UBC Phar400 Business of Retail Pharmacy 3.0 11Sept2015

UBC – Phar400 | Pharmacy Management
Gerry Spitzner | pharmacySOS.ca
September 11, 2015

pharmacySOS.ca | Gerry Spitzner
Learning Objective: High level overview
of retail community Pharmacy business
Thoughtstarters
Customer Experience
Operational Areas of Retail Pharmacy
Retail Pharmacy Formats
Pharmaceutical Logistics & Supply Chain
Future Developments, Opportunities & Trends

 Health Authority Associated Pharmacy
 ambulatory care pharmacy, cancer drug pharmacy, HIV drug pharmacy,
hospital pharmacy, corrections facility pharmacy, mental health,
substance use and addiction, nuclear pharmacy (radiopharmacy),
 Retail Community Pharmacy
 “full mix” retail pharmacy, Health Centre, simply a dispensary,
consulting pharmacy, compounding pharmacy, veterinary pharmacy,
central fill pharmacy, mail order pharmacy, tele-pharmacy
 Other Pharmacy
 military pharmacy, R&D @ Pharma, sales @ Pharma, Government (Pcare)

What do you hope to do
when you graduate?
Source: RoderickSlavcev

 Healthcare is a business and always will be...but Pharmacy
practice is an art; and always will be.
◦ The practice of Pharmacy and the business of healthcare
are converging like never before
◦ Community Pharmacy is a retail business
◦ Community Pharmacists are small business entrepreneurs
◦ Pharmacists are the only health care practitioner (HCP)
practicing in a retail business setting

For your patient service project ,
you are going to approach today’s
busy customers, here are some
thought-provoking ideas about the
retail business to consider…

 What is the real purpose of a business?
◦ Profit isn't a purpose, it's a result. To have purpose means the
things we do are of real value to others.
 Creating, engaging and keeping customers is the key to
repeat business and long term survival for any business.
◦ A retail Pharmacy that continuously relies on only current
customers for its economic success is not going to grow.
◦ How will you create, engage and keep your customer?
◦ What purpose does your patient service serve?

 Why should patients do business with your service?
◦ Customers don’t care how awesome you are
◦ Crazy competition
◦ Fickleness trumps loyalty
 Questions you must answer about your patient service
from your patients perspective…
◦ Why should business come to you rather than someone else?
Why does it matter? Why should anyone care?
◦ How does it work?
◦ What problem does your professional service solve? What
makes it better than any other Pharmacy?

 What exactly is value in the 21st century?
◦ Value is not determined by the people who set the price, it
is determined by those who choose to pay the price.
◦ In order to engage your customer/patient, there must be
some form of interest or perceived value on their part.
◦ Prospective customers should be able to visualize exactly
what value you and your service could bring them.
◦ Develop a unique value proposition of the tangible results a
patient gets from using your patient service.

 The public perceives what it sees.
 Perception is in the eyes and ears of the beholder; value
means different things to individual people.
 Value is a function of the bundle of perceived benefits
offered at a given price. It's a unique perspective.
 The vision of your patient service should be the basis of
your unique value proposition.
 Think different; BEE DEPHERENT… is the most important
strategic business principle of all.

 Your patient service is not about selling something;
rather it is to fulfill an intention your patient has.
 Never about what you can get; always about what you
can give. It's customer focused vs transactional.
 Value is in the ‘applied’ benefits of the benefit you as
the provider and your service offer.
 Applied benefits are the outcomes patients expect
beyond how to take the prescribedmedication.

The moment of truth in healthcare
and retail Pharmacy…why the
customer experience matters.

 There are 3 types of customers in every retail channel
1. Shop local- they value and support small
businesses (service & community)
2. Bit of both- they value convenience (time crunch)
3. Big Box | Mall- they spend 3-4 hours on a Saturday
as a hobby-they value entertainment (price)

 Confidence is the #1 factor
◦ in determining what, from who and where customers repeat buy...
 quality is #2,
 service is #3
 selection is #4
 and price is #5
 PRICE IS PRICE; VALUE IS THE TOTAL EXPERIENCE

 Serve people, don’t just provide customer service.
◦ Customer service is what every retail 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 (applied benefit). The control position is in
the customer’s hands; the organization is in the responsive
position.
 Customer service is an attitude not a department.

◦ Consider the life time value of a customer rather than just as a
single one-time transaction. Always think customers for life.
◦ Listen to customers; first understand why, how and what they
want to buy, rather than how and what you want to sell to them.
◦ Positive relationships are a pleasant result of conducting a
professional, prepared and productive patient interaction.
◦ But callingthem your patient is more than having a "great
relationship" with them and helping them with their problems.
◦ For a customer to become your patient; you have to earn it…

 Your customers and patients want you to be a valuable
resource to them all the time … when they need you.
◦ Bring them ideas, insights, and information to help them achieve
their health objectives.
◦ Guide them about how to make a good decision, as well as who
needs to be involved and the next steps.
◦ Keep them up to date about any changes that could impact them—
positively or negatively.
◦ Challenge their thinking and provide them with fresh perspectives.
◦ They want to know that their Pharmacist really cares about them
and their health. It’s a feeling…

 How did the customer feel ?
◦ A focused customer experience is not just about a rational
experience (e.g. how quickly a phone is answered, what hours you’re
open, delivery time, etc.).
◦ Customer experience is about how a customer consciously and
subconsciously sees his or her unique experience.
◦ How the customer feels is their unique perception and it’s based on
their total experience.
 Loyalty is not a tactic driven by points or low prices.
◦ Customer loyalty is not a tactic but a way of doing business.
◦ Service experience has more impact on customer loyalty than any
other function of a Pharmacy business.

