Pharmacies have always existed in different formats to give customer or patient choices.
Physical size has been one of these determinants, but does size really matter?
Pharmacy, as an industry has relied on the PBS as being the centre of its universe.
In so doing, pharmacists have skewed pharmacy practice to becoming overwhelmingly geared towards the quick dispensing service that patients find attractive.
But those same patients also feel let down because the production line that has evolved in the dispensary has physically separated pharmacists from their patients.
Income gaps have traditionally been filled through retailing, but the capital and management skills required in an intense environment of competition, has meant that a different form of “skewing” has evolved and given birth to warehouse pharmacies.
PBS bureaucracy has found that it could pass on costs and manipulate policy through the PBS, which has made it ever burdensome for pharmacies.
Pharmacy’s core business is primary health care which comprises dispensing and clinical services.
Dispensing has thus evolved into being 90 percent owned by PBS (and funded by government).
The clinical service role of the pharmacist has been politically diminished through a number of factors that include ongoing vocal opposition by the medical profession and cost pressures within the PBS system.
The result is now a lopsided profession trying to repair the imbalance and restore the clinical service income, which traditionally was earned as a margin on products sold.
Pharmacy has traditionally held a large market share of primary health care that is ignored by the medical profession and not recognised by government.
That market share has diminished from a high of 70 percent to an estimated 40 percent (and declining), with the lost segment being shared between the medical profession and complementary medicine practitioners.
Pharmacy must restructure its professional approach before any reforms can occur that would be acceptable to government and the medical profession.
Not that we have to “touch the forelock” to either of these entities, but the buzzword for the moment is “collaboration” so we must decide what that actually means in practice.
To say that there is little research, investigation or planning by anyone vitally interested in pharmacy collaboration is an understatement, as the medical profession places restrictions on all “health turf” excluding all others, and government is only interested in cutting costs without losing votes.
So a hiatus exists which means pharmacy cannot capitalise on the rapidly expanding health market, that is concentrated in an ageing population and a range of smaller demographics.
What follows is an analysis of pharmacies and the direction each different type will follow.
Pharmacies divide up into two broad classes that are titled “Retail Pharmacies” and “Community Pharmacies”.
Retail pharmacies deal substantially with customers and regard their major competition as other retail pharmacies and supermarkets.
They have difficulty in recognising “patients” within their environments and generally engage with them in a commoditised fashion, which manifests as a discount prescription service or a discount professional service e.g. a $9.95 flu vaccination service.
As such, they need a large trading area that is staffed by people paid at the lower end of the pay scale as part of the support needed for discount prices.
Patient engagement is only given lip service.
Discount price is the paramount format for marketing and this model needs expanding cash flows in the form of additional outlets and relies on “brand subsidies” to expand market share per outlet, and gross profit through marketing devices such as shelf rentals charged back to brand suppliers.
They need national advertising delivered in strong media formats to continually drive their sales.
Community pharmacies deal substantially with patients in their local community and genuinely try to develop patient engagement, by taking a personal interest in patient health.
With the PBS now having reached the end of its life cycle without pharmacy’s leaders paying too much attention to this fact, this group of pharmacies is feeling highly vulnerable through losing PBS income at a rate of knots as well as being assaulted on the retail front by the retail pharmacies and supermarkets.
This group of pharmacies have not adapted to what i2P has defined as “The Aldi Strategy” which pushes “like brands-only cheaper” for its primary retail effort.
There is a gap in the marketing group offering for a catalogue containing only generic products spread across a wide product range, that may even be able to become uniformly “branded”.
The PGA Gold Cross comes part of the way in this process but needs to be expertly and professionally revamped.
Someone external to the PGA and the established market groups would probably do the job better and if the manufacturers that fit in this segment created a collaboration, they could become a real force in the industry.
Community pharmacies need to have at the centre of their marketing activities a “Local Area Marketing Program” that can be developed and organised internally with expertise hired from a number of consultancies that could be very effective.
Control through email campaigns and linked website pages would be the main media with the remainder reliant on in-store merchandising and new formats such as “Connected Glass”.
