ubc phar400 business of retail pharmacy 12sept2014

UBC – Phar400 | Pharmacy ManagementpharmacySOS.ca | Gerry Spitzner

September 12, 2014

Health Authority Associated Pharmacy

ambulatory care pharmacy, cancer drug pharmacy, HIV drug pharmacy,

hospital pharmacy, corrections facility pharmacy, mental health,

substance use and addiction

Community Pharmacy

“full mix” retail pharmacy, Health Centre, simply a dispensary,

consulting pharmacy, compounding pharmacy, veterinary pharmacy,

central fill pharmacy, mail order pharmacy, tele-pharmacy

Other Pharmacy

nuclear pharmacy (radiopharmacy), military pharmacy

pharmacySOS.ca | Gerry Spitzner 2

Learning Objective; High level overview of the

retail community Pharmacy business

Thoughtstarters & insights

Pharmacy business in Canada & BC

Retail Pharmacy types & differences

Pharmaceutical Logistics & Supply Chain

Retail Pharmacy Operations & Pricing

Future Developments, Trends, Issues & Opportunities


Consider where the need and the

market for Pharmacy patient

services fits within the

consciousness of today’s busy

retail customer.


What is the real purpose of a business?

◦ Profit isn't a purpose, it's a result. To have purpose means the things we do are of real value to others.

◦ The key to business survival... creating, engaging and keeping customers.

◦ A retail Pharmacy that continuously relies on only current customers for its economic success is not going to grow.

◦ Meet the needs of ideal customers by engaging them and creating a professional business relationship with them.

◦ Deliver value and keep the customers you already have.


Healthcare is a business and always will be...but Pharmacy is an art; and always will be.

◦ Practice of Pharmacy and business of healthcare are converging

◦ Community Pharmacy is a retail business

◦ Community Pharmacy owners are small business entrepreneurs

Should Pharmacists focus on clinical services vs dispensing?

◦ Per capita usage of prescriptions is climbing

◦ Dispensing leads to the opportunity to provide additional professional patient services

◦ Think beyond the walls of the dispensary to find incremental revenue opportunities through inter-professional collaboration


What is value in the 21st century?

◦ Value is not determined by the people who set the service and

price, it is determined by those who choose to pay the price for

the service.

◦ Value is always defined by the recipient, not the provider, it is

always rooted in one’s need system.

◦ Value is a function of one’s needs being identified and satisfied

in ways that meet and exceed one’s expectations.

◦ Value is created for the customer during the experience of

interacting with the service provider.


Value is a function of the bundle of perceived benefits offered at a given price.

Perception is in the eyes and ears of the beholder; value means different things to individual people.

Develop a value proposition for patient services.

Think different; Bee depherent… is the most important strategic business principle of all.


Why should a patient do business with you?

◦ Crazy competition

◦ Patients/customers don’t care how awesome you are

◦ Increasingly demanding & overly informed patients

◦ Fickleness trumps loyalty

Questions you need to answer about your clinical service from your patients perspective…

◦ Why should business come to you rather than someone else?

◦ What problem does your professional patient service solve?

◦ How does it work? What makes it better than the other Pharmacy? Why does it matter? Why should anyone care?


Your clinical service is not about selling something; rather it is to fulfill an intention your patient has.

Never about what you can get; always about what you can give.

Fulfilling a customers real intention is a motivator to them buying other Pharmacy patient services.

Value is in the ‘applied’ benefits of the benefit you and your service offer.

Applied benefits are the outcomes patients expect beyond how to take the prescribed medication.


What makes a positive customer

experience in retail Pharmacy?


Confidence is the #1 factor

◦ in determining what, from who and where customers repeat buy...

quality is #2,

service is #3

selection is #4

and price is #5

PRICE IS PRICE; VALUE IS THE TOTAL EXPERIENCE


In today’s world, business is built on relationships.

◦ People do business with people they know, like and trust.

◦ Consider the life time value of a customer rather than just as a single one-time transaction. Think customers for life.

