Objective; High level view of the Pharmacy business
Definition of value
Pharmacy business in Canada and BC
Retail Pharmacy types, and main differences
Pharmaceutical Logistics and Supply Chain
4 key controllable moving parts of retail Pharmacy
Future Developments, Issues and Opportunities
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The key to business survival...
Creating, engaging and keeping
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Healthcare is a business and always will be...but
Pharmacy is an art; and always will be.
◦ Health consumers spending fewer discretionary dollars. I.e.
Government, 3rd party, patients/customers.
◦ Prescription drug costs escalating.
◦ Count on facing predictable uncertainty at an accelerated pace.
◦ Crazy competition.
◦ Increasingly demanding customers.
◦ Fickleness trumps loyalty.
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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
business growth that follows.
◦ Consider the life time value of a customer rather than just as a
single one-time transaction. Think customers for life.
◦ Listen to customers; understand why, how and what they want to
buy, rather than how you want to sell to them.
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Why should the business come to
you... rather than someone else?
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What problem does my professional service solve?
What am I solution for?
Why does it matter?
◦ Your project is not about selling something; rather it is to
◦ Fulfillinga customers intention is a motivator to buying.
◦ Value is in the applied benefit of the benefit.
◦ Never about what you can get; always about what you can give.
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A function of the bundle of
perceived benefits offered at a
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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
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How can you?...
Help them save money
Save them time
Make them feel safe
Make them feel special
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High Level Overview of Pharmacy
practice in Canada and BC
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Total prescription market Canada; $27.2 billion in 2011
Generic drugs accounted for 25 % ($5.4-billion).
Generics were dispensed to fill more than 60% of all prescriptions.
Average cost of a brand-name prescription in Canada is now $73.76.
Average cost of a generic prescription is $25.04.
Estimated for every 1 % increase in generic drug utilization in
Canada; savings = an additional $260 M.
In the US generic drugs are dispensed to fill 80 % of all
Source;IMS Brogan and IMS Health ,a firm that tracks the pharmaceuticalindustry
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What are the main types of
Community Pharmacy and the
details of how they work?
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Health Authority Associated Pharmacy
ambulatory care pharmacy, cancer drug pharmacy, HIV drug
pharmacy, hospital pharmacy, corrections facility pharmacy,
“full mix” retail pharmacy, Health Centre, simply a dispensary,
consulting pharmacy, compounding pharmacy, veterinary
pharmacy, central fill pharmacy, mail order pharmacy
nuclear pharmacy, military pharmacy
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Departments and Products Professional Services
Alternative medicines (NHP’s)
Orthotics and mobility aids
Food and Groceries
Books and Magazines
Patient Education seminars
Disease state screening
Chronic Disease Mgmt
LTC and Group homes
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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
Grocery stores fall into this category
Rexall, Wal-Mart and London Drugs
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“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
Associate agreement is a renewable 3 year deal
Retained equity requirements
Franchise agreement restricts or outlaws certain activity
All inventory comes from own warehouse
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“Medicine Shoppe” concept
Own the business and the physical assets
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
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What is a banner Pharmacy?
◦ Key features include:
Looks like a chain
Independently owned and operated
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
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Main differences from franchise and banner
◦ Key features include:
No name affiliation
Independently owned and operated
Often belong to a wholesalers IND program
Not having to answer to others (especially regarding the
Financial independence and high risk
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A complex process from
manufacturer to patient
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◦ In BC; 3 national & 1 regional that distribute Rx and front shop
◦ McKesson, ABC, 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: they also draw from local wholesalers, especially narcotics
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How wholesaler upcharges work in BC...
◦ 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
◦ Urban; 11 deliveries per week for Rx and 1 or 2 for Front Shop
◦ OTC and Front Shop net upcharges vary greatly and usually
rebates are provided for achievingagreed to volumes
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There are a lot of moving parts to all
retail businesses and they are
crucial to customer experience .
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Doctors Patients and Customers
PharmaCare & PharmaNet
College of Pharmacy
Canada Revenue Agency
Loss Prevention services
Employee Relations & HR
Retail Insurance providers
3rd Party providers
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Three broad areas to every Pharmacy business;
◦ Monitoring,analysis, cash flow, P&L
◦ Ideal audience and services communication
◦ Delivering the promise and customer experience
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◦ It is all about flow - keep goods flowing
◦ Any practice which contributes to the sale of products
◦ The quality of an employee's work experience has a direct
impact on the quality of the customer's experience.
