UBC Phar400 Biusiness of Retail Pharmacy 3.0 23Jan2015

UBC – Phar400 | Pharmacy Management
pharmacySOS.ca | Gerry Spitzner
January 23, 2015

 Health Authority Associated Pharmacy
 ambulatory care pharmacy, cancer drug pharmacy, HIV drug pharmacy,
hospital pharmacy, corrections facility pharmacy, mental health,
substance use and addiction
 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
 nuclear pharmacy (radiopharmacy), military pharmacy
pharmacySOS.ca | Gerry Spitzner 2

Learning Objective: High level overview
of retail community Pharmacy business
Thoughtstarters
Pharmacy Business in Canada & BC
Retail Pharmacy Formats & Differences
Pharmaceutical Logistics & Supply Chain
Functional Areas of Retail Pharmacy
Future Developments, Trends & Opportunities

Consider where the need and the
market for Pharmacy patient
services fits within the
consciousness of today’s busy
retail customer.

 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.
◦ The key to business survival... creating, engaging and keeping
customers.
◦ A retail Pharmacy that continuously relies on only current
customers for its economic success is not going to grow.
◦ Meet the needs of ideal customers by engaging them and
creating a professional business relationship with them.
◦ Deliver value and keep the customers you already have.

 What is value in the 21st century?
◦ Value is not determined by the people who set the service and
price, it is determined by those who choose to pay the price for
the service.
◦ Value is always defined by the recipient, not the provider, it is
always rooted in one’s need system.
◦ Value is a function of one’s needs being identified and satisfied
in ways that meet and exceed one’s expectations.
◦ Value is created for the customer during the experience of
interacting with the service provider.

 Why should a patient do business with you?
◦ Crazy competition
◦ Patients/customers don’t care how awesome you are
◦ Increasingly demanding and informed patients
◦ Fickleness trumps loyalty
 Questions you need to answer about your patient
service from your patients perspective…
◦ Why should business come to you rather than someone else?
◦ What problem does your professional service solve?
◦ How does it work? What makes it better than the other
Pharmacy? Why does it matter? Why should anyone care?

 Should Pharmacists focus on clinical patient
services vs dispensing?
◦ Per capita usage of 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.
◦ Funding for new initiatives is still tied primarily to
dispensing and drug margins, rather than on reimbursement for
clinical services or patient outcomes.
◦ Dispensing leads to the opportunity to provide patient services
◦ Move from product to experience. Move from drug distribution to
health. Move from patient care to patient empowerment.

What makes a positive customer
experience in retail Pharmacy?
Move from product to experience.
Move from drug distribution to
health.

 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 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

 Value is a function of the bundle of perceived benefits
offered at a given price. It's a unique perspective.
 Perception is in the eyes and ears of the beholder;
value means different things to individual people.
 Develop a value proposition for patient services.
 Think different; Bee depherent… is the most important
strategic business principle of all.

 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. The control position is in the customer’s
hands; the organization is in the responsive position.
 Customer service is an attitude not a department

 In today’s world, business is built on relationships.
◦ 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.
◦ Use “pull” vs. “push” marketing.
◦ Positive relationships are the pleasant by-product of conducting
a professional, prepared and productive patient interaction.
◦ But it's much more than just having a "great professional
relationship" with them and helping them with their problems.
◦ 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 the Pharmacist really cares about them and
their health. It’s a feeling…

 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. Transactional vs serving patients and
customers for outcomes.
 Value is in the ‘applied’ benefits of the benefit you and
your service offer.
 Applied benefits are the outcomes patients expect
beyond how to take the prescribedmedication.

 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.).
◦ A customer experience is about how a customer consciously and
subconsciously sees his or her 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.

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

Retail Pharmacy business is BIG
business.
Overview of the business of retail
Pharmacy in Canada and BC.

Source: CACDS 2012

Source: Canadian Generic Pharmaceutical Association (CGPA).