1. Awareness – HCC knows about a
service but doesn’t think much about it
2. Engagement – HCC knows and cares,
but isn’t yet compelled to act
3. Activation – HCC takes action
4. Reflection – HCC reflects on the patient
experience, and perhaps rates their
Patient Satisfaction
5. Loyalty – HCC’s would repeat the
action, expect a good experience and
may tell others about it

 Some interesting and thought provoking findings:
◦ 89% of customers who receive poor service will abandon your
brand for the competition
◦ 64% of customers say service is more important than price
when it comes to brand loyalty
◦ 55% of customers would pay more to guarantee great service
◦ 64% of customers said that a company’s customer service
reputation is very important
Source: Retail Council of Canada

 The #1 Factor in Customer Loyalty
◦ 19% - Company/brand impact
◦ 19% - Product and/or service delivery
◦ 9% - Value-to-price ratio
◦ 53% - Experience with service provider
 Companies don’t dazzle customers, people do.
Source: Jill Konrath

There are a lot of moving parts to
all retail businesses and they are
crucial to customer experience .

 For your project you’ll need to address these
areas in your business plan and presentation.
 Finance
◦ Monitoring, analysis, cash flow, sales, expenses, Profit & Loss
 Marketing
◦ Research, omni-channel communication to ideal customer
audience, and branding activities
 Operations
◦ Daily activities delivering the promise of marketing & customer
experience with an eye on sales and expenses

Patient/Customer Experience Profitability
 Inventory management
 Pricing
 Merchandising
 Staff
 Receiving
 Loss Prevention
 Staff Schedules
 Operations systems
 Training
 Supplies
 Information Technology
 Computer hardware
 Policies & Procedures
 Wages and Benefits
 Computer software
 Cash flow
 Sales Revenue
 Sundry Revenue
 General Expenses
 Fixtures
 Repairs and Maintenance
 Occupancy costs & Utilities
 Advertising & Marketing
 Wholesaler and suppliers

 Inventory
◦ It is all about flow - keep goods (products) flowing
 Merchandising
◦ Any practice which contributes to the sale of products
 Staff
◦ The quality of an employee's work experience has a direct
impact on the quality of the customer's experience
 Pricing
◦ Setting competitive pricing is an art form

What are the main types of Retail
Community Pharmacy and some
details of how they work?

 4 Main formats of Retail Community Pharmacy
 Corporate Pharmacy
 Franchise Pharmacy
 Banner Pharmacy
 Independent Pharmacy

 Wholly owned by a large company
 Pharmacy is a department managed by a Pharmacist
 Rx Manager is an “employee” of a chain Pharmacy
 Managers are paid a salary and compensated with
pay-for-performance incentives
 Operations/Marketing are determined by head office

 “SDM | Associate” concept
 Own the business but not the physical assets
 No capital investment or personal capital risk
 Guaranteed minimum annual income and benefits
 “Share” in profitability, based on benchmarking similar stores
 Quality support services in Operations/Marketing/Finance
 SDM Associate agreement is a renewable 3 year deal
 Retained equity requirements
 Franchise agreement restricts or outlaws certain activity
 All inventory comes from own warehouse/wholesale
 Excellent business training; especially for Pharmacy managers

 “Medicine Shoppe” concept
 Own the business and the physical assets
 Franchise fees 4-6% of sales
 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

 What is a banner Pharmacy?
 Looks like a chain; but really isn’t. Power of trade mark
 Independently owned and operated but working together
 Sales/promotions, contracts
 Buying group wit a menu of services
 Sales percentage fees or monthly membership dues
 Your own profit and loss centre
 Owners often have more than one store
 Sometimes shareholder; ie in a wholesale

 Key features include:
 No trademarked name affiliation
 Independently owned and operated
 Often belong to a wholesalers IND program
 Entrepreneur/Self-management
 Creative freedom
 Not havingto answer to others (especially regardingthe
pharmacy and professional service focus)
 Financial independence and high risk/high reward
 Can move quickly to seize opportunities

A complex process of medication
distribution from manufacturer to
patient

 Wholesalers
◦ In BC; 2 national & 2 regional distribute Rx, OTC & Front Shop
◦ 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: chains also draw from local wholesalers, especially narcotics/cold chain

For Retail Community Pharmacy –
the future is not in the rear view
mirror.
Taking a step back from the
hysteria, it is easy for us to see that
retail Pharmacy is doing what it
always does - change constantly.

