Joe Koechner keeps independent community pharmacy growing in northeastern Kansas

By Chris Linville

Joe Koechner acquired a building that was in foreclosure in Atchison, Kan. (above left). After extensive renovations, it became his third Kex Rx pharmacy. Eight years ago, Joe Koechner was at a good place in life. In 2005, Koechner traveled the 120 miles south from After graduating from pharmacy school at the University Omaha and met with previous owner Steve Smith (the of Missouri at Kansas City in 1996, his career progressed pharmacy was known as Steve’s Corner Drug). After giving steadily. By 2005 he was in Omaha, Neb., working at Kohll’s Koechner and his wife a tour of the community, Smith Pharmacy and Homecare, a local independent chain. suggested that Koechner work for him for a year to find “I liked working and living in Omaha,” he says. “My out if he liked it, with the long-term goal of transitioning wife Chanda is from there, and our first child was born ownership to Koechner. there. We enjoyed it.” “This way I could find out if it was a good fit,” Koechner Then, a friend told him about a pharmacy for sale in says. “At the end of that year we could make our decision. Hiawatha, Kan. I figured if it works out, great, and if not we’ll shake hands “We went and looked at it and I realized it was what I and go our separate ways. It left it pretty wide open. I really wanted to do,” he says. had nothing to lose. I knew I could go back to Omaha and Koechner had grown up in Tipton, Mo., a community find a job pretty easily [if it didn’t work out].” of about 3,500 people, and the idea of owning a small-town So Koechner and his family moved to Hiawatha and business was appealing. knew within a few months that it was the right decision. “It reminded me of the area where I grew up,” he says. He and Smith began working on the details. Like most “My dad was a small business owner, a welder; he made pharmacists who weren’t owners, Koechner didn’t have a turkey cages. I think that’s why I always wanted to have my lot of capital to invest, so he and Smith decided on a 100 own store, and this gave me the opportunity to do that.” percent owner-financed sale. That first pharmacy acquisition got Koechner thinking “He took the whole note on and I have been paying about a second which he purchased in 2010 in Horton, it back in monthly installments over time,” Koechner Kan., and then a third, a recently opened store which he says. “That works out really well. He continues to own built from scratch in Atchison, Kan. All three operate the building, and there are two years left on the lease, under the Kex Rx Pharmacy & Home Care banner (http:// so I am leasing it from him, and then at the end of the www.kexrx.com/), with the two locations open for more lease agreement, which is eight years, we have the first than a year combining for $5 million in annual sales. The option to buy.” corporate name is Koechner Pharmacies, LLC. Koechner Koechner adds, “It relieved the burden of trying to go says it will transition to Kex Rx Hiawatha as one LLC, as will through the financing with a bank. I think it worked out for the Horton and Atchison businesses. Each will be its own him too because he didn’t have to realize all the income on LLC, wholly owned by Koechner Pharmacies. taxes in one year. It was kind of a win-win situation.” “We’re changing the corporate structure primarily Hiawatha is the county seat for Brown County, and to transition ownership of each store possibly 50/50 to the pharmacy is located in the downtown square near the other individuals as pharmacist partners are brought on courthouse. The one-story building, constructed in the board,” he says. early 1980s, is about 4,000-square-foot and in a structure And Koechner doesn’t plan on sitting still. 40-foot wide by 50-foot long. At one time it had been “I would be very interested in continuing to acquire divided into three different business spaces. The pharmacy other stores, either through acquisition or startup,” he says. was located in one section, with one-third rented out to “I’ve been very fortunate. Things are going very well with an insurance agent, and a small portion to a barber. By the the management of the three locations right now, which is time Koechner arrived, the business had expanded into greatly attributed to the staff here and being able to assume durable medical equipment and compounding, and the their roles and do a good job.” pharmacy occupied the entire space. Koechner says the pharmacy was showing some First Pharmacy wear and tear after 30 years, so he decided to make some Hiawatha is tucked away in the northeastern corner of cosmetic changes. The carpet, paint, and lighting had Kansas, about 15 miles from the Nebraska state line and become dated, so those were all upgraded. Also, a wall some 30 miles from Missouri. dividing the building in half was removed.

