Diversify and Prosper

February 12, 2019

How to build new revenue streams and show your value by expanding services.

Independent community pharmacists might be the quick-change artists of the 21st Century, both out of necessity and by choice. Nimble enough to reinvent their practices in response to new economic and business challenges, they are increasingly adding innovative services that meet the dual purpose of delivering exceptional customer service and opening up additional and much-needed revenue streams.

“Simply filling prescriptions as fast as possible is no longer a viable business model for most community-based pharmacies,” notes the 2018 NCPA Digest. “Strong local relationships and a focus on local healthcare service delivery is the backbone-and the future-of community pharmacy in America.”

Role Transformation

Long considered to be among the most readily accessible healthcare providers in the United States, community pharmacists have always prided themselves on providing the highest quality of patient care. They just haven’t always been recognized or paid for their efforts. Those days are over, according to industry observers.

“The Expanding Role of Pharmacists in a Transformed Health Care System,” a paper issued by the National Governors Association (NGA) in 2015, notes the ongoing and significant transformation of the healthcare system in terms of both finances and delivery of services. It also recognizes the changing role pharmacists play by providing a wide variety of patient-centric services as part of an integrated healthcare team.

“Integrating pharmacists, who represent the third-largest health profession, into such systems is important for achieving intended goals,” the NGA states. “Pharmacists have the professional expertise to address key challenges facing the healthcare system, including the prevalence of people who have multiple chronic conditions and the increased use of more complex medications to manage those diseases.”

This new way of thinking coincides with today’s economic reality that independent pharmacists can no longer rely solely on prescription drug sales for their livelihood.

The Marketplace

In 2017, independent community pharmacy was a $77.6-billion marketplace, with 92% of sales derived from prescription drugs. However, gross margins as a percentage of sales decreased for the fourth straight year to 21.8%. NCPA attributes most of the reduction to below-cost reimbursement and unpredictable DIR fees in Medicare Part D.

Reimbursement has long been a thorn in the side of many community pharmacists trying to do business in a healthcare system where payment policies are driven by product-based reimbursement rather than the direct-care services provided to patients. For example, one study reveals that while 80% of the respondents were providing medication therapy management (MTM) services directly to patients, only 35% were compensated for their efforts.

“The change in reimbursement structure is essentially placing a squeeze on the pharmacist’s ability to provide services in conjunction with prescriptions,” says Trista Pfeiffenberger, PharmD, MS, director of quality and operations at CPESN USA. Still, she says the organization’s members don’t want to compromise on the services they provide because they strive to give their patients the best care possible.

“We’re now at a point in healthcare where the movement to the value-based aspect on the medical side will really create a nice opportunity for pharmacies to see their business model flourish around services,” she says.

Phil LaFoy, RPh, is a co-owner of Blount Discount Pharmacy in Maryville, TN. Deeply invested in diversification at his three retail outlets, he offers a variety of services including immunizations, hospice care, compounding services, a diabetes care program, smoking cessation classes, MTM, and a medication compliance program.

LaFoy likens the core of his business to the hub and spokes of a wheel. “The hub is our long-time loyal customers, patients, and family members who come to us generation after generation. The spokes are our services,” he explains. Diversification, he adds, “ultimately grows the business, but primarily it helps us take better care of people we have.”

Niche Services

Jake Olson, PharmD, made the decision several years ago to add niche services to his pharmacy. Choosing which services to offer was practically a no-brainer and was based primarily on one factor-location, he says.

Olson’s Skywalk Pharmacy is situated at Children’s Hospital in Milwaukee. “About 15 years ago, we decided pediatrics was a category that other pharmacies and chains really weren’t focusing on,” he explains. Within that niche, Olson concentrates on providing services for kids who are undergoing treatment for brain tumors, recipients of a heart or solid-organ transplants, and growth hormone patients.

The primary focus is on transitioning these young patients smoothly from hospital to home, which is often located in a small rural town where the local pharmacy may have limited experience in treating such complicated medical conditions.

Olson’s solution was to establish a med sync program. “When you have a kid on 10 different medications-some of them are compounded, some are specialty and not available at all pharmacies-you’re proactively working with the mother, the doctor, and the insurance company for prior authorizations to make sure you don’t have a gap in therapy,” he says. “A gap in therapy for a guy with cholesterol or Type II diabetes medication is troublesome, but when you have a kid with a heart transplant, there cannot be a gap.”

Meeting Community Needs

At Gatti Pharmacy in the college town of Indiana, PA, owner Stephanie Smith Cooney, PharmD, tailors her offerings to the specific needs of the community. In addition to discounts, prescription transfers, free delivery, and the Rx Local App aimed at students, she lists immunizations; travel medicine consultations; diabetes prevention; special packaging; med sync, comprehensive medication reviews; and mastectomy, bracing and diabetic shoe fittings as good returns on her investment.