◦ Listen to customers; first understand why, how and what they want to buy, rather than how and what you want to sell to them.

◦ Use “pull” vs. “push” marketing.

◦ Positive relationships are the pleasant by-product of conducting a professional, prepared and productive patient interaction.

◦ But it's much more than just having a "great professional relationship" with them and helping them with their problems.

◦ You have to earn it…


Your customers and patients want you to be an valuable

resource to them all the time ; when they need you.

◦ Bring them ideas, insights, and information to help them achieve their

health objectives.

◦ Guide them about how to make a good decision, as well as who needs to be

involved and the next steps.

◦ Keep them up to date about any changes that could impact them—

positively or negatively.

◦ Challenge their thinking and provide them with fresh perspectives.

◦ They want to know that the Pharmacist really cares about them and their

health. It’s a feeling…


How did the customer feel ?

◦ A customer experience is not just about a rational experience (e.g. how quickly a phone is answered, what hours you’re open, delivery time, etc.).

◦ A customer experience is not just about the ‘what,’ but also about the ‘how’ and ‘why’.

◦ A customer experience is about how a customer consciously and subconsciously sees his or her experience.

Loyalty is not a tactic driven by points or low prices.

◦ Customer loyalty is not a tactic but a way of doing business.

◦ Service experience has more impact on customer loyalty than any other function of a Pharmacy business.


Serve people, don’t just provide customer service

◦ Customer service is what the organization wants to supply to

the customer; it is governed by policies and rules intended to

serve the business.

◦ Serving customers, on the other hand, is driven by what the

customer wants. The control position is in the customer’s

hands; the organization is in the responsive position.

Customer service is an attitude not a department


The #1 Factor in Customer Loyalty

19% - Company/brand impact

19% - Product and service delivery

9% - Value-to-price ratio

53% - Experience with service provider


Retail Pharmacy business is BIG

business.

Overview of the business of retail

Pharmacy in Canada and BC.



Source: CACDS 2012


Source: Canadian Generic Pharmaceutical Association (CGPA).

Corporate/Franchise/Chain Banner/Independent

Shoppers Drug Mart 164

Safeway 70

Overwaitea/Save-On 74

London Drugs 50

Walmart 37

Rexall 36

Loblaw/Drugstore 55

Costco 14

Thrifty Foods 12

Target 11

Pure Integrative 16

Total 539

Pharmasave 149

Peoples 47

Medicine Shoppe 29

Medicine Centre 40

Remedy's RX 22

I.D.A. 52

Guardian 26

PharmaChoice 11

Total Banner 367

Family Healthcare (IND) 26

All Other (IND) 287

Total 554


*Source: B.C. College of Pharmacists registry and 2013/14 annual report

Source: Canadian Healthcare Network Aug 2013

What are the main types of

Community Pharmacy and the

details of how they work?


4 Main formats of Retail Community Pharmacy

Corporate Pharmacy

Franchise Pharmacy

Banner Pharmacy

Independent Pharmacy


Wholly owned by a large company

Pharmacy is a department managed by a Pharmacist

Rx Manager is an “employee” of a chain Pharmacy

Managers are paid a salary and compensated with

pay-for-performance incentives

Operations/Marketing are determined by head office


“SDM | Associate” concept Own the business but not the physical assets

No capital investment or personal capital risk

Guaranteed minimum annual income and benefits

“Share” in profitability, based on benchmarking

Support services in Operations/Marketing/Finance

Many “masters”

SDM Associate agreement is a renewable 3 year deal

Retained equity requirements

Franchise agreement restricts or outlaws certain activity

All inventory comes from own warehouse/wholesale

Excellent business training; especially for Pharmacy managers


“Medicine Shoppe” concept

Own the business and the physical assets

Franchise fees 4-6% of sales

Trademark rules

Required program participation

Full Pharmacy ownership

Capital investment required

Ongoing Sales and Biz Dev support

Custom marketing strategy

Training and Professional Development

Preferred Supplier agreements


Target Pharmacy concept

easy-startup; no initial franchise fee

comprehensive training program

no store buildout costs with fully-constructed pharmacy, including dedicated counseling room

no renewal fee and no cap on total earnings

franchise fee based on gross sales

competitive licensed space fee

subsidized advertising fund

competitive OTC royalties paid to franchisee

dispensing system including software and hardware, along with a P.O.S. system


What is a banner Pharmacy?