www.americaspharmacist.net March 2013 | america’s Pharmacist 31 In 2009, he brought in industry consultant Gabe “That always drove me crazy,” he says. “Employees Trahan, now NCPA’s senior director of Store Operations were walking back and forth to check people out. So we and Marketing and a team member of Front-End moved the checkout counter to the back, which I think has Overhaul (www.ncpanet.org), to help freshen up the helped customer service.” pharmacy even more. On the exterior, Koechner had kept the store’s old name “We needed a lot of help in merchandising, product for continuity, “but we were getting new customers, and selection and pricing,” Koechner says. “We had a lot of they were calling me Steve. That was when we decided it was questions, and we didn’t have a lot of experience in that time to make the change [to Kex Rx].” area. We were like most retail independent pharmacists: we With the name change came some exterior had about two inches of space in between each item on the facelifting. The old sign—a 4-foot by 8-foot sheet of shelf. And most things only had one SKU on the shelf.” hand-painted plywood—was replaced by a new lighted Trahan was able make some suggestions, for which sign. The awning was also repainted. Koechner is grateful. The Hiawatha store has what Koechner describes as the “I give Gabe a lot of credit for the improvements,” “three-legged stool—traditional dispensing retail, durable he says. “We hadn’t thought a lot about it and didn’t medical equipment, and compounding.” The pharmacy put a lot of value into it, honestly. Some of us do things has two full-time pharmacists (other than Koechner), four because we’ve done it forever, and we don’t sit back full-time technicians, two dedicated DME staff, a full-time and question it. He kind of cuts through that type of DME delivery driver (who also does DME maintenance and thinking, so he was a big help.” cleaning), a part-time local delivery driver, and a bookkeeper. Working with Trahan, Koechner tweaked the A part-time respiratory therapist was recently hired also. interior layout. The store dispenses about 225 prescriptions daily, “A path had been worn back to the pharmacy which includes LTC and a small number of compounded counter, so people wouldn’t even look to see what we had medications. The front-end is mostly DME, with in terms of front-end items,” he says. “We rearranged the some greeting cards and a few spinner racks. Koechner selection of merchandising, so people spent more time to uses standard technology such as point-of-sale and see what we had for purchase.” e-prescribing. His computer vendor has web refilling Also, the pharmacy section was in the back but the available, and he is looking to take advantage of some checkout counter was up front, which made no sense smartphone apps that it offers. Koechner also says “the to Koechner. SIG capture on the POS is priceless.”

32 america’s Pharmacist | March 2013 www.americaspharmacist.net Branching Out After acquiring the Hiawatha location, Koechner wanted A Name Change to branch out. He found a location in Horton, Kan., Can Be A Game Changer about 12 miles south of Hiawatha. It was a traditional By Gabe Trahan retail pharmacy located inside a doctor’s clinic building. There are three types of pharmacy customers out Koechner says it was owned by the local hospital, which there. Group one are those who are aware of your was purchased by an acquisition company based in Kansas pharmacy and choose to patronize it. Group two City, Mo. The company decided to spin off all of the other are those who are not aware of your store, and entities that the hospital had acquired over the years, one group three are those who know about your store, of them being the pharmacy. and for whatever reason choose not to patronize it. Groups two and three are required for accelerated Koechner received a heads up from the hospital growth. To attract these groups a pharmacy’s name administrator about the pharmacy divesture. change may need to be a part of your marketing “I was interested, and we put together something program. When you acquire someone else’s store, pretty quickly,” he says. “We started talking in late it is assumed that you will operate it with the same summer of 2009, and in January [2010] we went or improved services that the previous owner had to through with the acquisition. I saw it as a good offer, thus giving nobody a reason to leave. A name change allows you to reintroduce yourself to groups opportunity to own a local business.” one and two. After the acquisition, Koechner made a number of upgrades. He installed a Computer Rx system (which he Gabe Trahan is NCPA's senior director of store opera- has in the Hiawatha store) to keep both pharmacies on tions and marketing. Visit (www.ncpanet.org) and the same platform. Pharmacists and technicians working click on Front-End Overhaul. Watch the videos, read in either location have easy access to reports and other the tips, and view two galleries of photos from Gabe. Follow him on Twitter @NCPAGabe for additional tips. information. Koechner has also put in inventory controls, an automatic re-ordering system, and other standard

After acquiring Steve's Corner Drug (opposite page, top left) in Hiawatha, Kan., Koechner gave the exterior a facelift (above), changing the name, replacing the signage, and painting the awning. With help from NCPA Senior Director of Store Operations and Marketing Gabe Trahan, Koechner freshened up the interior of his Hiawatha store, making it more open and revamping his merchandising strategy.