◦ Setting competitive pricing is an art form
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It is all about flow - keep goods
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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
◦ specific items; type of storage location where product is kept
◦ 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 the stock room that could be filled with
faster selling items which would draw more profit.
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◦ Complete inventory checks and keep track of every item that comes in
and out 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, incorrect pricing to customer
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Merchandisingis any practice
whichcontributes to the sale of
products to a retail consumer
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Closely related to inventory
What is a facing?
Keep merchandise fresh and clean
Search for outdates
Signs and promotional shelf talkers
Cross merchandising for profit
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The quality of an employee's work
experience has a direct impact on
the quality of the customer's
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Hire for attitude and train for skill
One of the key drivers of the employee experience is
how the staff feels about their colleagues.
That's why teamwork at the store level is such a vital
component of a store's success.
The key to effective teamwork is leadership.
There are four actions that will create a more effective
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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 team's
◦ Share what you see are the strengths and areas of improvement needed in
3. Don't enable poor performance and unacceptable
◦ Teams begin to splinter when the majority feels that one or more
individuals aren't contributing to the team.
4. Recognize and celebrate effective
teamwork, behaviors, and results.
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In the Front Shop and the Pharmacy
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What’s the difference between mark up and margin?
◦ Markup is % of profit on cost
◦ Marginis % of profit on selling price
Frequently used terms
◦ Gross profit percent; GP%
◦ Gross profit dollars; GP$
◦ Gross margin percent; GM%
◦ Gross margin dollars; GM$
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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
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What makes a positive customer
experience in healthcare?
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How did you make the customer feel?
◦ Service has more impact on customer loyalty than any other
function of a Pharmacy business.
Customer loyalty is not a tactic but a way of doing
◦ Never let your business processes dictate your customer
Ask; don’t tell. Listen; don’t talk.
◦ How can you hear your customer when you are busy telling
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Serve customers, don’t just provide customer service
◦ Customer service is what the organizationwants 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
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Why maintaining trust is a marathon; not a sprint.
◦ In today's world, whether you are talking about marathon
times, or ingredients on a label, or a product's health
benefits, or whether something is organic or not, or what an
item's environmental profile happens to be, you have to get it
◦ 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
gettingit right is what people expect. Get it wrong, and you
risk eroding people's trust.
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For Retail Community Pharmacy –
Chains, Banners and Independents
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Supermarkets, mass merchandisers, mail order and
Pharmacy chains are likely to keep competition keen
for the independent Pharmacist.
The Government's plans for pharmacy include an
enhanced role for Pharmacists.
The aging population and ongoing shortage of
physicians will strengthen the demand for Pharmacy
◦ Community Pharmacy will be the centre of health care and
Pharmacists will focus more and more on disease management.
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Government Drug Reforms
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.
◦ In BC – more than 45% of prescriptions are paid by Government;
most of the rest is covered by a 3rd party insurer like Blue
Cross, GWL, Assure and NIHB; there is very little “cash pay”.
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Key Industry Stat
◦ Per capita usage of prescriptions is climbing among all age
groups, ranging from 4.21 Rx/year among those aged 0-39
years up to 41.82 Rx/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
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Want a copy an electronic copy of this of
this presentation with bonus slides?
◦ Email me; gerry@retailSOS.ca
To your business and professional
success, thank you for your attention.
retailSOS.ca 57Gerry Spitzner
retailSOS.ca is a Vancouver-based retail consultancy guiding and
supporting Pharmacy owners to create, engage and keep great
customers by doing the right thing extraordinarily well.
Gerry Spitzner works as a management consultant with 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 the Pharmaceutical wholesale
supply-chain; Gerry brings the leadership, knowledge and market
awareness of ownership and business development to Pharmacy
owners to achieve growth objectives.
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A few basic acronyms and
frequently used jargon in retail
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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
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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
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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 )
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Drug Store News
Chain Drug Review
Canadian Healthcare Network – free registration
CACDS – Canadian Assoc of Chain Drug Stores
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How do you start a movement of
It starts with leadership.
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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 keep great
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