UBC Phar400-business of pharmacy-14sept2012


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Overview of the business of Pharmacy presentation to 4th year UBC Pharmacy students.

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UBC Phar400-business of pharmacy-14sept2012

  1. 1. UBC – Phar400 | Pharmacy Management retailSOS.ca | Gerry Spitzner September 14, 2012
  2. 2.  Objective; High level view of the Pharmacy business Thoughtstarters People and moving parts of retail Pharmacy Types of Community Pharmacy practice Retail Pharmacy main differences Logistics and the Supply Chain 4 key controllable areas Customer Experience Future Developments, Issues and Opportunities retailSOS.ca | Gerry Spitzner 2
  3. 3. A few basic acronyms andfrequently used jargon in retailPharmacy retailSOS.ca | Gerry Spitzner 3
  4. 4.  AR/AP = Accounts Receivable/Payable P&L = Profit and Loss statement POS = point of sale POP = point of purchase WMS = warehouse mgmt system SKU = stock keeping unit MOM = minimum order multiple CPG = consumer package good IND = independent retailer RDA = Retail Display Allowance retailSOS.ca | Gerry Spitzner 4
  5. 5.  UPC = universal product code QR = quick response code PO = purchase order GMROI = Gross Margin Return On Investment CRM = Customer Relationship Management DSD = Direct Store Distribution EDI = Electronic Data Interchange EDLP = Everyday Low Pricing OTB = Open-to-Buy POG = Plan-o-gram retailSOS.ca | Gerry Spitzner 5
  6. 6.  HHC = Home Health Care DME = Durable Medical Equipment OTC = Over The Counter NHP = Natural Health Products HBA = Health & Beauty Aids LTC = Long Term Care AAC = Actual Acquisition Cost MALP = Maximum Allowable List Price U&C = Usual and customary ( refers to fee ) retailSOS.ca | Gerry Spitzner 6
  7. 7. The key to business survival. retailSOS.ca | Gerry Spitzner 7
  8. 8.  Healthcare is a business and always will be; but Pharmacy is an art. ◦ In today’s world, business is built on relationships. ◦ People do business with people they know, like and trust. ◦ Put relationships first – then reap the long term high quality growth that follows. ◦ Consider the life time value of a customer rather than just as a one-time transaction. retailSOS.ca | Gerry Spitzner 8
  9. 9. Why should the business come toyou... rather than someone else? retailSOS.ca | Gerry Spitzner 9
  10. 10.  What problem does my service solve? What am I solution for? Why does it matter? ◦ Your job is not to sell something; rather it is to fulfill an intention. ◦ Fulfilling an intention is a motivator to buying. ◦ The applied benefit of the benefit. ◦ Never about what you can get; always about what you can give. retailSOS.ca | Gerry Spitzner 10
  11. 11. A function of the bundle ofperceived benefits offered at agiven price. retailSOS.ca | Gerry Spitzner 11
  12. 12.  Confidence is the #1 factor ◦ in determining what, from who and where customers buy... quality is #2, service is #3 selection is #4 and price is #5 retailSOS.ca | Gerry Spitzner 12
  13. 13.  How can you?... Help them save money Save them time Make them feel safe Make them feel special retailSOS.ca | Gerry Spitzner 13
  14. 14. High Level Overview retailSOS.ca | Gerry Spitzner 14
  15. 15.  Staff  Canada Revenue Agency Nurses  Provincial Government Doctor’s Receptionists  Loss Prevention services PharmaCare & PharmaNet  Employee Relations & HR College of Pharmacy  Payroll services Municipal  WorkSafe BC Landlord  Technology providers Banker  Retail Insurance providers Accountant  3rd Party providers Bookkeeper  Wholesaler Lawyer  Manufacturer Suppliers Contractors  Other Suppliers Head Office  Delivery Services Neighbouring tenants  CompetitorsDoctors Patients and Customers retailSOS.ca | Gerry Spitzner 15
  16. 16.  There are three broad areas to every business; Finance ◦ Monitoring, analysis, cash flow, P&L Marketing ◦ Ideal audience and services communication Operations ◦ Delivering the promise and customer experience retailSOS.ca | Gerry Spitzner 16
  17. 17.  Health Authority Associated Pharmacy  ambulatory care pharmacy, cancer drug pharmacy, HIV drug pharmacy, hospital pharmacy, corrections facility pharmacy, addiction Community Pharmacy  “full mix” retail pharmacy, Health Centre, simply a pharmacy, consulting pharmacy, compounding pharmacy, veterinary pharmacy, central fill pharmacy, mail order pharmacy Other Pharmacy  nuclear pharmacy, military pharmacy retailSOS.ca | Gerry Spitzner 17