There is an important subsection of community pharmacies known as the “Compounding Pharmacy” which is a specialised pharmacy that concentrates on the core business of pharmacy that includes treating a limited number of health conditions and has a significant number of paid patient consultations in its offering.
So, primary health care delivered in a pharmacy specialist environment through clinical services and dispensing.
A large number of compounding pharmacies do not rely on PBS prescriptions and it is significant that not only has this type of pharmacy flourished over the past decade, but continues to show strong growth in sales and profitability.
Certainly a different trajectory compared to its PBS-centric community counterpart.
There are some models of pharmacy that try to be all things to all people and you see a discount pharmacy with PBS dispensing plus a compounding laboratory grafted on.
This model has not been as profitable and has been harder to manage with pharmacists and technicians having to share time between the dispensary and the laboratory.
The fastest growing pharmacy type in the US is known as the “Specialty Pharmacy” which has a compounding laboratory at its centre, plus clinical service pharmacists embedded in their own clinical spaces privately located at the centre or front areas of the pharmacy.
The most common specialties serviced are clinical nutrition (including TPN dispensing), sexual health, rheumatology, multiple sclerosis, inflammatory bowel disease, sickle cell disease, women’s health, transplant, oncology, and HIV/AIDS.
There is no reason why this type of pharmacy clinic cannot expand into the more common areas of respiratory disorders (including cough and cold), pain management, and men’s health.
It is only a matter of scale vs cost and reimbursements from government and health insurers will increase as a realisation of the effectiveness of pharmacy care solutions evolve.
i2P believes that it is the Specialty Pharmacy Model that will emerge in Australia as the eventual destination for community pharmacies and their patients.
The primary reason for its pathway to dominance is because it is built to accommodate pharmacy ownership aspirations and clinical services practice ownership – both co-existing in the same premises.
Thus there is a clearly defined career pathway and an extension of the clinical service pharmacist to evolve as a prescriber.
Initial prescribing focus will be for S2/S3 products that will hopefully become PBS listed items, and for the products that evolve from the specialist areas that they form part of. This is much like the clinical nurse practitioners who can only prescribe within their specialty.
This type of pharmacy may also build collaboration with clinical nurse practitioners to try and build a home outreach.
Because of the high level of service, patients will travel to a specialty pharmacy and so there will be less reliance on having a prime commercial site.
This will create a permanent plus to the bottom line and allow for clinical service pharmacists to be paid a decent hourly rate derived from fee for service paid directly by patients, or subsidised from the higher gross profit rate from specialty dispensing.
Specialty pharmacies created in rural and remote areas, and some in suburban areas, may be able to extend service capacity by having living quarters attached (upstairs or at the rear of the building) allowing for a potential 24/7 service access, including a call centre.
Young pharmacists will then have a genuine incentive to build such a practice and capitalise on their underutilised knowledge base.
They will pioneer new and cheaper locations.
This process would be further accelerated by abandoning location rules, but ownership restrictions should continue to exist – at least for a decade to allow the clinical service component to mature.
Here’s how one US start up budgeted the build for their pharmacy service:
“The specialty pharmacy service initially was staffed by one pharmacist.
To ensure we could cover our costs, we calculated the value of each patient prescription.
For example, if a specialty prescription has a “profit” of $100, and the patient is on therapy for one year, then the value of that patient prescription is $1200 per year.
Once this first pharmacist’s time was covered by prescription capture, we used the above formula to calculate the number of prescriptions we needed to capture and fill in order to justify additional hires.
Our initial goal was to be self-supporting, and later to profit.
We were able to continue in this way—using pharmacists part-time and growing the business—from 2007 to 2012, when we received approval from administration to consolidate our efforts and establish a true specialty pharmacy “call centre”.
At this time, the pharmacist who had been handling most of the specialty responsibilities along with the rest of the job became a full-time specialty pharmacist, and we hired one technician.
We also hired a clinical liaison pharmacist, who helped us establish our call centre functions, and two full-time pharmacy students assisted during the summer months.”
“Once break-even point had been established various techniques were developed to access data and mine for broad therapeutic opportunities.
Based on our monthly data mining for prescription items dispensed, we developed services for rheumatology, multiple sclerosis, inflammatory bowel disease, sickle cell disease, and women’s health, among others.”
