PBS Co-Pays…Come out Swinging!

When something does not make sense and defies commonsense and logic- then it is political.
The decision to enable pharmacists to discount the PBS co-pay by up to $1.00 is one such decision.
The logic is that it will create more competition, but the reality is that it will cause erosion to the profit base of most pharmacies, already in a distressed position.
So the question is:

“What entities are pharmacies supposed to compete against?”

Certainly not Woolworths or Coles-because they are not pharmacies.
Perhaps we are meant to compete with doctors?
If it is between ourselves then surely any bystander could observe a very intense and competitive marketplace at a number of different levels.
PBS is a government controlled and carefully coordinated market that is not meant to be an ordinary item of commerce – or is it?

The PBS product life cycle has reached an endpoint and will be commoditised to a level where it will basically become a “loss leader” within pharmacy, if it hasn’t already achieved that status.
Machines and lower cost technicians will absorb the PBS task completely and a wider range of pharmacy care programs will absorb pharmacists.

There is a significant mention in the 6CPA agreement where Sussan Ley said:

“A key component of the agreement will include a doubling of investment in new and existing support programs for patients to $1.2 billion over the next five years, including a greater focus on regional and rural services.
This is recognition of the increasingly important role pharmacists play in a patient’s ‘medical team’ of health professionals and further demonstrates the Abbott Government’s commitment to delivering greater integration between health services in Australia’s primary care system.”

Judging from the “kicking and screaming” from the AMA camp after the release of 6CPA details, it would appear that medicos already feel in competition. In particular, the announcement that funds dedicated for pharmacy professional services were being doubled in the agreement, have provoked scorn from AMA leaders.
This is hardly the team effort or collaboration that was hinted at in Sussan Ley’s statement above, but this attitude will not prevail in any area of health delivery because it is simply too costly for any government to support elitism and expensive silo mentalities.
The longer the AMA remains outside a collaborative philosophy, the more “brownie points” it loses with a consequent loss of influence and prestige at all levels of government and inter-professional relationships. This attitude has been picked up in a recent article in the Australian newspaper, and titled “The AMA is a platform for self-interested grandstanders”.

An instance of the cracks appearing in AMA/government relations is the fact that a new medical school is being built in Western Australia and the AMA is being ignored in terms of its purpose.
Control of medical education by the AMA and creating it as an exclusive process, has long been a method of promoting elitism and silo spaces – and resultant expensive medical services.
The AMA appears to be undergoing a leadership crisis.

And given that the total package to pharmacy has risen by $3 billion over the 5CPA agreement, on the surface pharmacy appears to have pulled off a reasonable result.

However, there is no immediate financial relief so the agreement seems to favour the planning and building of larger pharmacies (rather than pharmacy multiples), where a more intricate system of clinics and professional services can flourish.

The message here for pharmacy is to adapt and build collaboration even when other health professions may not initially cooperate.
They will be the ones that will eventually be forced to catch up.

So, what to do with the new PBS co-pays?
Answer; take a marketing approach and trade discount for a value received, but only for registered patients.
Two immediate thoughts here are first, transfer discounted prescriptions to a quiet time of the week for dispensing, and organise separate staffing for this condensed period of time.
This will increase productivity, and overheads will reduce proportionately through taking them out of peak time periods, to allow pharmacists more time in the front of shop.
The second is to make any discount a progressive one by linking the discount to the number of prescriptions dispensed at the pharmacy.
For example, the first 10 – no discount, include the full $1.00 in the co-pay.
The second 10 prescriptions – 20 percent discount i.e. the co-pay reduces by 20 cents, and so on with each extra set of 10 prescriptions, until the full $1.00 has been given as a discount.
The total scripts dispensed may be approaching a safety net limit at that point.

Additional incentives may exist in generic switching provided there is a value to the patient.
And there is one more potential trade-off in the form of delivery service costs.
If you have not already structured a delivery service with a charge attached, then now is the time to do so.
When advising customers/patients of the charges, deliver it in the format of a comparison with Coles and Woolworths and show your charges at a point or two below theirs.
Also, tie in the discounting of the co-payment with the delivery cost.
For example, you may wish to continue offering a free delivery service to full co-pay prescriptions, but charge a sliding fee for discounted co-pay prescriptions.

By using the above methods patients are trading value and loyalty for their discount received, and the pharmacy can progressively further build a formal database of registered patients to utilise in local area marketing campaigns. 

It is important that you still retain your prescription base until you can create additional value to re-balance the government-induced loss.

But before an agreement is structured to give away such a discount you will need patients to register with you to acknowledge that they will receive a benefit by doing so.
Included within patient registration is the need to access a patient’s email address and mobile phone number so that you can build your patient base into a marketing platform for clinical services.
Local area marketing systems coupled with customer relations software will become very important, so here is an offset to franchised marketing schemes that are built mainly around products.
They have become very expensive (some up around $40,000 pa or more) so the cost of PBS discounting can be recouped in this area by maybe dropping down to a lower scale of activity.
The other consideration is that there will be pressure on space as a range of clinics are built within a pharmacy, so there will be a rationalisation of the products and markets serviced.
If there is an intention to build retail markets concurrent with professional services, the move to larger premises needs to be budgeted for, within the marketing plan.

As professional services build up, the competition will evolve around what size your patient base is, because drug manufacturers will target those pharmacies with the largest number of patients.
Health insurers may also have a future interest in high patient numbers.

The best form of advertising professional services is to publish a booklet describing the range and scope of your professional practice.
Be careful not to print too large a quantity because they will need to be updated regularly.
The booklet actually becomes your market-planning instrument as new professional services are designed and incorporated.
It is possible to even create marketing objectives around revision dates for the publication.

Separately, as confidence grows in marketing ability, a price list needs to be established covering every service on offer.
The skill in putting a professional services price list together may require external help, because it becomes your primary patient communication.
Another extension will be a pharmacopiea that lists all the cheap drugs falling out of the PBS list(such as Panadol).
These will be promoted as a patient benefit and at a low price point unseen by competitors and the general public.
This will enable a higher front of shop price for the display shelf.

The 6CPA really signals a change in pharmacy care delivery.
While there will be real difficulties in transitioning, the sooner the process is embraced the better position you will be in when competition for patients increases through other health professions.
And it is competition for patients (not customers) that will assume more importance, yet customer creation through retail marketing will still be significant activity.
The internal strategies for converting customers to patients will be the key for success in stability and survival.
While the AMA currently scorns pharmacist initiatives and complains they will have to fix the faults created by pharmacists, that attitude will soon change as patients gravitate to those health professionals who keep them at the centre and create high satisfaction levels through good care.

At the point of realisation that they are losing patient numbers and goodwill, they will readily adapt and willingly accept any pharmacist referrals – which has always been the natural order of things anyway!

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