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Correct Rx a New Major Player in the Prison Drug Industry

Pharmaceutical drug distributors have found a future and a fortune in our nation?s prison system. Record rates of incarceration equal record profits for drug companies.

One enterprising pharmacist has made herself a major player in the drug distribution industry. With an idea that literally was created at her kitchen table Ellen Yankellow and two fellow pharmacists founded Correct Rx, a pharmacy that specializes in prison and geriatric supplies.

Yankellow did not start out to be a major drug distributor. In 1992 she was recruited by Rombro Health Services of Baltimore. Rombro was eventually sold to a company which in turn was involved in a series of mergers. When the dust eventually settled, in 2003, Yankellow found herself unemployed.

?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.?

Yankellow and her two partners Jill Molofsky and Jim Tristani got a loan, a line of credit and got busy. Their success was immediate. Gross profit grew 140 percent during the first two years. Correct Rx began with 14 employees. It now employs 85. After 3 years the company is almost entirely debt free.

Roughly 85 percent of sales were and still are made to prisons. ?We focused most of our marketing on the correctional market,? said Yankellow.

It proved to be a wise strategy. Among its first customers was the GEO Group Inc., formerly known as Wackenhut Corrections. GEO oversees prisons in 16 states with over 40 thousand beds.

Correct Rx also contracted to supply Maryland state prisons in July 2005 increasing their coverage by 27,000 beds and their annual income by $16 million. The windfall amounted to a 40 percent increase in revenue.

Yankellow has also introduced a new variable into her marketing strategy. Correct Rx?s contract with Maryland includes pharmacists working in ?chronic-care clinics? counseling prisoners. The program is intended to instruct prisoners on effectively managing their health conditions.

?The model makes sense,? said C. Daniel Mullins, professor of pharmacoeconomics for the University of Maryland School of Pharmacy.
According to Mullins studies have proven that similar efforts have had success in the geriatric community and in nursing homes. But he admits that it is too new to assess the results in Maryland?s prisons.

Yankellow is certain the program will work and sees it as a future commodity.

?Once we put a dollar amount on it we can market it,? she said.

Dr. John E. Barnett of Prison Health Services Inc. (PHS) points out that prisoners are generally in worse health than the general public.

?People who enter jails and prisons enter with a high disease burden,? said Barnett. ?They?re sicker and they haven?t gotten proper care.?

Among the most notable health problems for prisoners are HIV, Hepatitis C, dental deterioration, obesity, drug related illnesses and trauma related injuries like gunshot wounds.

PHS is the largest prison health provider in the U.S. caring for about 200,000 prisoners. The Tennessee based company has been in the forefront of multiple scandals in their attempt to cut costs for prison medical care. PLN has reported extensively on many PHS improprieties. [PLN, October, 2006].

Current trends of incarceration ensure that companies like Correct Rx will thrive. In 1994 the U.S. had about 1.5 million prisoners in state and federal lock-ups. The total now tops 2 million.

What is uncertain is whether Correct Rx will survive as a single entity or be bought out by mega-companies like Omnicare and PHS.

?Economy of scale matters,? says Jerry T. Doctrow, managing director and health analyst for Stifel, Nicolaus & Co., Inc of Baltimore. ?The bigger you are, the more efficiently you can buy.?

Yankellow has a different philosophy. Correct Rx ?has been profitable from the day we started she says. ?I don?t want to be another PharMerica or Omnicare.?

Yankellow has her managers read the book Small Giants: Companies that Choose to be Great Instead of Big.

Of course, this has been a philosophy of PLN for years.

Source: Baltimore Sun