Looks like a chain; but really isn’t. Power of trade mark

Independently owned and operated but working together

Sales/promotions, contracts

Buying group wit a menu of services

Sales percentage fees or monthly membership dues

Your own profit and loss centre

Owners often have more than one store

Sometimes shareholder in a wholesale i.e.


Key features include:

No trademarked name affiliation

Independently owned and operated

Often belong to a wholesalers IND program

Entrepreneur/Self-management

Creative freedom

Not having to answer to others (especially regarding the

pharmacy and professional service focus)

Financial independence and high risk/high reward

Can move quickly to seize opportunities


A complex process of medication

distribution from manufacturer to

patient


Wholesalers

◦ In BC; 2 national & 1 regional distribute Rx & Front Shop

◦ McKesson, Kohl & Frisch, and uniPHARM

◦ Primary suppliers to Banners and IND’s

◦ Secondary suppliers to Chain

DSD; ( Direct Store Delivery )

◦ Select Generic/Brand suppliers, some Front Shop categories

Self Distributors; Chain

◦ SDM, London Drugs, Save-On, Safeway

◦ Note: chains also draw from local wholesalers, especially narcotics/cold chain


How wholesaler upcharges work in BC...

◦ For Rx; MALP = MFR cost plus 8% | 5% cap for high cost drugs

◦ MALP for Generics is 20% of the equivalent Brand; 18% Top 6

◦ Prompt payment (cash discount) of 2%

◦ Loyalty allowances range between 3% to 4.5%

◦ Net net upcharges range between 1½% and 3%

◦ Net net upcharges depend on volume and loyalty

◦ Urban; 11 deliveries per week for Rx and 1 or 2 for Front Shop

◦ Rural; 6 deliveries per week for Rx and 1 for Front Shop

◦ OTC/Front Shop net upcharges vary greatly and usually rebatesare provided for achieving agreed to volumes


There are a lot of moving parts to

all retail businesses and they are

crucial to customer experience .


Finance◦ Monitoring, analysis, cash flow, Profit & Loss

Marketing◦ Ideal customer audience & services communication

Operations◦ Delivering the promise of marketing & customer experience

For your project you’ll need to address these areas in your business plan and presentation.

39pharmacySOS.ca | Gerry Spitzner

Patient/Customer Experience Profitability

Inventory management Pricing

Merchandising

Staff

Receiving

Loss Prevention

Wages and Benefits

Staff Schedules

Training

Supplies

Information Technology

Computer hardware

Policies & Procedures

Computer software

Cash flow

Sales Revenue

Sundry Revenue

General Expenses

Fixtures

Repairs and Maintenance

Occupancy costs & Utilities

Advertising

Marketing


Inventory

◦ It is all about flow - keep goods (products) flowing

Merchandising

◦ Any practice which contributes to the sale of products

Staff

◦ The quality of an employee's work experience has a direct

impact on the quality of the customer's experience

Pricing

◦ Setting competitive pricing is an art form


In the Front Shop and the Pharmacy


What does gross profit mean?

◦ Gross profit is defined as the profit before deducting expenses.

◦ It’s a key indication of whether the business will survive.

What’s the difference between mark up and margin?

◦ Markup is % of profit on cost

◦ Margin is % of profit on selling price

In retail Pharmacy; wholesalers use markup and

retailers use margin to set prices.


Pharmacare sets a maximum price for brand & generic

◦ Maximum price is applied during PharmaNet adjudication

MALP (includes upcharge) plus dispensing fee; $10.00

3rd party payers generally adjudicate the same way;

but sometimes they will accept a higher fee or

ingredient cost or both. Many Pharmacies submit 1st.

