Published by Computachem Services

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NSW Australia

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With escalating costs on the Pharmaceutical Benefits Scheme, and the rationing of health resources now a reality, Pharmacy once again must look at where the pieces may fall, and restructure their health offerings within a new mosaic.
While there is a current emphasis on cognitive services (and rightly so), to not devote some resources to the core business of dispensing now, may result in a bad case of heartburn later.
Perhaps this is as good a time as any to begin a restructuring process for dispensing, in terms of work flows, what its real components are, and how it is marketed.
The time-management aspects of work flows are under particular stress, so a "time-out" is required to make some particularly hard decisions.

Pharmacy is a resilient profession, having survived many governmental enquiries and adverse changes over time, some changes going to the very core of its existence.
Somehow, pharmacists have survived, even prospered, because many saw opportunity amidst rapid periods of change. As we have all "quickstepped" through the maze of challenges continuously thrown across our pathway, it is evident that exhaustion levels have risen, because of the extra effort required to stay afloat in all departments.

Changes to the Pharmaceutical Benefits Scheme (PBS) have been successfully absorbed in the past, but in the current round of changes, this will prove more difficult. As always, the PBS pie will remain the same in dollar terms for government expenditure, it is in the breakup of this pie where pharmacy may find itself severely disadvantaged.

The "pie" components are consumers, community pharmacists, pharmacy wholesalers and pharmaceutical manufacturers.

* Consumers will find that they will have to pay considerably more to access the PBS.
* Pharmacists will find that they will have increased drug purchase costs, margin reductions and a sales reduction as some consumers drop out totally, or find a cheaper generic alternative.
* Pharmacy wholesalers are facing a government induced margin reduction which will inevitably find its way back into community pharmacy. They will probably have to face pharmacy bulk buying groups dealing directly with manufacturers, in an attempt to improve margins. Also, they face major costs to revamp their supply chain management because of their sluggishness in adopting new technologies.
* Pharmaceutical manufacturers face sales and margin reductions as consumers seek cheaper alternatives.

While all the pie components will come under pressure, manufacturers seem to have positioned themselves for the best outcome. This positioning began under the stewardship of Dr Michael Wooldridge, the previous federal Minister for Health, who undermined the Pharmaceutical Benefits Advisory Committee by allowing manufacturer representatives within its ranks. The Celebrex cost blowout is a direct legacy of this decision.
Prior to all the above, pharmaceutical manufacturers had begun a process of global amalgamations, which have resulted in less competition between manufacturers, plus a concentration of wealth and power that has never been experienced in the past.
Resources devoted to political lobbying will be almost impossible to match, as other "pie-members" struggle to protect their turf. We are likely to see a continuing pressure on Poison's Schedules to allow a wider distribution outside of community pharmacy, ostensibly at a cheaper price, and we are also likely to see pressure applied to allow Direct To Consumer (DTC) advertising, as a means of bypassing traditional restraints on the sale of medications (doctors and pharmacists).

Wholesalers, as a group, probably have the most to lose from their "pie membership".
Two major wholesalers (Sigma and API) have sought to amalgamate, as a means of reducing overheads and gaining a scale of economies.
The Australian Competition and Consumer Commission (ACCC) has disallowed this process.
Mayne Health, while having a slightly larger market share than the other two players, is probably best positioned for survival through its integrated health strategies. Should pharmacies in Australia ever be allowed to be owned by non-pharmacists, Mayne Health would probably become the major beneficiary.
Pharmacies run as an extension of a wholesaler (or other major retailer group) would be able to run at a lower gross profit percentage, because of the ability to absorb pharmacy running costs within the main business structure, without damaging internal profitability.
Other scales of economy would follow, such as the ability to negotiate lower shopping centre rentals.

Well, enough of all the above, but I did need to set the scene for some community pharmacy strategies, to identify and seize opportunities as they arise.

