This presents the resource-based theory of competitive advantage as a framework for describing, understanding, and predicting the adoption and dissemination pharmacy service innovations into routine practice. The theory argues that sustainability of any business innovation (e.g., pharmacy service) is based upon (1) the internal resources of the firm offering it, (2) the firm’s capabilities in using those resources, (3) the competitive advantage to the firm of its resources and capabilities, (4) the attractiveness of the market in which it competes, and (5) the innovation’s contribution to financial performance of the firm.

1. School of Pharmacy
RESOURCE-BASED THEORY
OF COMPETITIVE ADVANTAGE
A FRAMEWORK FOR PHARMACY PRACTICE
INNOVATION RESEARCH

3. School of Pharmacy
Learning Objectives
LO 1: Discuss pharmacy practice innovations
LO 2: Describe resource-based theory of competitive advantage
LO 3: Explain its role in advancing research in pharmacy practice
innovations

4. Fact:
~ 3 out of 4 pharmacists (>300 thousand
total) work in community pharmacies in
the United States
https://www.bls.gov/oes/current/oes291051.htm

5. Fact:
Community pharmacists are an
underutilized asset to society

6. Why?

7. Some reasons pharmacists are underutilized
1. Structure & financing of healthcare system
2. Product-focused business model has been
profitable until recently
3. Pharmacist complacence & passivity
4. Unclear value proposition for pharmacist services

8. FACT
“Pharmacy services cannot be sustained over time if
they do not cover the costs of providing them.”
Holdford DA. Chapter 14: Providing Sustainable Pharmacy Services in Ambulatory Care. Introduction to Acute and Ambulatory Care
Pharmacy Practice. 2nd ed. Bethesda, Maryland: American Society of Health-Systems Pharmacists. 2017.

9. INTRODUCTION

10. Problem
Too many pharmacy practice innovations fail in the long run
Available models of practice research have yet to show the answer to
professional practice success
This presentation presents a framework from the business literature for
conducting research about innovations in pharmacy practice

11. Resource-based Theory Of Competitive Advantage
Interdisciplinary theory developed from marketing, management, ethics, law,
supply chain management, and general business
Provides a foundation for uniting innovation research streams into a single
coherent framework
In fact, it can serve as a general theory for research in pharmacy practice

12. School of Pharmacy
LO 1: DISCUSS PHARMACY
PRACTICE INNOVATIONS

13. Pharmacy practice
The provision of services by pharmacists and
pharmacy organizations to respond to the
medication-related needs of the people

14. Practice Innovations
Any changes in the provision of pharmacy perceived
as new by consumers, payers, or stakeholders
Types:
1. Service innovations
2. Service process innovations
3. Innovations in the service business model

15. Category Examples
Newservicesorservicebundles
Offering something new (e.g., specialty pharmacy services)
Finding new customers (e.g., veterinary pharmacy services)
Expanding a product line (e.g., adding ABMS to basic dispensing)
Growing services (e.g., moving into new international markets)
Changing the service bundle (e.g., unbundling MTM into
components)
Modifying existing service bundles (e.g., adding a private
counseling area)
Repositioning existing service bundle (e.g., promoting the
pharmacist in ads instead of merchandise)

16. Category Examples
Serviceprocessinnovations
Improvements in the patient journey from the hospital to home through
transitions in care programs
Pharmacy loyalty programs which reward patients for purchases
Use of practice guidelines and practice models
Retail clinics in pharmacies which permit one-stop health care for minor
ailments
Smart phone apps which combine medication reminders, gamified health
promotion, and other services on one device
Use of artificial intelligence to personalize care to patients
Electronic point-of-care technology that offers discounts or some other
form of value
Cashier-free stores which track items placed in carts by shoppers and
automatically charge customers when they leave the store with those
items
Shopping in pharmacies using augmented and virtual reality technology

17. Service Business Model Innovations
describe a major change in the way in which
services generate revenues and/or earn profits

