In comparison with the traditional volume-based pharmacy model, the membership model decreases financial barriers while increasing customer-pharmacist relationships.
Researchers observed both value-based and volume-based pharmacy models and found that a value-based membership operation would reduce the financial burdens experienced in drug purchasing and establish better customer relationships, ultimately creating better health outcomes for patients.1
“The volume-based model is centered on prescription fulfillment, with pharmacies incentivized to maximize the number of prescriptions filled. Conversely, the value-based model treats prescription fulfillment as an expense and emphasizes medication adherence as the primary goal. This shift in focus leads to a radical change in the pharmacy’s business model, aligning economic incentives with patients’ best interests,” wrote Hohmeier et al.
The proposed membership model does just this: focuses on the best interests of patients without creating greater incentives for filling and selling prescriptions.
Because customers would be paying a fixed, recurring membership, they would not have to worry about out-of-pocket costs for prescription drugs. This would lessen the burden of pharmacists incentivized to move as much product as possible.
Researchers from the Hohmeier et al study performed an analysis of both pharmacy models to assess whether a membership service would be a viable option for pharmacies going forward, in turn, improving the overall patient outcomes for all customers.
Before exploring the newer membership model, it’s important to understand volume-based pharmacies, the model in which most pharmacies have operated since their inception.
“In the traditional model, a pharmacy purchases large quantities of drugs and supplies, then prepares smaller quantities in a dosage form (e.g., tablets, solutions, creams) per prescription,” wrote the authors.1
The volume-based pharmacy is the model most of the population is familiar with.
In order to drive profits, pharmacies are incentivized to maximize the number of products sold and minimize the number of products in their inventory. Furthermore, they are incentivized to focus on prescription profits rather than adherence.
“Prescription adherence is having access to the right medication at the right time and taking it properly with the goal of achieving better health outcomes,” continued the authors.1
With the traditional pharmacy model focusing on profits, patient accommodation is deprioritized for clearing inventory, which is also known as the inventory—or “just-in-case”—model.
“Consequently, the inventory model is termed just-in-case (JIC), requiring the pharmacy to keep a large inventory on-hand ‘just-in-case’ a patient needs it,” they continued.1
The just-in-case model has been increasingly difficult to maintain because of rising drug costs. Ultimately, profits in the traditional model are reliant on maximizing sales, no matter who the customer is, rather than retaining a customer-client relationship, something that is highlighted in the value-based pharmacy.
“The business model itself disincentivizes improving medication use because the pharmacy can primarily increase revenues by increasing the number of prescriptions sold, increasing the price of each medication, or increasing the dispensing fees associated with each fill,” they wrote.1
In comparison with the volume-based model, the membership model creates a “just-in-time” (JIT) inventory for pharmacies.
In a JIC inventory, pharmacies are incentivized to maximize the number of products on hand to accommodate customers at any time. However, a JIT inventory brings time into the equation.
“In JIT (just-in-time) inventory, the pharmacist works to order medications only when needed for quarterly synchronized medication fills simultaneously for all membership patients to maintain the smallest inventory necessary—reducing inventory costs and simplifying inventory management,” wrote the authors.
Once a membership is established, pharmacists know the exact number of prescriptions to fill and exactly when they must fill them.
“The value-based model does not generate revenue based on prescription fills; rather, revenue is realized through membership fees,” they continued.1 “Due to its intrinsic financial incentives, the membership model has been shown to reduce topline prescription drug spending by 35%, drive adherence by increasing ‘proportion of days covered’ rates above 90%, and reduce pharmacy visits to every 4 months for over 95% of prescriptions filled via medication synchronization.”
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With constant focus on maximizing profits and prescriptions sold in the current pharmacy landscape, the value-based model flips pharmacists’ incentives to highlight the customer rather than the seller.
“Through the purchase of a membership, patients pay for access to at-cost medications (since revenue is generated by membership fees, there is no need to markup medication acquisition costs), proactive medication management during fulfillment, and an overall improved pharmacy experience,” they wrote.1
Good Shepherd Pharmacy in Memphis, Tennessee, originally opened as a discount drug seller for the under-insured. They launched a value-based program in 2017 and have since seen successful results.
“To further lower operational costs, per-patient synchronization was transitioned to a ‘group’ synchronization practice whereby all patients at [Good Shepherd Pharmacy] were synchronized to the same fill period. Internal analysis demonstrated high levels of patient adherence, reduced out-of-pocket prescription costs for patients, and a financially sustainable business model based solely on membership fees,” continued the authors.1
With new innovations in the pharmacy space looking to give back to patients, while simultaneously taking stress away from pharmacists, systems like the value-based membership model have increased potential to benefit health outcomes for the entire population.
“The idea of synchronizing all medications for all member patients at set periods over the year to maximize clinical efficiency, labor efficiency, and purchasing efficiency is not just theoretical—it has been shown to be both effective and feasible in practice,” they concluded.
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