 “I really believe that in the future, companies like Novartis are
going to be paid on patient outcomes as opposed to selling the
pill.”
 “Beyond-the-pill is a logical and inevitable path forward for all.”
 “Creating value by embedding products into a holistic offering
with the aim to improve patient outcomes and provide tangible
competitive advantages.”
 “Such holistic offerings include telehealth services, wellness
programs, wearable sensors and improved chronic disease
management over patients’ lifetimes.”
Source: Joseph Jimenez, CEO of Swiss healthcare giant, Novartis

 Should Pharmacy focus on patient services vs dispensing?
◦ Funding for new initiatives is still tied primarily to
dispensing and drug margins, rather than on reimbursement for
patient services and outcomes.
◦ Per capita prescriptions is climbing among all age groups;
ranging from 4.21 Rx/year among those aged 0-39 years and
41.82 Rx/year for 60 years and up.
◦ More Rx’s means more customer traffic and an opportunity to
engage patients in extended services.
◦ Focus on re-fills & medication adherence with existing patients.

 Pharmacists practice at the most interfaces in the
healthcare network and are uniquely positioned to
provide value to the health of the public.
◦ Pharmacy practice is a knowledge industry at the cross roads
of health care. Eventually everyone ends up at our doorstep.
◦ Pharmacist is the most versatile profession in healthcare
◦ Pharmacists speak multiple languages more than other HCP’s
◦ Think beyond the dispensary to find incremental revenue
opportunities

If you look at broader trends in the
long-term; healthcare delivery is
going to be a retail-driven model —
it is going to be driven by consumer
choice.

 Canadian population is spending less on clothing,
entertainment and alcohol and more on healthcare,
cell phone, and internet.
 Overall total spending is flat with last year but a major
shift…healthcare spend is up 62% year over year.
 Top healthcare and well-being topics on respondent’s
minds are healthy eating, weight management, and
starting or continuing an exercise or health program.
Source: Nielsen Canada

Source: Nielsen Canada and Allidura, GSW,
and the Harris poll
 27% of Canadian population
are millennials; 28% are
boomers.
 70% of millennials say they
stress about personal health
 97% say that being happy is
important to them, and 95%
say the same about being
healthy.
 only 42% say they consider
themselves healthy.

 2016 will be a huge year for Tele-health.
◦ Using secure video-conferencing to live-link patients with their
physicians or pharmacists from the comfort of their homes-or even
from work-using their laptops, tablets or smartphones.
 Tele-pharmacy is the provision of pharmacy services in
rural and remote communities.
◦ BC is only province in Canada that has regulation with college
approval
◦ BCPhA supports the provision of telepharmacy services
◦ Opportunities for collaboration with other remote pharmacies to
focus on a niche patient services -- where not in competition

Some believe that wearable technology
is simply a transition technology.

 Healthcare and the practice of Pharmacy is arriving at
a new intersection.
◦ The shift in focus from accuracy in dispensing to therapeutic
appropriateness and patient-centric support for optimal health
requires time and intentional strategies.
◦ What if we had a healthcare system that kept us healthy?
◦ Focus on beyond the pill strategies instead of accuracy and ‘fast’
service and your customers will really start to see the value of
your role and will soon become your patients.
◦ Do well by doing good. Focus on care; commerce will follow.

 To your business and professional success,
thank you for your attention.
 Questions? Email me…

 Follow Twitter: @passion4retail
 Connect LinkedIn: Gerry Spitzner
 Web: pharmacySOS.ca
 Blog: gerryspitzner.ca
 Email: gerry@pharmacySOS.ca
 Online Biz Card: gerryspitzner.tel
 You Tube Channel: Gerry Spitzner

Gerry Spitzner is an optimist with a curiosity for improving life and business results. Optimism is
the ability to focus on where we're going; not where we're coming from and Gerry is passionate
about making the public aware of the great things Pharmacists do. He believes in helping
pharmacists achieve leadership, professional practice, and business success.
Drawing on 40+ years in regional multi-site retail Pharmacy operations and drug store
ownership with SDM, plus business development with K&F in the Pharmaceutical wholesale
supply-chain; and as a consultant; Gerry has the unique advantage of having worked in several
different business models within retail Pharmacy.
Fascinated with a lifelong curiosity for why customers buy and a passion for retail Pharmacy;
Gerry guides his clients to create, engage and keep great customers by delivering the promise
of an extraordinary customer experience. He has devoted his life to sharing his thinking with
leaders in Pharmacy to take advantage of trends and build business plans that increase sales
and profitability through creating a competitive advantage.
His company is pharmacySOS.ca, a Vancouver-based business management consultancy with
Strategic Operations Services to advise, guide and support Pharmacist owners to brand and
market for optimal growth through customer experience. With a clear understanding of retail
Pharmacy and drug store operations he uses a solution oriented focus with ideas and
alternatives that clients can use to address the changing marketplace issues they face right
now. Gerry understands who they are, what they need, and where to find it.

UBC Phar400 Business of Retail Pharmacy 3.0 11Sept2015

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UBC Phar400 Business of Retail Pharmacy 3.0 11Sept2015