  18. 18. What are the main types ofCommunity Pharmacy and thedetails of how they work? retailSOS.ca | Gerry Spitzner 18
  19. 19.  Alternative medicines (NHP’s)  Consultations Vitamins/OTC’s  Private Consultations Orthotics and mobility aids  Medication Management Wound Care  Blister Packaging  Medication Reviews HBA  Patient Education seminars Cosmetics  Disease state screening Electronics  Chronic Disease Mgmt Food and Groceries  Immunization Post Office  Refill services Greeting cards  Delivery services Books and Magazines  LTC and Group homesDepartments and Products Professional Services retailSOS.ca | Gerry Spitzner 19
  20. 20.  4 Main types of Retail Pharmacy Corporate Pharmacy Franchise Pharmacy Banner Pharmacy Independent Pharmacy retailSOS.ca | Gerry Spitzner 20
  21. 21.  Wholly owned by a large company Manager is an employee of a chain Pharmacy Pharmacy is a department managed by a Pharmacist Managers are paid a salary and compensated with performance incentives Grocery stores fall into this category Rexall, Wal-Mart and London Drugs retailSOS.ca | Gerry Spitzner 21
  22. 22.  “SDM | Associate” concept  Own the business but not the physical assets  No capital investment or capital risk  Guaranteed minimum annual income and Benefits  “Share” in profitability  Support services in all areas of Operations  Many “masters”  Associate agreement is a renewable 3 year deal  Retained equity requirements  Franchise agreement restricts or outlaws certain activity  All inventory comes from own warehouse retailSOS.ca | Gerry Spitzner 22
  23. 23.  “Medicine Shoppe” concept  Own the business and the physical assets  Franchise fees  Trademark rules  Required program participation  Full Pharmacy ownership  Capital investment required  Ongoing Sales and Biz Dev support  Custom marketing strategy  Training and Professional Development  Preferred Supplier agreements retailSOS.ca | Gerry Spitzner 23
  24. 24.  What is a banner Pharmacy? ◦ Key features include:  Looks like a chain  Independently owned and operated  Working together  Sales/promotions, contracts  Buying group  Menu of services  Fees or membership dues  Own profit and loss centre  Owners often have more than one store  Sometimes shareholder in wholesale  Pharmasave, Peoples Drug Mart, IDA, Remedy’sRx  Guardian, Pharmachoice, Medicine Centre retailSOS.ca | Gerry Spitzner 24
  25. 25.  Main differences from franchise and banner ◦ Key features include:  No name affiliation  Independently owned and operated  Often belong to a wholesalers IND program  Entrepreneur  Self-management  Creative freedom  Not having to answer to others (especially regarding the pharmacy focus)  Financial independence and high risk retailSOS.ca | Gerry Spitzner 25
  26. 26. There are 3 main Logisticschannels... or ways to get productsto the door of the store. retailSOS.ca | Gerry Spitzner 26
  27. 27.  Wholesalers ◦ In BC; 3 national & 1 regional that distribute Rx and front shop ◦ McKesson, ABCC, K&F, and uniPHARM ◦ Primary suppliers to Banners and IND’s ◦ Secondary suppliers to Chain DSD; ( Direct Store Delivery ) ◦ Select Generic/Brand suppliers, some Front Shop categories Self Distributors; Chain ◦ SDM, London Drugs, Save-On, Safeway ◦ Note: also draw from local wholesalers retailSOS.ca | Gerry Spitzner 27
  28. 28.  How wholesaler upcharges work in BC... ◦ There are differences in every province ◦ For Rx; MALP (AAC) cost plus 8%, 5% for high cost drugs ◦ MALP for Generics is 35% of the equivalent Brand ◦ Prompt payment (cash discount) of 2% ◦ Loyalty allowances range between 3% to 5.5% ◦ Net net upcharges range between ½% and 3% ◦ Depends on volume and loyalty ◦ 11 deliveries per week for Rx and 1 or 2 for Front Shop ◦ OTC and Front Shop upcharges vary greatly and usually rebates are provided for achieving agreed to volumes retailSOS.ca | Gerry Spitzner 28
  29. 29. There are a lot of moving parts toretail and they are all crucial tocustomer experience .There are 4 key ones. retailSOS.ca | Gerry Spitzner 29
  30. 30.  Inventory management  Policies & Procedures Pricing  Computer software Merchandising  Cash flow Staff  Sales Revenue Receiving  Sundry Revenue Loss Prevention  General Expenses Wages and Benefits  Fixtures Staff Schedules  Repairs and Maintenance Training  Occupancy costs & Utilities Supplies Information Technology  Advertising Computer hardware  MarketingPatient/Customer Experience Profitability retailSOS.ca | Gerry Spitzner 30