18. Traditional Business Model for Community Pharmacy
Sale of
merchandise
– Out-of-pocket
(OOP)
– Third party

19. New Community Pharmacy Business Models
Fee-for-service: FFS generates revenue by selling services for a negotiated fee
• Immunizations
• MTM/CMR
• Health screening services (e.g., BP, cholesterol)
• Point of care testing (e.g., HIV)
Value Based: Healthcare delivery model in which providers, pharmacies and
pharmacists, are paid based on patient health outcomes
Social Business Models: Non-profit organization where revenues come from
donations, investment returns, and other non-traditional sources

20. Category Examples
Businessmodelinnovation
Hospital Inpatient Value-Based Purchasing Program: Medicare
compensation to hospitals based on value-based purchasing measures
relating to clinical processes, efficiency, & patient outcomes/experience.
Federal 340B Drug Pricing Program: allows eligible healthcare institutions
to purchase outpatient drugs at significantly reduced prices from drug
manufacturers. Savings can be used to expand service to Medicaid
patients, the uninsured, and some other patients.
"Incident to" models in which pharmacists charge Medicare for clinical
services provided under a physician's National Provider Identifier (NPI).
Medicare Star Rating Program: uses a star rating system to assess the
performance of Medicare Advantage and prescription drug (Part D) plans.
Compensation to plans is based on scores (1 to 5 stars).
Pay-for-performance contracts: reward or punish providers depending on
performance on measures of quality and efficiency.

21. Types are
not mutually
exclusive
1. Service
innovations
2. Service
process
innovations
3. Innovations
in the service
business
model
4 5
6
7

22. School of Pharmacy
LO 2: DESCRIBE RESOURCE-
BASED THEORY OF
COMPETITIVE ADVANTAGE

23. RESOURCE-BASED THEORY (RBT) OF
COMPETITIVE ADVANTAGE
Long-term success of a pharmacy service innovation is based on
1. What the firm has (Firm Resources)
2. What the firm does (Firm Capabilities)
3. Competition (Sustained Competitive Advantage)
4. The market in which it competes (Market Attractiveness)
5. How well the firm performs financially (Financial Performance)

24. RBT considers innovating to be an evolutionary process
founded on the following premises:
1. Demand continually varies in market segments
2. Consumers and firms lack perfect information
3. Humans are motivated by self-interest
4. Firms seek profits
5. The firm's heterogeneous resources are physical, human, and organizational
capital
6. Competition is the source of innovation and it comes from a firm’s ability to
recognize, understand, create, select, implement, and modify strategies to its
situation
7. Financial performance between firms varies depending on their resources and
capabilities

25. RBT argues that…
Pharmacy firms achieve sustainable competitive advantage by innovating
in ways that are hard to substitute for or imitate
Success is also the result of the people involved, the organization(s) behind
the innovation, context surrounding its implementation and dissemination,
and the innovation’s benefits to stakeholders and the firm

26. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
Key constructs and
their relationships
in resource-based
theory

27. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
Key constructs and
their relationships
in resource-based
theory
STRENGTHS,
WEAKNESSES
OPPORTUNITIES,
THREATS

28. Using RBT to Understand
Appointment-Based Medication
Synchronization (ABMS)

29. Appointment-Based
Medication
Synchronization (ABMS)
Patient enrolls, MD
Contacted
Patient and pharmacist
discuss medication
regimens, establish
monthly pick-up date
One week prior to pick-
up: patient is called to
confirm refills, clarify
modifications, address
concerns
Pharmacist reviews
medications, obtains
necessary refill orders,
and addresses
insurance changes
Patient picks up
medication on
arranged day,
Pharmacist discusses
changes and questions
Holdford DA, Inocencio TJ. Adherence and persistence associated with an
appointment-based medication synchronization program. J Am Pharm Assoc
(2003). 2013 Nov-Dec;53(6):576-83. .