management items. He says the pharmacy was dispensing “I saw a need for that because I don’t have a lot about 120 prescriptions daily when it was purchased, and of business background, you don’t get a lot of that in that number has gradually risen to approximately 150. The pharmacy school,” Koechner says. “I saw where they could 800-square-foot pharmacy is primarily retail, though it probably improve our management ability, so I contacted does service a 35-bed LTC facility. It has a limited front end, them and started working with them.” with basic OTC offerings. It can provide some DME items He adds, “After working with Larry, I realized that it (oxygen, wheelchairs), delivered via the Hiawatha location. would probably be more efficient to have multiple stores It has one full-time pharmacist, two full-time technicians, instead of just one location. So I was very open into looking and is open 9 a.m. – 6 p.m Monday through Friday (closed to acquire another store. And then I was approached by the on weekends). hospital, so it all came together at the same time. Multiple By the time Koechner bought the Horton location, he stores are better for economies of scale, better buying power had established a solid business relationship with a local through your wholesaler, efficiencies in bookkeeping, bank, and the transaction was fairly smooth, with assistance administration, and a whole range of other items.” from a Small Business Administration loan. Actually, prior to the acquisition, Koechner had become Atchison Opens acquainted with Retail Services Group, a Kansas City, Koechner’s most recent pharmacy, in Atchison, Kan., Mo.-based consulting organization. Koechner, through his opened in June 2012. Hiawatha and Horton are mostly rural pharmacy’s buying group (Pace Alliance), and his affiliation farming communities with its population bases skewing with the Kansas Pharmacy Services Corp. (he is on its board), older. As a county seat, Hiawatha has a few government met Larry Lewis, RSG’s president and CEO. Koechner says employees. In contrast, Atchison has some industry and a that Lewis works with about 10–15 pharmacists through college (Benedictine), so its demographics are a bit more the state, and KPSC said Lewis and another consultant were diversified. All three towns have hospitals. available to work with additional pharmacists on a trial basis And unlike his other two businesses, this one was a as part of member benefit opportunity. startup from scratch. A building in town was in a bank

34 america’s Pharmacist | March 2013 www.americaspharmacist.net foreclosure and available. In September of 2011 Koechner “Multiple stores are better learned that the one remaining independent in the community was going to be closing and selling its files to a for economies of scale, chain, leaving a town of 10,000 residents with a choice of better buying power two chain pharmacies. through your wholesaler, “It’s about 35–40 miles from Hiawatha, but you have to pass through Horton to get there, so geographically it efficiencies in bookkeeping, made sense for us to look at that,” Koechner says. Also, administration, and a whole he and Chanda both attended Benedictine College, and Koechner received his pharmacy pre-requisites there before range of other items.” transferring to UMKC to finish his pharmacy degree. “Five of the six kids in my family went to BC,” he says. They have two more girls (Capri, born in 2008 and “We had an uncle who was the abbot at the Benedictine Phoebe in 2010) and a fifth child is on the way. Koechner Monastery in Atchison, and our parents wanted us to himself is the youngest of his five siblings (his brother continue to grow in that Catholic environment. Now one David Koechner is an actor who has starred in movies of my sisters, Joan Charbonneau, sits on the board for the such as “Anchorman” and Talladega Nights,” along with college. Chanda went to BC on a soccer scholarship, then a recurring role in the TV show “The Office”). His wife is ended up walking on to the basketball and tennis teams. the third of seven children, so family is a big deal. She and I met 10 years after I left BC at a homecoming “My wife was overwhelmed by the welcome from the football game. It’s wild how it all played out and now we community [after Zeno was born], with people bringing have a pharmacy there.” food and well wishes,” Koechner says. “Being from a larger For the pharmacy, Koechner says, “We found city, she was kind of taken aback in a good way. It’s what I a building right away, but it needed quite a bit of expected, growing up in a small community myself. It’s a remodeling. That’s probably been our biggest hurdle. great community to raise our family” I think if we had been able to open the business three So it’s no surprise that Koechner feels right at home or four months after the old pharmacy had closed, we among the small towns where his pharmacies are located. would have taken off a lot quicker.” He has become deeply rooted in the community, serving as The facility’s 2,000-square-feet is contained in a president of the local Kiwanis Club and as part of the city long and narrow configuration (25-foot-wide by 80- planning commission among his civic activities. foot long). The business is mostly retail, but does have “Getting to know your patients and visiting with them some LTC patients and is hoping to expand in that area. is probably the most rewarding aspect,” Koechner says. “It so It doesn’t have any DME on site, but Koechner tells much different from a metro area to a rural setting, where patients that it can be provided. you are just given that trust right away as a health care As with his first two stores, Koechner says Trahan helped professional, and people come and seek your advice and guide him in the right direction with his design elements. respect your decisions.” “Gabe was a huge help in the layout of the Atchison store, in terms of what products to carry, where to put them in the store, and pharmacy/drive thru location,” he says. “I Chris Linville is managing editor for America’s Pharmacist. used many of his suggestions regarding store front as well, such as awning lettering, window lettering, and flowers in front. Gabe’s input is priceless!”

Satisfaction When Koechner moved to Hiawatha in November 2005, he and his wife had a nine-month old girl named Norah, and their second child, son Zeno, was born in July 2006.

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