The Heart of a Company

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Katy Grannan

Hadley's circle of care includes (from left) au pair Jenny Bergman, uncle Woody Neiss, and Shelley, Sarah, and Kenny Kramm.

The combinations that Kramm deemed most successful he carried home to Hadley in diminutive dosing cups. "She rejected at least 10 before she finally accepted banana," he says. "When she swallowed it, that was the first time in months that I felt I had some control back in my life."

Center Pharmacy, which is in Spring Valley in Washington, D.C., shares a building with several pediatricians' offices and an annex of Children's Hospital. Word of the Kramms' success with phenobarbital spread, and soon their neighbors began sending down patients with all kinds of prescriptions to be filled and flavored: everyday children's antibiotics, as well as medicines for more serious conditions, like phenytoin for seizures and digoxin for heart arrhythmia. As more and more customers requested the flavorings, Kramm, who had been a business major, saw an opportunity to increase sales with a distinctive offering. And the notion of helping children was therapeutic, since he could do so little for the one child that mattered to him most.

Kramm recognized immediately that variety was key to the new offering's appeal. So he used some of the store's young customers as a focus group to test flavor combinations. Does sour apple clash with Zarontin? Wouldn't mixing chocolate and Biaxin only make matters worse? He continued to taste-test every concoction himself and began compiling a formulary of optimum drug and flavor recipes. In each case, the amount of flavoring had to be carefully controlled so it wouldn't dilute or destabilize the medicine. (The flavorings -- all commercial products -- were already approved by the FDA.)

Center Pharmacy, which started life in a nursing home, had always catered to elderly customers. But after Kramm placed an ad touting the flavoring service in the Washington Post, parents and their finicky offspring swarmed the pocket-sized pharmacy from as far as 25 miles away. The Kramms began stocking toys and other child-related products. Within a few years, the clientele changed from 90% geriatric to 90% pediatric. Meanwhile, the pharmacy's sales overall jumped from $600,000 to $3 million.

But that growth only partly salved the anxiety that Kramm felt as he watched his personal expenses mount. At the pharmacy, he was making $70,000 a year. What with medications (Hadley routinely took at least four, including ones for seizures and blood clots), operations (she needed surgery every two years because her muscles became so rigid that her feet turned in), various therapists, special equipment, and modifications to their home, the family was spending as much as $100,000 a year on Hadley alone.

Kramm and his wife worried obsessively about what would happen to their daughter after they died. "I couldn't bear the thought of her unable to support and defend herself, at the mercy of people that did not love her," says Kramm. "We needed enough money to make sure she would be taken care of for the rest of her life."

Though Center Pharmacy was solid, Kramm also fretted about its future. Huge chains such as CVS, Rite Aid, and Kroger were swallowing up or driving out smaller stores, while third-party reimbursements were spiraling downward, taking a further toll on independents. "We'd seen some of our friends go out of business," says Kramm. "I wanted a backup plan in case something happened to the pharmacy."

So in 1995 Kramm took $15,000 from his personal savings and a little more than $200,000 that his father gave him from the pharmacy's profits, and launched FlavorX as an independent company. It would sell its "systems" -- consisting of the formulary and refillable sets of flavorings -- to other pharmacies. "It was a risky thing to do because we had such large expenses at the time," says Kramm. "But those expenses were only going to get larger. We had to make it work."

Center Pharmacy is a curious seedbed for an innovative, fast-growth company. The 36-year-old neighborhood business is comfortably old-fashioned, competing on personal service rather than price. Staff and customers are on a first-name basis, home deliveries are common, and the Kramms themselves will drive to other pharmacies to pick up something for a customer if they're out of stock. They even give out their home phone numbers. "I can remember many instances," says Kramm, "when my dad would get called out in the middle of the night because a hospice patient needed a pain medication or somebody had some other emergency."

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Leigh Buchanan

Leigh Buchanan is an editor at large for Inc. Magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture, and she contributes Inc.'s capsule book reviews, "A Skimmer's Guide to the Latest Business Books."

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