30. Appointment-Based
Medication
Synchronization (ABMS)
Patient enrolls, MD
Contacted
Patient and pharmacist
discuss medication
regimens, establish
monthly pick-up date
One week prior to pick-
up: patient is called to
confirm refills, clarify
modifications, address
concerns
Pharmacist reviews
medications, obtains
necessary refill orders,
and addresses
insurance changes
Patient picks up
medication on
arranged day,
Pharmacist discusses
changes and questions
Holdford DA, Inocencio TJ. Adherence and persistence associated with an
appointment-based medication synchronization program. J Am Pharm Assoc
(2003). 2013 Nov-Dec;53(6):576-83. .
How does
this offer
competitive
advantage?

31. What resources and capabilities
might offer competitive advantage
with this innovation?

32. Firm Resource Type Examples
Financial cash, access to credit
Physical adequate space/privacy for counseling, workflow, synchronization software
Legal Prescriptive authority, collaborative practice agreements, provider status,
credentialing
Human Pharmacist competence, education and training for personnel,
communication skills, motivation, leadership skills, professional satisfaction,
pharmacist knowledge of and attitude toward cognitive services,
pharmacists’ self-efficacy, autonomy, attitude of staff, sufficient staff
Organizational Culture of pharmacy, innovative practice orientation, script volume,
management support, reputation with the community
Informational Access to patient records, access to reference literature, evidence of benefits
of services
Relational Relationships with physicians, pharmacist/patient relationship, support from
professional organizations and/or government, external advisors or mentors

33. Firm Capability
Category
Examples
Managerial Use of pharmacy technicians, delegation of tasks, organizational
flexibility, human resources management
Marketing Customer service, market segmentation, proactive entrepreneurial
behaviors, services management, active relationship management
with stakeholders
Financial Cross-subsidization of expanded services, financial management
Technical Being patient-centered, use of protocols, interaction with other
pharmacists, use of a documentation system, learning from others,
working in interprofessional teams

34. Sustainable Competitive Advantage
Achieved by accumulating and using resources to serve customer interests
in ways that are hard to substitute for or imitate
In general, intangible resources (e.g., pharmacist’s expertise, proprietary
software) offer more sustainable competitive advantages because they are
difficult to copy
Tangibles (e.g., drive-thru, counseling areas) offer only short term
competitive advantages

35. Indeterminate
Competitive
Advantage
Competitive
Advantage
Competitive
Disadvantage
Parity
Competitive
Advantage
Competitive
Disadvantage
Competitive
Disadvantage
Indeterminate
Relative Resource-Produced Value
RelativeResourceCost
Higher
Lower
Parity
Lower SuperiorParity
Sustainable
Competitive
Advantage
European Journal of Marketing,
Vol. 35 No. 5/6, 2001, pp. 524-548

36. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
Sustained competitive
advantage is not
enough

37. Market attractiveness
Potential for success of an innovation in a
market (segment)
Ability of an innovating firm to exploit
market potential
An innovation may succeed in one market
segment but not another. The key is to
match competitive advantage to the right
segments

38. Porters Five
Forces Model
Rivalry
among
industry
incumbents
Barriers to
entry of
competitors
Threat of
substitutes to
what a firm
offers
Bargaining
power of
customers for
firm's outputs
Bargaining
power of
suppliers of the
firm's inputs
Porter, M.E. (March–April 1979) How Competitive Forces Shape Strategy, Harvard Business Review.
OPPORTUNITIES,
THREATS

39. Force Examples
Rivalry among industry
incumbents
Number of pharmacies, 24/7, omnichannel distribution
Barriers to entry of
competitors
Regulatory hurdles, economies of scale, limited networks
which make it difficult to enter or leave markets
Threat of substitutes to
what a firm offers
Substitutes for ABMS include status quo, medication
synchronization without appointment, automatic refills
Bargaining power of
customers for firm's
outputs
Major customers are PBMs (Express Scripts, CVS Caremark,
and OptumRx) and the Federal Government
Bargaining power of
suppliers of the firm's
inputs
Suppliers to pharmacy service providers are software
companies, labor, or other inputs.