  31. 31.  Inventory ◦ It is all about flow - keep goods flowing Pricing ◦ Setting competitive pricing is an art form Merchandising ◦ Any practice which contributes to the sale of products Staff ◦ The quality of an employees work experience has a direct impact on the quality of the customers experience. retailSOS.ca | Gerry Spitzner 31
  32. 32. It is all about flow - keep goodsflowing. retailSOS.ca | Gerry Spitzner 32
  33. 33.  Choosing An Effective Inventory Management Strategy ◦ aware of the state of stocked inventory at any time ◦ system to easily monitor the coming and going of product Spatial Needs ◦ specific items and the type of storage location in which the product is kept Maximize Profit ◦ items in inventory may sit for long periods of time due to lack of demand. This is not only a wasted expense; it also takes up valuable room in your stock room that could be filled with faster selling items which would draw more profit. retailSOS.ca | Gerry Spitzner 33
  34. 34.  Software Systems ◦ complete inventory checks and keep track of every item that comes in and out of your warehouse to identify errors, thefts, losses, and any other discrepancies. ◦ use auto-replenishment features in the technology to re-order Labeling and Identification ◦ make sure that all items are properly labeled. Incorrect or incomplete labeling can lead to several problems, including wrong identification by your software, misplacement when restocking the inventory, loss of the item, or inability to find it for shipment or shelving later. retailSOS.ca | Gerry Spitzner 34
  35. 35. Competitive pricing in the FrontShop is an informed art form. retailSOS.ca | Gerry Spitzner 35
  36. 36.  What’s the difference between mark up and margin? ◦ Markup is % of profit on cost ◦ Margin is % of profit on selling price Frequently used terms ◦ Gross profit percent; GP% ◦ Gross profit dollars; GP$ ◦ Gross margin percent; GM% ◦ Gross margin dollars; GM$ retailSOS.ca | Gerry Spitzner 36
  37. 37.  Pharmacare sets a maximum price for brand & generic Maximum price applied during PharmaNet adjudication MALP (AAC includes upcharge) plus fee; $10.00 The professional fee is the entire gross profit Reimbursement for clinical services Med Reviews, Immunization, Rx renewals, adapting Rx’s, therapeutic substitution, Plan B capitation fees, rural incentive program retailSOS.ca | Gerry Spitzner 37
  38. 38. Merchandising is any practicewhich contributes to the sale ofproducts to a retail consumer retailSOS.ca | Gerry Spitzner 38
  39. 39.  Closely related to inventory Plan-O-Grams Service Levels What is a facing? Keep merchandise fresh and clean Search for outdates Signs and promotional shelf talkers Pricing labels Promotional merchandising Cross merchandising for profit retailSOS.ca | Gerry Spitzner 39
  40. 40. The quality of an employees workexperience has a direct impact onthe quality of the customersexperience. retailSOS.ca | Gerry Spitzner 40
  41. 41.  Hire for attitude and train for skill One of the key drivers of the employee experience is how the staff feels about their colleagues. Thats why teamwork at the store level is such a vital component of a stores success. The key to effective teamwork is leadership. There are four actions that will create a more effective team. retailSOS.ca | Gerry Spitzner 41
  42. 42.  1. Stop drama in its place. ◦ Nothing tears apart a team more quickly - or more quietly - than drama. 2. Regularly communicate your assessment of your teams teamwork. ◦ Share what you see are the strengths and areas of improvement needed in teamwork. 3. Dont enable poor performance and unacceptable behavior. ◦ Teams begin to splinter when the majority feels that one or more individuals arent contributing to the team. 4. Recognize and celebrate effective teamwork, behaviors, and results. retailSOS.ca | Gerry Spitzner 42