Corporate/Franchise/Chain Banner/Independent
 Shoppers Drug Mart 164
 Safeway 70
 Overwaitea/Save-On 74
 London Drugs 50
 Walmart 37
 Rexall 36
 Loblaw/Drugstore 55
 Costco 14
 Thrifty Foods 12
 Target 11
 Pure Integrative 16
 Total 539
 Pharmasave 149
 Peoples 47
 Medicine Shoppe 29
 Medicine Centre 40
 Remedy's RX 22
 I.D.A. 52
 Guardian 26
 PharmaChoice 11
 Total Banner 367
 Family Healthcare (IND) 26
 All Other (IND) 287
 Total 554
*Source: B.C. College of Pharmacists registry and 2013/14 annual report
Source: Canadian Healthcare Network Aug 2013

 Healthcare is a business and always will be...but
Pharmacy practice is an art; and always will be.
◦ Practice of Pharmacy and business of healthcare are converging
◦ Community Pharmacy is a retail business
◦ Community Pharmacy owners are small business entrepreneurs
◦ Pharmacists are the only HCP practicing in a retail setting

What are the main types of Retail
Community Pharmacy and the
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
 Support services in Operations/Marketing/Finance
 Many “masters”
 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

 Target Pharmacy concept
 easy-startup; no initial franchise fee
 comprehensive trainingprogram
 no store buildout costs with fully-constructed pharmacy,
including dedicated counseling room
 no renewal fee and no cap on total earnings
 franchise fee based on gross sales
 competitive licensed space fee
 subsidized advertising fund
 competitive OTC royalties paid to franchisee
 dispensing system including software and hardware, along
with a P.O.S. system
Closed

 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 in a wholesale i.e.

 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 & Front Shop
◦ McKesson, Kohl & Frisch, uniPHARM and AP Martin
◦ 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

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

 Finance
◦ Monitoring, analysis, cash flow, Profit & Loss
 Marketing
◦ Ideal customer audience & services communication
 Operations
◦ Delivering the promise of marketing & customer experience
 For your project you’ll need to address these
areas in your business plan and presentation.
40pharmacySOS.ca | Gerry Spitzner

Patient/Customer Experience Profitability
 Inventory management
 Pricing
 Merchandising
 Staff
 Receiving
 Loss Prevention
 Wages and Benefits
 Staff Schedules
 Training
 Supplies
 Information Technology
 Computer hardware
 Policies & Procedures
 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

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.

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

 The cost of healthcare, the ability to maintain
margins and the ability to continue to grow revenue
are the top business challenges in the retail
Pharmacy sector.
◦ Low-volume stores are really going to struggle
◦ 3rd party plans looking for ways to reduce Rx drug costs
◦ Plans are more complex; patients don’t understand them
◦ Many ‘veteran’ pharmacists prefer to operate at the status quo
◦ Patients have a more active approach to how they optimize
their own health

 Supermarkets, mass merchandisers, mail order and
Pharmacy chains are likely to keep competition keen
 Government's plans for pharmacy may include an
enhanced role for Pharmacists
 Aging population and ongoing shortage of physicians
will strengthen demand for Pharmacy services
 Count on facing predictable uncertainty at an
accelerated pace
 Change management is a “soft” skill requirement for
Pharmacists

 Promoting Safe and Effective Use of OTC Medications
 Natural Health Products
 Compounding
 Pharmaceutical specialty niches and services
 Adherence/Better Care/Zero Waste Go Hand-in-Hand
 Focus on refills
 Community connections and engagement

 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 through inter-professional collaboration

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.

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
 44% of millennials say online
access to health info causes
them to worry more about
overall health
 only 42% say they consider
themselves healthy.

 2015 will be a huge year for Tele-health/Tele-medicine.
◦ Using secure video-conferencing to live-link patients with their
physicians 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.
◦ It’s amazing what you’ll find when you can focus on these
areas instead of accuracy and ‘fast’ service.
◦ Your customers will really start to see the value of your role
and will soon become your patients.
◦ Focus on care first; commerce will follow.

What do you hope to do
when you graduate?

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

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

 Gerry Spitzner is an optimist with a natural "kid-like"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 a bright future and our ability to build it together.
 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; Gerry has the unique advantage of having worked in several different
business models within the retail Pharmacy industry.
 Fascinated with a lifelong curiosity for why customers buy, trends and a passion for retail;
Gerry guides Pharmacy retailers with strategies to create, engage and keep great
customers by delivering the promise of an extraordinary customer experience. He is
dedicated to sharing his thinking to build strategic business development action plans that
increase sales and profit.
 pharmacySOS.ca is a Vancouver, BC based business management consultancy providing
Strategic Operations Services focused on drug stores and Pharmacies. Specializing in
consumer trends and strategic business development helping Pharmacists to market their
patient care services beyond dispensing.

UBC Phar400 Biusiness of Retail Pharmacy 3.0 23Jan2015

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UBC Phar400 Biusiness of Retail Pharmacy 3.0 23Jan2015