The dispensing fee is always the entire gross profit of

the prescription.


For Retail Community Pharmacy –

the future is not in the rear view

mirror.


Supermarkets, mass merchandisers, mail order and

Pharmacy chains are likely to keep competition keen

Government's plans for pharmacy may include an

enhanced role for Pharmacists

Aging population and ongoing shortage of physicians

will strengthen demand for Pharmacy services

Count on facing predictable uncertainty at an

accelerated pace

Change management is a soft skill requirement for

Pharmacists


Low-volume stores are really going to struggle

While pricing cuts were rolling out more Independent Pharmacies were opening

3rd Parties looking for ways to reduce Rx drug costs

Plans more complex; patients don’t understand them

Many current ‘veteran’ pharmacists prefer to operate at the status quo

Patients have a more active approach to how they optimize their own health


Impact of drug pricing reforms worry BC Pharmacists

Drug Shortages

Costs are escalating faster than increases in revenue

Preferred Pharmacy providers

Balancing business needs with patient care needs

Public awareness, attracting new customers and how

to market professional patient services

Reimbursement challenges are likely to intensify

PharmaCare audits


Growing importance of Pharmacists as OTC advisors

Natural Health Products/Nutrition/Compounding

Pharmaceutical specialty niches and services

Adherence/Better Care, Zero Waste Go Hand-in-Hand

Tele-pharmacy, Tele-medicine and Tele-health

Community connections and engagement

Reduce dispensing costs. Medication synchronization


Healthcare and the practice of Pharmacy is arriving at a

new intersection.

The shift in focus from accuracy in dispensing to

therapeutic appropriateness and patient-centric support

requires time and intentional strategies.

Yet the positive results can be immediate.

It’s amazing what you’ll find when you can focus on these

areas instead of accuracy and ‘fast’ service.

Your patients will really start to see the value of your role.


To your business and professional success,

thank you for your attention.

Questions?


Follow Twitter: @passion4retail

Connect LinkedIn: Gerry Spitzner

Web: pharmacySOS.ca

Blog: gerryspitzner.com

Email: [email protected]

Online Biz Card: gerryspitzner.tel

You Tube Channel: Gerry Spitzner


Gerry Spitzner is an optimist with a natural "kid-like“ curiosity for improving life and business results. He believes in

a bright future and our ability to build it together and is passionate about making the public aware of the great things

Pharmacists do.

Drawing on 35+ years experience in multi-site retail Pharmacy operations, drug store ownership and the

Pharmaceutical wholesale supply-chain; Gerry brings the leadership, knowledge and market awareness of business

development to retail Pharmacy owners helping them achieve growth objectives. He teaches and inspires

Pharmacists to achieve results by aligning their vision with marketing strategy and operational execution.

Fascinated with a lifelong curiosity for why customers buy and a passion for retail Pharmacy; Gerry guides leaders

and organizations to create, engage and keep great customers by delivering the promise of an extraordinary

customer experience. He has devoted his life to sharing his thinking with other Pharmacy leaders to manage

market analysis and build business plans that increase profitability and create competitive advantage with systems

to implement.

His company is pharmacySOS.ca, a Vancouver-based business management consultancy with a suite of business

services focused on helping Pharmacists implement business development, branding and marketing. With a clear

understanding of the business of Pharmacy he uses a solution oriented focus with ideas and alternatives that clients

can use to address the changing practice issues they face right now. Gerry understands who they are, what they

need, and where to find it; helping them market and strategically realign their professional and clinical services to

integrate the business activities of optimal drug therapy outcomes through patient centered care.


ubc phar400 business of retail pharmacy 12sept2014

Leadership & Management

business of pharmacy

military pharmacy

addictioncommunity pharmacy

hospital pharmacy

veterinary pharmacy

consulting pharmacy

pharmacy business model

retail community pharmacy