“Once product opportunities were defined, we turned our attention to identifying new patients.
Potential patients for any health system may include hospital patients, hospital employees, students, and the general public.
Plentiful opportunities to negotiate arrangements (with manufacturers) exist if the registered patient base or employee base is large.”
Because this was a US pharmacy all payment methods were investigated and patient need was matched with an appropriate insurer ranging from Medicare, Medicaid and across a range of private insurers.
Again with a large patient base it is possible to aggregate patient insurance for a much lower cost.
The way that Australian health needs are escalating it would seem an association with private insurers would be a prudent future move.
It is known that there are some potential payment systems being developed that will be cheaper for patients than existing systems and i2P will publicise these as they become available.
The next development step involved capture of specialised prescriptions.
“Consider how prescriptions written by your health-system providers will be captured by the specialty pharmacy. How will leakage—i.e, sending prescriptions to other specialty pharmacies—be prevented?
We sent our first specialty pharmacist to a hospital GI clinic once per week to capture prescriptions by helping with prior authorisation.
That was the start of our specialty pharmacy call centre, which now processes over 100 new prior authorizations and reauthorizations each month for prescriptions we fill in the specialty pharmacy.
The key to our capture model is embedding clinical pharmacists in as many specialty clinics we can to facilitate identification of potential opportunities.
Without this strategy, we would not have a robust specialty pharmacy operation.
If embedding specialty pharmacy staff in clinics is not an option, consider utilizing in-house advertising to make your existence and services known to any specialty units and clinics and ask for their specialty prescription business.”
Perhaps this may be a more workable collaboration with doctor practices than trying to work as employees of GP surgeries, although all opportunities should be exploited.
At least there is a clear delineation of work flows and the opportunity to develop a working relationship for referrals and other clinical conversations.
There needs to be a clear message sent to the medical profession to respect pharmacy need to have an expansion pathway and freedom to move.
Whatever that pathway ends up being it will be drug-centric with some clinical input.
There will always be overlaps between professions.
The traditional method has always been for a pharmacist to service their patient to the maximum limit of their licence, and then refer appropriately to an experienced practitioner for further assistance.
This may mean clinical service pharmacists will need to become specialist prescribers with the ability to refer patients to an appropriate medical specialist.
It would be too expensive to keep layering the system to include referral to a GP if specialist attention was needed in those instances.
There will be these complex areas where protocols need to be sorted, but it is clear that patients need a more economical system without having to wear out their shoe leather to access different medical overlays.
With the Intergenerational Report clearly showing an explosion in the ageing population, and life expectancies entering the early 100’s not too far away, the problem will not be the worry of GP’s losing patients to clinical pharmacists, but patients losing access to a quality health pathway that is affordable.
Pharmacy has a part to play at all levels.
Based on our investigations to this point it is clear to us that the traditional community pharmacy is under threat no matter the size and existing turnover.
Those pharmacies have to be converted to retail pharmacies by being part of an organised group, be located in prime retail locations, and above all, have access to a range of funds to cover all emergencies.
If too many adopt this model competition will become very intense and only the strongest financial contenders will survive.
The other alternative is to become a Specialist Pharmacy built around specialised health conditions and servicing the drugs for those conditions.
That means not bothering with the PBS licence or only dealing with the minimum number of specialised drugs in the PBS system.
Many new drugs need special attention and their manufacturer sponsors would be keen to ensure no mishaps as they launch these new (and generally expensive drugs) on to the market.
They can be tapped as a source of payment to be involved in a clinically supervised launch.
A much cheaper program if a conveniently located Specialty Pharmacy is not too far away, having a range of access services available (phone contact 24/7; delivery service; call centre advisory system).
Some existing model community pharmacies may extend their lifespan by just simply adding specialties to their existing model without any real planning, but at some stage their overheads will make their professional lives a misery.
Another thought for Specialty Pharmacies is that they would make excellent training areas for intern pharmacists.
This could provide a subsidised form of labour and a pool to recruit suitable new partners from – to expand an existing practice or to start an entirely new pharmacy.
The Specialty Pharmacies would also need some form of an association for industrial and advocacy matters and the PGA may not be suited to this newer environment.
These are all forward considerations.