Procurement Strategy:

Bulk buying groups are no strangers on the community pharmacy landscape, but bulk buying utilising the Internet would represent a definite challenge for community pharmacists at the moment.
A B2B strategy involving regional groups of pharmacists, evolving to a nationally coordinated structure, would be one method of preserving pharmacy margins.
Developing a higher profile with manufacturers and designing a strategy where they have to compete for a share of your business (thus diverting them from directly competing for a share of the consumer dollar) is an obvious pathway to go down.
While the need is obvious, you are not likely to get any help from pharmacy wholesalers, and by extension, their franchised marketing wings. Nor will you get help from the Pharmacy Guild, because there are too many traditional ties, which inhibit their free movement.

So the move to create a structure for bulk drug procurement will have to evolve directly from the front end of community pharmacy. The components required are an organiser, software to create an Internet based procurement site, and an organisation specialising in order fulfillment.

It works simply by creating a central online catalogue of products and prices. Each item selected is electronically placed in a shopping trolley, and an invoice is generated.
Payment for the invoice is negotiated by a recognised electronic method.
The orders are collated and transmitted to each manufacturer electronically, who will pack the orders (in original outers) in a shrink-wrap film for each pharmacy, identified by a bar code.
Enter the fulfillment service operator, who then collects the parcels from the manufacturers, arranges for any temporary storage, and finally delivers into each pharmacy location.

This single e-commerce site can manage any number of pharmacies in any location, provided you have access to the Internet.

GP Communication:

The GP is a vital link in the supply chain, for after all, it is the GP who initiates the demand for a particular drug. A good detailing service provide by community pharmacists, revolving around quality prescribing, plus the most economical brands, would provide strong competition for manufacturer detailing.

Manufacturers spend an enormous amount of money on doctor drug detailing, some of which may be able to be diverted to this type of project. Managed ethically, this type of communication would be a valuable enhancement for a GP practice, as most GP's would wish their patients to have the best value for money from their prescribing.

Secured Document Transfer:

The documents referred to here are prescriptions, care plans, consultant reports and segments of hospital discharge summaries. There are probably many others.
The need for a speedy and secure document transfer process (between pharmacists and GPs) is growing daily, as a means of reducing overheads and scheduling workloads.
For example, a patient who has a prescription transmitted by their doctor to a nominated pharmacist would not necessarily have an immediate need to have that prescription processed. More than likely, they would go and perform other chores, such as shopping, after transmission, and make the pharmacy the last port of call. Alternatively, they may opt to have the prescription delivered (for a fee).
If the time of pick up is negotiated in advance, you would end up with less pressure from patients and more time for counseling.
A system like this, if properly implemented, could have a positive impact on pharmacy workloads, simply because there is now a method for electronically scheduling work and marrying it up to an economically appropriate work flow.

Internet Dispensing:

There has been a lot of emotion and drama injected into the debate on Internet dispensing.
On one hand, the Internet offers an opportunity to provide a service outside of traditional geographical boundaries, with the prospect of a lower cost offering to patients.
On the other hand, the opportunity for face-to-face counseling is diminished.
There has to be a compromise, because if pharmacy does not embrace the positive aspects of the Internet, other non-pharmacists will. And they will have a good argument.
Consider that if a patient submits their prescription to an Internet pharmacy accompanied by a recent pharmacist-produced medication review.
Would this not be a valid opportunity to supply legitimately via the Internet?
And would this not present a new opportunity for consultant pharmacists to sell their services direct to the general public?
Internet dispensing also presents another opportunity for work scheduling, for Internet orders can be processed in the evening (if there is a high volume), behind closed doors, to prevent work flow interruption. Patients would not be expecting a five minute service for these types of prescriptions, and at the very least, they can be scheduled for a "down time" component of a working day.

And what about repeat prescriptions?
Surely, these days, it could be assumed that the original prescription had been counseled with the original dispensing?
If not, a standard signed form from a patient stating that they had received appropriate counseling might be a reasonable compromise?
There seems to be no valid reason why prescription repeats cannot be handled by an Internet pharmacy given the above reasonable safeguards.
The bonus comes in the increased sale of cognitive services (medication reviews) and the ability to match dispensing to economical work flows.
Certainly, another survival strategy.

