When Leo Avakian wanted to open his new pharmacy in Canoga Park, he knew getting a loan to go into business would be hard. And, even though Avakian had plenty of experience in running a pharmacy, he was right. Today, Avakian’s West Park Pharmacy is doing well, but only after he used his own credit cards and cash to start the business. “I couldn’t get the banks to help,” said Avakian, with a shrug. Avakian’s story is not uncommon. But a Valley investment group, motivated at least in part by the multi-million-dollar settlement of a class action suit in favor of independent pharmacists five years ago, wants to do something about it. Martin M. Cooper heads the group planning this fall to open the Horizon Bank, catering to independent pharmacists. “It’s never been tried and we’ll be the first to target the needs of pharmacists,” said Cooper, who will serve as the bank’s chairman. Officials at the National Community Pharmacists Association agree: there has never been a U.S. bank catering specifically to pharmacists. In 1996, an estimated 40,000 pharmacists were awarded $723 million in the settlement of a class-action lawsuit that alleged drug companies and wholesalers sold their products to chain-owned pharmacies at lower prices than they did to independent pharmacies, forcing many out of business. Cooper, also president of Woodland Hills-based Cooper Communications, said the settlement left many pharmacists with money, but without the necessary financing when drug wholesalers put an end to a decades-old practice of lending them money to make their purchases. “They couldn’t get some banks to help, so who did they have left?” he asked. Drug company control loosens David Breslow, a former pharmacist and board member of the proposed bank, said drug wholesalers typically have locked independent pharmacists into tight contracts that did not allow them to shop other companies for the best price. “Problems arose when I was indebted to them and someone offered me a better deal. I couldn’t take advantage of it,” Breslow said. Douglas Hoey, vice president of professional and practice affairs for National Community Pharmacists Association in Virginia, said pharmacists must often contend with banks unfamiliar with their business. “The (average) independent community pharmacy does about $2 million in annual revenue and $1.7 million of that is in medicine,” Hoey said, noting the rest of the revenue comes from bandages, orthopedic appliances and other non-drug items. “So you come up with big numbers in overall revenue, but there is lag time when you actually get paid from a third party like an HMO,” he added. Gary Sethi, owner of Oaks Pharmacy in Sherman Oaks, said he supports any bank that would cater to Valley pharmacists. He said most banks are not familiar with how the pharmacy business works and are leery of its up-and-down cash flow patterns. That fluctuating cash flow is often grounds to deny loans, Hoey says. Hoey said, while pharmacists’ bills for drugs are due in less than 30 days, their payments from third-party providers often come much later. Moreover, they typically turn their inventory over seven to 12 times a year, forcing pharmacists to use financing just to keep up with routine merchandise purchases. “There is a razor-thin margin that they have to deal with,” he said. Cooper insists the new bank will take the particular vagaries of the business into account. “Who better to evaluate your ability to run these pharmacies than guys who have been pharmacists, combined with financial people?” he asked. “We’ll have a computer in their pharmacy and a computer in our bank so we can do things on line. It’ll be very high tech, but service-oriented.” Although Cooper would not give financial projections for the bank, he anticipates it will be profitable by the second year. So far, Cooper and 10 other board members have put up $1 million in seed money. Among those board members is Kirk Hayes, chief executive officer of Iowa-based Pharmacists Mutual Insurance Co. “We also have a strategic alliance with Pharmacists Mutual to market our bank to pharmacists all over the country,” Cooper added. After approval by state and federal regulators anticipated in June the proposed Horizon Bank could begin soliciting investors to raise the needed $6 million to fund the bank under federal law. It would serve more than 1,000 pharmacists in the Valley and Los Angeles area, along with thousands of other pharmacists throughout the U.S., Cooper said. The bank will be located in Encino if a deal to lease a multi-story building near the Ventura Freeway is finalized in the next few weeks. Noting that Horizon Bank will not turn away non-pharmacist customers, Cooper said, “There are just three community banks left in the Valley, and that’s not enough to meet the demand