“For many of the services that we provide, we just see an opportunity, and we try it and see if it works. If it does, we continue to offer it. If not, it doesn’t last long,” she says. “A big part of a new service consideration is whether or not it checks the boxes of potentially helping us move more into the clinical world and providing value to the patient and the provider.” 

LaFoy says he has some winning services (immunizations, travel medicine, diabetes education) and at least one-specialty pharmacy-that worked for a while, but eventually faded and was sold. And then there’s MTM.

“I’m not making any money on MTM, but I’m not losing any money,” he admits, adding that he can’t afford not to do it. “With all the Star Ratings and compliance numbers, we decided to hire a really good pharmacist to take care of this because it’s a lot of work. He gets more phone calls than I do. He’s out in the community and has become one of the faces of the company because he touches so many lives.”

The “M” Word

Marketing, as defined by the American Marketing Association, is the process for “creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” It sounds simple enough, but not everyone is comfortable tooting their own horn, says Kurt Proctor, PhD, RPh, senior vice president of strategic initiatives at NCPA.

“Clearly, being able to market yourself might have sort of a retail sound to it, but it’s really a skill that everybody needs to have,” he says. “Whether you’re promoting yourself internally to upper management in a health system or talking to payers or to consumers, you do need to know how to promote yourself and talk about the value of what you’re bringing.”

Marketing is a concept that Liz Tiefanthaler, president of Pharm Fresh, advises pharmacists on to help them get over their aversion to self-promotion. “I like to tell people they’re not building a field of dreams. Just because it’s there doesn’t mean people are going to show up,” she explains.

Tiefanthaler says the marketing challenge is to reach people who are so bombarded with information that they’re effectively on autopilot. She tells pharmacists that the key to breaking through that fog and reaching potential customers is to become their habit.

“We used to feel like we could reach a new customer in about five touches, but now it’s up to 19 because they are just so deluged all day long with information,” she explains. “That means you’re going to have to try a lot of different things. It’s not just one platform.”
Marketing is also a significant chunk of the Enhanced Services Boot Camp run by CPESN USA and NCPA, says Jay Williams, CPESN’s Director of Marketing Communications. He maintains that the notion of consumer choice often goes by the wayside in the healthcare system.

“You have insurance, and the insurer is directing the patients to where they can and can’t go, and doing so with incentives to go to this place versus that place,” observes Williams. “You can get a lot of new customers into your pharmacy, but if the insurance is unwilling to work with you or reimburse at the same rates, it makes it more challenging.”

Taking on the Competition

Katherine O’Neal, PharmD, MBA, agrees that it’s extremely important that independent pharmacists market themselves, especially in light of competition from chain and mail-order pharmacies. O’Neal is associate professor at the University of Oklahoma College of Pharmacy. “I don’t think independent pharmacies can compete at the same marketing or advertising budget that the large retail chain stores have, so what they do at the community level with their customer loyalty and the services they provide is key to success,” she says.

Cooney admits that she personally isn’t comfortable with marketing, but she recognizes its importance to her business. She has had a part-time marketing professional on staff for the last five years to promote all the different ways the pharmacy takes care of its patients.

“We spend a lot of time working on our website, making sure it’s changing and relevant and doing some things with key words so people can find us if they’re looking for specific services,” she says. The pharmacy also has a social media presence, a newsletter, and an email program to get the message out to established and potential customers.

Olson establishes his pharmacy’s reputation by going above and beyond the expectations of his patients and providing services they can’t get at other pharmacies. “You want the people who are affected by whatever disease state you are an expert in to say, ‘This is the place you go,’” he says.  

Pharmacists Helping Pharmacists

The current challenge facing all medical providers-pharmacists especially-is the ongoing transformation of the U.S. healthcare system to a value-based care and reimbursement model. Pharmacists are adapting to this new reality in the ways outlined above as well as by adopting a concept already in use in other areas of healthcare: a clinically integrated network of community pharmacies

CPESN USA is a shared services entity for dozens of localized CPESN networks. Member pharmacists collaborate to improve the quality of care offered to patients and to offer value to payers through enhanced services and lower costs. In return, they receive a share of the money that payers save in patient care costs as a result of the services they provide. CPESN USA has two non-profit member owners, Community Care of North Carolina and the NCPA, and it is managed by representatives from the local networks.

“Routine patients just need a pharmacy to get their prescription filled. More complex patients-the ones costing the system money, who are difficult to reach, who have difficulty understanding what’s going on with them-are the ones CPESN is primarily focused on and delivering the enhanced level of care they need to lower their total healthcare costs,” NCPA’s Proctor explains.

Williams at CPESN acknowledges that the concept of spending money to make money can be a tough sell for pharmacists who’ve had their hopes for reimbursement raised and dashed many times in the past. However, he advises that the time to act is now.

“The payer community is going to come around and start to reimburse for these services, so pharmacists have to jump on this opportunity to provide those services and to tell their story differently before they fall to the same fate of independent community pharmacies that have closed over the years,” he says. Even a big box chain like Target decided to get out of the pharmacy business by selling its in-store pharmacies to CVS, he notes. 

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