ubc phar400 biusiness of retail pharmacy 3.0 23jan2015

The Business of Retail Pharmacy

UBC – Phar400 | Pharmacy ManagementpharmacySOS.ca | Gerry Spitzner

January 23, 2015

pharmacySOS.ca | Gerry Spitzner 2

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

pharmacy, hospital pharmacy, corrections facility pharmacy, mental health, substance use and addiction

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 nuclear pharmacy (radiopharmacy), military pharmacy

3 Main Places of Pharmacy Practice


RoadmapLearning Objective: High level overviewof retail community Pharmacy business ThoughtstartersPharmacy Business in Canada & BCRetail Pharmacy Formats & DifferencesPharmaceutical Logistics & Supply ChainFunctional Areas of Retail PharmacyFuture Developments, Trends &

Opportunities


Why should we learn business?


Thoughtstarters & Insights

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.

Thoughtstarter


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.

Thoughtstarter


Why should a patient do business with you?◦ Crazy competition◦ Patients/customers don’t care how awesome you are◦ Increasingly demanding and informed patients◦ Fickleness trumps loyalty

Questions you need to answer about your patient service from your patients perspective…◦ Why should business come to you rather than someone else?◦ What problem does your professional service solve?◦ How does it work? What makes it better than the other

Pharmacy? Why does it matter? Why should anyone care?

Thoughtstarter


Should Pharmacists focus on clinical patient services vs dispensing? ◦ Per capita usage of 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.

◦ Funding for new initiatives is still tied primarily to dispensing and drug margins, rather than on reimbursement for clinical services or patient outcomes.

◦ Dispensing leads to the opportunity to provide patient services

◦ Move from product to experience. Move from drug distribution to health. Move from patient care to patient empowerment.

Thoughtstarter


Customer ExperienceWhat makes a positive customer experience in retail Pharmacy?

Move from product to experience.

Move from drug distribution to health.


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 3-4 hours on a Saturday as a hobby-they value entertainment (price)

3 types of customers

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


Customer Experience


Value is a function of the bundle of perceived benefits offered at a given price. It's a unique perspective.

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.

Important Insight


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. The control position is in the customer’s hands; the organization is in the responsive position.

Customer service is an attitude not a department

Customer Experience


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

Customer Experience


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 the Pharmacist really cares about them

and their health. It’s a feeling…

Customer Experience


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. Transactional vs serving patients and customers for outcomes.

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.

Important Insight


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.).

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


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

Companies don’t dazzle customers, people do.

Important Insight


Retail Pharmacy Business

Retail Pharmacy business is BIG business.

Overview of the business of retail Pharmacy in Canada and BC.


Source: CACDS 2012


Canadian Prescription Drug MarketYear Ending December 2013

Source: Canadian Generic Pharmaceutical Association (CGPA).


1,202* Community Pharmacies in BC

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 reportSource: Canadian Healthcare Network Aug 2013


Healthcare is a business and always will be...but Pharmacy practice 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◦ Pharmacists are the only HCP practicing in a retail setting

Important Insight


Community PharmacyWhat are the main types of Retail Community Pharmacy and the 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 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

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


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

Franchise Pharmacy

Closed


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.

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 & Front Shop◦ McKesson, Kohl & Frisch, uniPHARM and AP Martin◦ 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


Functional Areas of Retail Pharmacy

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.

3 Broad Areas Of Any Retail Business


Asset Productivity

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 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


Future Developments, Opportunities and Trends

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.


Canadian population is spending less on clothing, entertainment and alcohol

Spending more on healthcare, cell phone, and internet. Overall total spending is flat with last year. Major shift…Healthcare spend is up 62% year over

year. Healthcare and well-being topics on respondent’s

minds are healthy eating, weight management, and starting or continuing an exercise program.

Source: Nielsen Canada

Retail Trends


The cost of healthcare, the ability to maintain margins and the ability to continue to grow revenue are the top business challenges in the retail Pharmacy sector.◦ Low-volume stores are really going to struggle◦ 3rd party plans looking for ways to reduce Rx drug costs◦ Plans are more complex; patients don’t understand them◦ Many ‘veteran’ pharmacists prefer to operate at the

status quo◦ Patients have a more active approach to how they

optimize their own health

Retail Pharmacy Trends


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

Future developments


Promoting Safe and Effective Use of OTC Medications

Natural Health Products Compounding Pharmaceutical specialty niches and services Adherence/Better Care/Zero Waste Go Hand-in-

Hand Focus on refills Community connections and engagement

Opportunities


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 through inter-professional collaboration

Important Insight


4 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.


Healthcare convergence


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

44% of millennials say online access to health info causes them to worry more about overall health

only 42% say they consider themselves healthy.


2015 will be a huge year for Tele-health/Tele-medicine.◦ Using secure video-conferencing to live-link patients with

their physicians 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, 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.

◦ It’s amazing what you’ll find when you can focus on these areas instead of accuracy and ‘fast’ service.

◦ Your customers will really start to see the value of your role and will soon become your patients.

◦ Focus on care first; commerce will follow.

Launching a new beginning


Question for you…

What do you hope to do when you graduate?


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

Questions?

Thanks

Follow Twitter: @passion4retail Connect LinkedIn:Gerry Spitzner Web: pharmacySOS.ca Blog: gerryspitzner.com Email:[email protected]

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Find me

Gerry Spitzner is an optimist with a natural "kid-like"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 a bright future and our ability to build it together.

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; Gerry has the unique advantage of having worked in several different business models within the retail Pharmacy industry.

Fascinated with a lifelong curiosity for why customers buy, trends and a passion for retail; Gerry guides Pharmacy retailers with strategies to create, engage and keep great customers by delivering the promise of an extraordinary customer experience. He is dedicated to sharing his thinking to build strategic business development action plans that increase sales and profit.

pharmacySOS.ca is a Vancouver, BC based business management consultancy providing Strategic Operations Services focused on drug stores and Pharmacies. Specializing in consumer trends and strategic business development helping Pharmacists to market their patient care services beyond dispensing.


About pharmacySOS.ca | Strategic Operations Services helps Pharmacy businesses plan for the future by anticipating it. More than just information; it’s about innovation and implementation.