40. Financial Performance
Typically refers to profits
Determined by (1) a firm’s competitive advantage over rivals and (2) the
attractiveness of the market in which it competes
“NO MONEY. NO MISSION.”

41. Financial Performance Depends on Perspectives of Decision
Makers
Decision Maker Interests
Patient
Out-of-pocket costs, personal convenience, impact on
medication adherence, satisfaction with providers
Physician
Affordability to patients, personal convenience, impact on
medication adherence, acceptability to health plans
Pharmacist Additional revenue, operating costs, costs of investment
Government Public health, public financing
Health Plan/ PBM/
Private Employer
Additional revenue, operating costs, costs of investment

42. School of Pharmacy
LO 3: EXPLAIN THE THEORY’S
ROLE IN ADVANCING
RESEARCH IN PHARMACY
PRACTICE

43. Comparing frameworks for evaluation pharmacy practice innovations
Resource Based
Theory
Donabedian Operations
Management
I.S. P-economics
Resources Structures Inputs Factors Medications
Competencies Processes Transformation
Processes
Factors Value added
services
Sustained
Competitive
Advantage
Intermediate
Outcomes
Outputs Strategies Intermediaries
Attractiveness of
Market
Patient clinical,
demographic, &
preferences
System Context of
implement-
ation
Perspective of
analysis
Financial
Performance
Outcomes Outputs Evaluations Economic, clinical,
humanistic
outcomes
I.S. = Implementation Science

44. RESEARCH QUESTONS ARISING
FROM RESOURCE-BASED THEORY

45. Literature on innovation research
Fragmented and gives vague guidance about how to develop successful
pharmacy practice innovations
Different terminology and classifications for innovation concepts
RBT offers a way of harmonizing innovation research. As a theory, it:
• explains relationships
• offers hypotheses on the directional relationships of variables
• addresses innovations within the real-life context of competition

46. RQ1. How does the pharmacy practice literature explain the competitive advantages of professional
services?
RQ2. What pharmacy practice resources are associated with competitive advantage?
RQ3. What competencies of pharmacy practice are associated with competitive advantage?
RQ4: How would pharmacists’ competitive advantage change if they had access to new resources (e.g.,
full patient data)?
RQ5: How would pharmacists’ competitive advantage change with different competencies (e.g.,
entrepreneurial mindset)?
RQ6: Under what conditions of the pharmacy market does competitive advantage lead to financial
performance of firms?
RQ 7: What advances in market segmentation can be used to exploit the competitive advantages of
pharmacy practice innovations?
RQ8: What competencies of individual pharmacists are needed to maximize their contribution to the
competitive advantage of firms?
RQ9: What characteristics of markets (i.e., Porter’s five factors) positively influence innovations in
pharmacy practice?
RQ10: What constructs and dimensions define innovative pharmacy services and their contributions to
competitive advantage?
RQ11: What proportion of published pharmacy practice innovations are sustained 2 years past the initial
implementation and study phase?
RQ12: What resources and competencies are associated with financial performance of pharmacies?

47. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
What pharmacy practice
resources and capabilities
are associated with
competitive advantage?

48. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
What capabilities of
individual pharmacists are
associated with
competitive advantage?

49. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
What advances in market
segmentation can be used
to exploit the competitive
advantages of pharmacy
practice innovations?

50. Financial
Performance
Market
attractiveness
Barriers to entry of competitors
Rivalry among industry incumbents
Threat of substitutes to what a firm
offers
Bargaining power of customers of the
firm's outputs
Bargaining power of suppliers of the
firm's inputs
Sustained
competitive
advantage
Firm Resources: Financial, Physical,
Legal, Human, Organizational,
Informational, Relational
Firm Capabilities: Managerial,
Marketing, Financial, Technical
What proportion of
published pharmacy
practice innovations are
sustained 2 years past the
initial implementation and
study phase?

51. Conclusion
Competition is a fundamental aspect of business and innovation
Innovations must achieve sustained competitive advantage and financial
performance
Resource-based theory of competitive advantage can serve as a general theory
for research in pharmacy practice and in the social and administrative sciences