ubc phar400 business of retail pharmacy 3.0 11sept2015

The Business of Retail Pharmacy

UBC – Phar400 | Pharmacy ManagementGerry Spitzner | pharmacySOS.ca

September 11, 2015

pharmacySOS.ca | Gerry Spitzner

RoadmapLearning Objective: High level overviewof retail community Pharmacy business ThoughtstartersCustomer ExperienceOperational Areas of Retail Pharmacy Retail Pharmacy FormatsPharmaceutical Logistics & Supply ChainFuture Developments, Opportunities &

Trends


Health Authority Associated Pharmacy ambulatory care pharmacy, cancer drug pharmacy, HIV drug

pharmacy, hospital pharmacy, corrections facility pharmacy, mental health, substance use and addiction, nuclear pharmacy (radiopharmacy),

Retail 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 military pharmacy, R&D @ Pharma, sales @ Pharma, Government

(Pcare)

3 Main Places of Pharmacy Practice


Question for you…

What do you hope to do when you graduate?

Source: Roderick Slavcev


Why should we learn business?


Healthcare is a business and always will be...but Pharmacy practice is an art; and always will be.◦ The practice of Pharmacy and the business of

healthcare are converging like never before◦ Community Pharmacy is a retail business◦ Community Pharmacists are small business

entrepreneurs◦ Pharmacists are the only health care practitioner

(HCP) practicing in a retail business setting

Important Insights


ThoughtstartersFor your patient service project , you are going to approach today’s busy customers, here are some thought-provoking ideas about the retail business to consider…

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. Creating, engaging and keeping customers is the

key to repeat business and long term survival for any business.◦ A retail Pharmacy that continuously relies on only current

customers for its economic success is not going to grow. ◦ How will you create, engage and keep your customer?◦ What purpose does your patient service serve?


Thought Starter


Why should patients do business with your service?◦ Customers don’t care how awesome you are◦ Crazy competition◦ Fickleness trumps loyalty

Questions you must answer about your patient service from your patients perspective…◦ Why should business come to you rather than someone else?

Why does it matter? Why should anyone care?◦ How does it work? ◦ What problem does your professional service solve? What

makes it better than any other Pharmacy?

Thoughtstarter

What exactly is value in the 21st century?◦ Value is not determined by the people who set the price, it

is determined by those who choose to pay the price. ◦ In order to engage your customer/patient, there must be

some form of interest or perceived value on their part.◦ Prospective customers should be able to visualize exactly

what value you and your service could bring them.◦ Develop a unique value proposition of the tangible results

a patient gets from using your patient service.


Thoughtstarter


By shifting your perspective you might see an old women or a young lady.


The public perceives what it sees. Perception is in the eyes and ears of the beholder;

value means different things to individual people. Value is a function of the bundle of perceived benefits

offered at a given price. It's a unique perspective. The vision of your patient service should be the basis

of your unique value proposition. Think different; BEE DEPHERENT… is the most

important strategic business principle of all.

Important Insight


Your patient 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. It's customer focused vs transactional.

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

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

Important Insight


Customer ExperienceThe moment of truth in healthcare and retail Pharmacy…why the customer experience matters.


There are 3 types of customers in every retail channel

1. Shop local- they value and support small businesses (service & community)

2. Bit of both- they value convenience (time crunch)

3. Big Box | Mall- they spend 3-4 hours on a Saturday as a hobby-they value entertainment (price)

Customer Segments

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


Why Customers Buy


Serve people, don’t just provide customer service.◦ Customer service is what every retail 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 (applied benefit). The control position is in the customer’s hands; the organization is in the responsive position.

Customer service is an attitude not a department.

How can I be of service to you?


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

◦ Positive relationships are a pleasant result of conducting a professional, prepared and productive patient interaction.

◦ But calling them your patient is more than having a "great relationship" with them and helping them with their problems.

◦ For a customer to become your patient; you have to earn it…

In today’s world, businessis built on relationships.


