mm-hmm. , a lot of pharmacies could not weather 2006 because Medicare Part D just took away all the cash business. And so I don't wanna be here and say, Oh, you know, struggling is wonderful, about knowing where the challenges are for you sometimes if you're a new graduate pharmacy student, king of the kool aid.
You just don't know where the landmines are. And so if someone is able to kindly know where they're at and then try to plan around them. So I think maybe in a way has, has helped, helped this. People are starting to value pharmacies, you know, both retail pharmacies and independent pharmacies more. They're like, Wow, I'm gonna talk to my pharmacist about, The vaccine or you know, whether or not I choose to do it or whatever.
And, and for a long time, I think pharmacy pharmacists were kept outta that discussion. Mm-hmm. Now pharmacists have to have provider status with CMS to be able to really actualize a lot of the things that I'm sure you talk about with, um, people you interview. But I, I think, you know, kind of with Covid, like there's this push to go back to small business a little bit, right?
Mm-hmm. , there's this push that some of the boutique hotels are succeeding while chains are really struggling. I do feel strongly that pharmacy, community pharmacy can't have that same success. It's just, it's easy to say right now when I've stepped outside of it a little bit, but you gotta weather the storm.
And I, and I understand that could be impossible, right? It really may not be possible for many, but for those that can, especially with the aging population, I think there's really gonna be this demand for these boutiques. Independent pharmacies and, and that shift right now is going digital, right? So there's, there's a million digital pharmacy startups mm-hmm.
and that's fine for, you know, people like you or me. We could use a digital pharmacy startup and we could be okay, but there's also gonna be the shift of all these individuals who need the high touch care and with paying at risk models that PEOs are negotiating and payers are more open to keeping people outta the hospital or out of long term care.
I'm still excited for pharmacy, but it does have to be a little bit different than what we're all used to. And again, I feel like a hypocrite, cause I'm not in it right now saying that because that's a little elitist when everyone else is count stick all day long and they, so it's how do you time to learn about what's coming, implement what's coming while you're just turning and burning as quick as you.
Mike Koelzer, Host: Yeah, no, that's not elitist because you do need that step back, especially when those that are paying us are trying to not allow us to step back because they keep everybody busy as hell knowing that they don't have the energy to deal with all of their might, all of the scandals that are taking place from the PBMs.[01:00:00]
Shelley Bailey, MBA: This is not just an independent pharmacy problem, right? When we say community pharmacy, if I was running a regional chain or whatever, I would put myself in that same bucket. The chains are feeling the same pressure. Maybe they. The benefit of an MBA is helping them on some different initiatives, but they're, they're, they're having the same, I can tell you with family.
So I, with you, we have a drug component, like someone has telehealth, we do their labs, they need meds. I went to three large pharmacy groups, national licensure, who did not want my scripts because they're generic medications that had to be shipped. Right. That literally said, Shelly, we like you, We really like what you're doing, but your drug mix.
Is not helpful to keeping us open. It's putting us in the red. And who would've ever thought there would be a time where a pharmacy owner would be like, Hey, sorry, I don't want all your scripts because I just can't make a living doing it. Yeah. And because of my background, I certainly understood that and was like, I mean really I didn't wanna go to my friends to fill the scripts cause they knew they're not profitable.
But it is very sad that it even changes. Were telling me, you know, this just doesn't work for us economically.
Mike Koelzer, Host: I think you're right about the shifting in online versus local niche pharmacy kind of things. And you're gonna see that with travel. You know, travel's gonna go down because of Covid and people are gonna say, Hey, we could save money by not flying somewhere for a customer, for our marketing agency.
But then when no one's doing it, then they're gonna stand out by doing it and so on. So it's gonna go in phases. So, Well Shelly, golly, thanks for talking today. I think that you are someone really for our listeners to watch and follow because you know you're selling in your, the experience there, but, Going into a niche market, but then thinking about maybe coming out of that at some point and getting back into pharmacy as long as it's niched down.
You have a lot of really cool thoughts there, so thanks for sharing those with us.
Shelley Bailey, MBA: I really feel that in pharmacy and in healthcare in general, we're all better together, so any little tidbit that I can share that might benefit someone else, I've certainly benefited from other people's little tidbits, and so it just goes both ways.
Mike Koelzer, Host: All right, Shelly, We'll be following, so thanks again. Absolutely.
Shelley Bailey, MBA: Thanks for having me today. All right. Thank you.
Mike Koelzer, Host: Bye-bye. Take care.