Automated dispensing equipment:

In the last edition (Number 3) of i2P e-magazine, I wrote about robotic dispensing and how this was having an effect on entities with a high prescription volume.
As developments in robotics increases, opportunities will be afforded pharmacists to automate many of their dispensing procedures.
For example, I believe that the Webster-Pack people have a machine packing system for their blister packs, eliminating a very tedious and time-consuming activity.
What if this type of prescription processing improves to the situation where you are not only able to tailor dose-specific packs for a patient, but you may be able to introduce elements of compounding and provide a better presentation of the end product?
Here, the basic skills of a pharmacist are able to be employed in a traditional mode.
It offers a market tool of differentiation and another aspect of a patient being able to select a pharmacist because of the personal interest taken in that patient.

All the above represents opportunities for value-adding, which is not dependent on margins available within the formal system. It also offers opportunities for work scheduling and labour replacement, which has to be a bonus in these days of pharmacist and other skilled labour shortages.

Prescription pricing:

The opportunity to present a range of prices for a prescription, creates an opportunity for work scheduling, which can save on costs and reduce stress levels in the working environment.
No, I am not advocating blatant discounting of prescriptions, but a discrete range of choices offered to a patient on the basis that if you enter into, and reduce my overhead structure, then I will pass the savings on to you.
So if a patient is willing to wait for you to order a prescription product in, you can automatically pass the cost of holding that item, on to the patient.
If a patient is willing to wait and link in to your "down time", not only does the patient get a financial benefit, but maybe is afforded time for counseling
If a patient is willing to sit down at an Internet kiosk located within your pharmacy and enter their prescription details, download and print the product information etc. then maybe a financial benefit is earned by that patient for doing part of your work for you. Plus, after accessing your site, they may become regular after-hour visitors, giving you an extra dimension for increasing market share.
Obviously, there are restrictions based on the no discounting rules for PBS prescription impost prices, but this leads me into another innovative area for you, the reader to pursue.

Prescription banking:

With a natural expected consumer resistance to price increases, now and for the future, it may be possible for you to set up a patient budgeting system, utilising a bank agency as a type of Loyalty Club.
I have noted the use of bank agencies in pharmacies, covered in early editions of Computachem E-Newsletter.
Agencies usually offer a reasonable commission for opening a new account, but commissions for deposits and withdrawals are only nominal.
However, with your initial account-opening commission, share half of it with each of your patients who elect to open a prescription budget account. This would amount to $10-$20.
Encourage your patients to make regular deposits towards the future cost of their prescriptions, and top up their balances, utilising a creative approach to prescription marketing.
Envisage that your Internet procurement system is seen as valuable to a manufacturer, who may wish to participate in your catalogue. Envisage further that the manufacturer may wish to pay a fee for that service, and that the fee is divided evenly among all prescription bank accounts.
You are now tapping marketing funds normally used by the manufacturer for detailing, being diverted to subsidise the price of their products, which remain at listed price. The only difference is that the patient is better able to make the purchase.
Where you can involve the patient in a workflow process, and there is a genuine and measurable savings in time and effort, pay them some form of a "wage" and deposit it in their prescription bank. This again, maintains your listed prices and assists patients in their ability to purchase.
This could be applicable to Internet ordering of prescriptions, but with a little imagination, I am sure you can develop some more creative ideas than I.
The above suggestion is only designed to stimulate your thinking "out of the square".

It also begets the question of how relevant franchised marketing groups are in this day and age.
Would the franchise fee be better spent by simply depositing an equal value in a prescription bank?
Franchised groups as they are currently structured, can do little to protect your core business because they are owned by wholesaler interests, not necessarily convergent with your own.
It is one of the many areas that require a total rethink, and it may stimulate marketing groups to come up with better support packages.
Only time will tell.

Usually, I request readers to peruse previous articles I have written, in sequence, so that you can gain an insight into my total commentary on the developing professional aspects of pharmacy.
The link page can be found here.

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