Your customers and patients want you to be a 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 their Pharmacist really cares about them

and their health. It’s a feeling…

Applied Health Benefits


How did the customer feel ?◦ A focused 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.).

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

◦ How the customer feels is their unique perception and it’s based on their total 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.

Customer Focus


Patient Engagement vs Patient Activation

1. Awareness – HCC knows about a service but doesn’t think much about it2. Engagement – HCC knows and cares, but isn’t yet compelled to act3. Activation – HCC takes action4. Reflection – HCC reflects on the patient experience, and perhaps rates their Patient Satisfaction5. Loyalty – HCC’s would repeat the action, expect a good experience and may tell others about it

Some interesting and thought provoking findings:◦ 89% of customers who receive poor service will

abandon your brand for the competition◦ 64% of customers say service is more important

than price when it comes to brand loyalty◦ 55% of customers would pay more to guarantee

great service◦ 64% of customers said that a company’s

customer service reputation is very importantpharmacySOS.ca | Gerry Spitzner

Cost of Bad Customer Experience

Source: Retail Council of Canada


The #1 Factor in Customer Loyalty◦ 19% - Company/brand impact◦ 19% - Product and/or service delivery◦ 9% - Value-to-price ratio◦ 53% - Experience with service provider

Companies don’t dazzle customers, people do.

Important Insight

Source: Jill Konrath


Operational Areas of Retail Pharmacy

There are a lot of moving parts to all retail businesses and they are crucial to customer experience .


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

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

Marketing◦ Research, omni-channel communication to ideal customer

audience, and branding activities Operations

◦ Daily activities delivering the promise of marketing & customer experience with an eye on sales and expenses

3 Broad Areas Of Any Retail Business


Asset Productivity

Patient/Customer Experience Profitability

Inventory management Pricing Merchandising Staff Receiving Loss Prevention Staff Schedules Operations systems Training Supplies Information Technology Computer hardware

Policies & Procedures Wages and Benefits Computer software Cash flow Sales Revenue Sundry Revenue General Expenses Fixtures Repairs and Maintenance Occupancy costs &

Utilities Advertising & Marketing Wholesaler and suppliers


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

4 Key Operational Parts of Retail


Retail Pharmacy Formats

What are the main types of Retail Community Pharmacy and some details of how they work?


4 Main formats of Retail Community Pharmacy

Corporate Pharmacy Franchise Pharmacy

Banner Pharmacy Independent Pharmacy

Community Pharmacy - Formats


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

Corporate Pharmacy


“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 similar stores Quality support services in Operations/Marketing/Finance 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

Franchise Pharmacy


“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

Franchise Pharmacy


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; ie in a wholesale

Banner Pharmacy


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

Independent Pharmacy


Logistics and Supply Chain

A complex process of medication distribution from manufacturer to patient


Wholesalers◦ In BC; 2 national & 2 regional distribute Rx, OTC & Front

Shop◦ 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

Logistics Channels


Future Developments and a Current Opportunity

For Retail Community Pharmacy –the future is not in the rear view mirror. Taking a step back from the hysteria, it is easy for us to see that retail Pharmacy is doing what it always does - change constantly.


“I really believe that in the future, companies like Novartis are going to be paid on patient outcomes as opposed to selling the pill.”

“Beyond-the-pill is a logical and inevitable path forward for all.”

“Creating value by embedding products into a holistic offering with the aim to improve patient outcomes and provide tangible competitive advantages.”

“Such holistic offerings include telehealth services, wellness programs, wearable sensors and improved chronic disease management over patients’ lifetimes.”

Beyond the Pill

Source: Joseph Jimenez, CEO of Swiss healthcare giant, Novartis


Should Pharmacy focus on patient services vs dispensing? ◦ Funding for new initiatives is still tied primarily to

dispensing and drug margins, rather than on reimbursement for patient services and outcomes.

◦ Per capita prescriptions is climbing among all age groups; ranging from 4.21 Rx/year among those aged 0-39 years and 41.82 Rx/year for 60 years and up.

