ProPublica Investigation
On September 22, 2009, an investigative report co-published by a New York City-based group ProPublica and the The Politico reported that in 2007, Ross was paid $420,000 for the building and lot of his family pharmacy in Prescott, Arkansas by USA Drug, a Pine Bluff, Arkansas-based pharmacy chain. The property had been assessed in 2007 by the county at $263,000; an independent appraiser hired by ProPublica put the 2009 value of the property at $198,000, although it was well into an economic recession that began in 2008.
USA Drug also paid roughly $1.2 million for related assets of the property, such as stock, and paid roughly $100,000 for a non-compete agreement. As of the date of the report, Holly Ross remained the pharmacist at Holly's Health Mart under USA Drug.
Additionally, USA Drug owner Stephen L. LaFrance donated $2,300, the maximum contribution allowed, to Ross' campaign two weeks after the sale was made. In two previous elections, LaFrance had supported Ross' opponent Jay Dickey, a close friend of LaFrance.
Following up on the story, the Arkansas Democrat Gazette reported shortly thereafter on September 23 that, “Richard Jackson, a professor of pharmacy administration at Mercer University in Atlanta and an expert in evaluating the worth of pharmacies, said the price tag for the pharmacy’s assets was ‘well within the ballpark’ of what similar pharmacies in similar communities would bring.”
The same article continued saying that Jackson agreed that the keys for the buyer of a pharmacy are those assets — such as the inventory, the fixtures and the “good will” the business has established in the community, an intangible asset “with significant value especially in a rural area.”
It quoted Jackson as saying that the price the Rosses received for the pharmacy’s assets — between $500,000 and $1 million — is “very average” and that “there’s nothing unusual about that whatsoever. I value pharmacies every day, and most are going to fall within that range.” He also commented on the noncompete agreement – standard in pharmacy sales – saying that “people come to that pharmacy not because of the bricks and mortar, but because of the pharmacist. There is a distinct and significant value to that pharmacist being there.”
That same article continued saying, “Scott Pace of the Arkansas Pharmacists Association echoed Jackson, noting that the sale of any pharmacy’s assets would take into consideration a number of factors in addition to the value of the real estate. He provided data from the National Community Pharmacists Association showing that the average independent community pharmacy had $3.6 million in sales in calendar year 2007, with an average inventory of more than $298,000.”
On September 25, the Arkansas Democrat Gazette reported that the only other pharmacy owner in Prescott — Ross’ former political and business rival — said the deal seemed fair. All Care pharmacy owner state Sen. Percy Malone was reported to say, “I would have bought it for that." In 1992, Malone and Ross ran a spirited Democratic primary campaign against each other for the state Senate, the Democrat Gazette reported. Malone said he “didn’t see anything out of line” in the price USA Drug paid and added that since there were only two drugstores in the town of 3,686 people, the price would likely be higher than the property’s assessed value.
The same article interviewed other pharmacy owners in Arkansas who have in recent years have had similar business transactions, such as David Smith who sold Central Pharmacy in Conway to Cardinal Health Care in 2006. Cardinal subsequently sold it to the Medicine Shoppe. Smith, who manages the pharmacy said that he received at least $50,000 in a noncompete agreement that stipulated that he couldn’t work for another pharmacy within five miles (8 km) for a threeyear period. Holly and Mike Ross received $110,000, but their noncompete agreement came with much more stringent terms. They agreed not to work for a competitor within 20 miles (32 km) for a period of 10 years. Smith said USA Drug “got an incredible deal." That’s because, Smith said, to a great extent a pharmacy’s value is tied up in the pharmacist himself. “The store revolves around the store owner or pharmacist,” he said. “That’s the face people trust.” To illustrate how important the noncompete agreement is, he said it was a “huge” deal that LaFrance hasn’t switched signs on the front of Holly’s Health Mart. “It’s a very shrewd move on his part to have retained that name,” he said.
The same article stated that it’s also common for a pharmacy chain to pay higher than assessed property values when acquiring land and buildings. Larger chains have paid premiums for land in smaller Arkansas towns in recent years it reported. For instance, Walgreen Co., the Illinois-based drug giant, purchased 2.8 acres (11,000 m2) and a building in Wynne in 2007 for $650,000. The current value of the land, according to the Cross County assessor’s office is $145,800. The same year, the chain bought an empty 1.3-acre (5,300 m2) plot in Newport for $560,000. In 2008, the Jackson County assessor pegged the land’s value at $35,900. And in 2008, according to Garland County records, Walgreen paid $990,000 for 1.8 acres (7,300 m2) and a building that was listed with a $282,650 value.
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