  43. 43.  Why maintaining trust is a marathon; not a sprint. ◦ In todays world, whether you are talking about marathon times, or ingredients on a label, or a products health benefits, or whether something is organic or not, or what an items environmental profile happens to be, you have to get it right. ◦ The big stuff, and the little stuff. In part, because if you get it wrong people are going to find out. But most of all, because getting it right is what people expect. Get it wrong, and you risk eroding peoples trust. retailSOS.ca | Gerry Spitzner 43
  44. 44. What makes a positive customerexperience in healthcare? retailSOS.ca | Gerry Spitzner 44
  45. 45.  How did you make the customer feel? ◦ Service has more impact on customer loyalty than any other function of a company. Customer loyalty is not a tactic but a way of doing business. ◦ Never let your business processes dictate your customer experience. Ask; don’t tell. Listen; don’t talk. ◦ How can you hear your customer when you are busy telling them something? retailSOS.ca | Gerry Spitzner 45
  46. 46.  Serve customers, don’t just provide customer service ◦ Customer service is what the organization wants to supply to the customer; it is governed by policies and rules intended to serve the business. ◦ Serving customers, on the other hand, is driven by what the customer wants. The control position is in the customer’s hands; the organization is in the responsive position. Customer service is an attitude not a department retailSOS.ca | Gerry Spitzner 46
  47. 47. For Retail Community Pharmacy –Chains, Banners and Independents retailSOS.ca | Gerry Spitzner 47
  48. 48.  Supermarkets, mass merchandisers, mail order and Pharmacy chains are likely to keep competition keen for the independent Pharmacist. The Governments plans for pharmacy include an enhanced role for Pharmacists. The aging population and ongoing shortage of physicians will strengthen the demand for Pharmacy services. ◦ Community Pharmacy will be the centre of health care and Pharmacists will focus more and more on disease management. retailSOS.ca | Gerry Spitzner 48
  49. 49.  Government Drug Reforms Drug Shortages Costs are escalating faster than increases in revenue 3rd Parties looking for ways to control Rx drug costs Plans more complex; patients don’t understand them. Reimbursement Rates ◦ In Canada – more than 50% of prescriptions are paid by Government; most of the rest is covered by an insurer like Blue Cross, GWL, Assure and NIHB; very little “cash pay”. retailSOS.ca | Gerry Spitzner 49
  50. 50.  Key Industry Stat ◦ Per capita usage of prescriptions is climbing among all age groups, ranging from 4.21Rx/year among those aged 0-39 years up to 41.82/year for 60 years and up. Fee for Service Patient Care ◦ Medication Reviews, Home delivery, home consultation, patient charge accounts, disease management programs (diabetes, asthma), LTC, Group Homes, Workplace health, immunization, medication adherence, Hearing centres, home health care retailSOS.ca | Gerry Spitzner 50
  51. 51.  Want a copy an electronic copy of this of this presentation with bonus slides? To your business and professional success, thank you for your attention. Questions? retailSOS.ca Gerry Spitzner 51
  52. 52.  Follow Twitter: @passion4retail Connect LinkedIn: Gerry Spitzner Web: retailSOS.ca Blog: gerryspitzner.com Email: gerry@retailsos.ca Online Biz Card: gerryspitzner.tel Online Biz Card: retailSOS.tel retailSOS.ca | Gerry Spitzner 52
  53. 53.  retailSOS.ca is a Vancouver-based retail consultancy guiding Pharmacy owners to create, engage and retain great customers by doing the right thing extraordinarily well. Gerry Spitzner works as a management consultant supporting community Pharmacy owners to achieve results by aligning their vision and implementing marketing strategy with operational execution. Drawing on 35+ years experience in drug store multi-site retail operations, Pharmacy ownership and Pharmaceutical wholesale supply-chain; Gerry brings the leadership, knowledge and market awareness of ownership and business development to Pharmacy owners to achieve growth objectives. retailSOS.ca | Gerry Spitzner 53
  54. 54. How do you start a movement ofchange?It starts with leadership. retailSOS.ca Gerry Spitzner 54
  55. 55.  Are you ready to start a movement? Are you ready to charge for the time it took for you to get your education and the time it’s going to take you to keep it up? Are you ready to make the public aware of the great things Pharmacists do? Are you ready to create, engage and retain great customers? retailSOS.ca | Gerry Spitzner 55