◦ More Rx’s means more customer traffic and an opportunity to engage patients in extended services.

◦ Focus on re-fills & medication adherence with existing patients.

Current BusinessOpportunity


Pharmacists practice at the most interfaces in the healthcare network and are uniquely positioned to provide value to the health of the public. ◦ Pharmacy practice is a knowledge industry at the cross

roads of health care. Eventually everyone ends up at our doorstep.

◦ Pharmacist is the most versatile profession in healthcare◦ Pharmacists speak multiple languages more than other

HCP’s◦ Think beyond the dispensary to find incremental revenue

opportunities

Important Insight


Consumer Health Trends

If you look at broader trends in the long-term; healthcare delivery is going to be a retail-driven model — it is going to be driven by consumer choice.


Canadian population is spending less on clothing, entertainment and alcohol and more on healthcare, cell phone, and internet.

Overall total spending is flat with last year but a major shift…healthcare spend is up 62% year over year.

Top healthcare and well-being topics on respondent’s minds are healthy eating, weight management, and starting or continuing an exercise or health program.

Consumer Trends

Source: Nielsen Canada


Nutrition & Medication


For #millennials healthy is the new happy!

Source: Nielsen Canada and Allidura, GSW,and the Harris poll

27% of Canadian population are millennials; 28% are boomers.

70% of millennials say they stress about personal health

97% say that being happy is important to them, and 95% say the same about being healthy.

only 42% say they consider themselves healthy.


Digital Healthcare Convergence


2016 will be a huge year for Tele-health.◦ Using secure video-conferencing to live-link patients with their

physicians or pharmacists from the comfort of their homes-or even from work-using their laptops, tablets or smartphones.

Tele-pharmacy is the provision of pharmacy services in rural and remote communities.◦ BC is only province in Canada that has regulation with

college approval◦ BCPhA supports the provision of telepharmacy services ◦ Opportunities for collaboration with other remote

pharmacies to focus on a niche patient services -- where not in competition

Tele-medicine | Tele-healthTele-pharmacy


Harris poll on virtual Pharmacist visits…

47% would be willing to have a med review on line and pay for the convenience


According to an A&D Medical survey conducted by Harris and released Jan 6th, 2015; more than half (56%) of Americans want to monitor their health with connected devices that automatically connect online and send information to their doctor or other people they choose.


The Future is here.

Some believe that wearable technology is simply a transition technology.


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 for optimal health requires time and intentional strategies.

◦ What if we had a healthcare system that kept us healthy? ◦ Focus on beyond the pill strategies instead of accuracy and

‘fast’ service and your customers will really start to see the value of your role and will soon become your patients.

◦ Do well by doing good. Focus on care; commerce will follow.

Launching a new beginning


To your business and professional success, thank you for your attention.

Questions? Email me…

Thanks

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Find me

Gerry Spitzner is an optimist with a curiosity for improving life and business results. Optimism is the ability to focus on where we're going; not where we're coming from and Gerry is passionate about making the public aware of the great things Pharmacists do. He believes in helping pharmacists achieve leadership, professional practice, and business success.

Drawing on 40+ years in regional multi-site retail Pharmacy operations and drug store ownership with SDM, plus business development with K&F in the Pharmaceutical wholesale supply-chain; and as a consultant; Gerry has the unique advantage of having worked in several different business models within retail Pharmacy.

Fascinated with a lifelong curiosity for why customers buy and a passion for retail Pharmacy; Gerry guides his clients 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 leaders in Pharmacy to take advantage of trends and build business plans that increase sales and profitability through creating a competitive advantage.

His company is pharmacySOS.ca, a Vancouver-based business management consultancy with Strategic Operations Services to advise, guide and support Pharmacist owners to brand and market for optimal growth through customer experience. With a clear understanding of retail Pharmacy and drug store operations he uses a solution oriented focus with ideas and alternatives that clients can use to address the changing marketplace issues they face right now. Gerry understands who they are, what they need, and where to find it.


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