Could the 7CPA become the driving force for change in community pharmacy? Or will it still stick to the old standards? Bruce Annabel and Mal Scrymgeour look at the options
Recently, both of us attended conferences covering two very different subject matters. One conference was predictably about pharmacy while the other was about the future of food.
At first glance, these are quite unrelated topics, but both conferences discussed dramatic change. To the casual observer the change didn’t appear too radical, but appearances can be very deceiving.
The food conference was, if not slightly depressing, certainly thought provoking. The world needs to find enough food to feed another couple of billion people who will pop up over the next 20 years.
To complicate matters we need to do this with less carbon, less animals and a change in land use. Effectively more horticulture and less agriculture.
To show that the change is here already, it turns out that vegetarianism isn’t some weird thing only slender, lithe, tanned people who live in California engage in.
The USA, the country that drove the global popularity of the hamburger, now has an almost unbelievable 23% of people identifying as vegetarian. Vegetarianism was something on the periphery of normal when, all of a sudden, it has arrived—dancing with Jazz hands and singing, ‘look at me Darling’.
Add to this that ‘farms’ are now in cities. This new type of farm grows hydroponic vegetables in giant warehouses in cities. It’s known as vertical farming. Meanwhile, a change to the price of carbon means more afforestation, which is a huge change after decades of deforestation. Farmers will make much more money selling carbon credits than farming—look forward to many, many more trees. It’s the economics of climate change at work.
The second conference was about change and highlighted just how different the 7CPA could be. What looks normal now will have the same degree of change as food production. A number of things will be addressed simultaneously and what looks like a small change could in fact be game changing. Remember when all you had to do was open the doors, dispense and good profits resulted?
Changing it up
It’s no longer that simple or easy. Pharmacy has not responded in an appropriate manner to the challenges thrown up.
Consider these changes:
- Patient visits—dropped 3.8% during the past five years, including 1.9% last year,1 reflecting reduced market relevance of the traditional business model.
- Scripts dispensed—volumes are flat.
- Net profit, before interest—dropped 22% compared with five years ago.1
- ROI—dropped to 14% compared with 25% 10 years ago1
- New medicines—high street pharmacy doesn’t participate—the majority of new medicines on the PBS are specialised, usually high cost and mostly delivered to patients in hospital or specialist practices.
- New treatments—emerging in the form of cell and gene therapy, immunotherapy and biologics.
- Cheap medications—pharmacy is dispensing cheap, off-patent pharmaceuticals with an average cost of $25.¹ Many are commoditised by competing through price in a flat market.
- Professional services—often shunned because the practice model isn’t conducive and, due to wage cuts, most don’t have the time.
- Job roles—pharmacists still dispense while assistants engage with patients. This is no longer good enough as dispensing becomes automated, pharmacist engagement is crucial.
- PBS—the government supports the exclusive and profitable pharmacist supply of PBS pharmaceuticals, while those further up the supply chain haven’t fared well. For example, last financial year manufacturers received $334m less from the PBS than the prior year while pharmacy benefited by $134m. ²
While the economic forces of change in pharmacy might not have arrived singing and dancing with Jazz hands, the change has been more gradual but equally profound.
An effective response at both pharmacy and peak bodies levels should encompass:
- Reform the pharmacist practice model.
- Offer consistent pharmacist professional service focused on ‘helping patients’ through health solutions and advice.
- Fully embrace existing and new professional services.
- Replace price with ‘helping patients’ as the value driver.
In the past, we have written about some pharmacies enjoying extraordinary success through embracing these features and we think it represents the framework for a sustainable future.
Both peak bodies have issued useful vision documents with the Guild’s Towards 2025 and the PSA’s Pharmacists in 2023 which have the potential to influence the broader industry.
Different this time
The changes can only come via the 7CPA. This negotiation will be held out of an election cycle thus increasing government clout, which will be enhanced by having won the unwinnable election. Compared with five years ago, other stakeholders are seeking a seat at the table thus enhancing government’s ability to divide and conquer.
A positive is the inclusion of the PSA who could play a critical role, introducing elements and ideas that may help transform the industry to the sustainable framework.
Three areas of the 7CPA are particularly important:
1. Dispensary profitability
It’s essential prescription supply remuneration continues to support the reliable and widely accessible PBS supply network. Current dispensing gross profit per script is about $13.501 generating good dispensary profitability.
2. Cost of distributing PBS pharmaceuticals
Presumably aimed at reducing PBS outlays, the PBAC last year recommended the government introduce extended 60 day script supply for 143 drugs. While Minister Hunt backtracked prior to the election, we don’t believe the issue is dead. Our modelling indicates, on average, pharmacies would lose one third of their net profit immediately plus the collateral damage suffered by less patient visits.
PBS script volume fell by 2 million between 2013/14 and 2017/18 and net outlays have been flat in nominal terms for 10 years. That policy will continue, suggesting all the new and high-cost drug listings will have to be paid by industry.
Calls for the patient co-pay structure to be radically reduced must be avoided to prevent further price discounting that would impinge service quality. Any impost on pharmacy must be compensated through profitable professional service funding, pharmacists’ uptake and seeking internal process, space and merchandise efficiencies.
3. Professional services incentives
Moving pharmacists out of dispensary administration and processing requires positive incentives because negative ones haven’t worked. As the supply function moves to more efficient technological platforms, pharmacists will move more into professional services.
a) Medication management
The hub of professional services is medication management through community dose administration aids (DAA), MedsCheck, home medicines reviews (HMR), clinical interventions (CI), residential medication management reviews (RMMR) and staged supply. They support patients and are profitable. Community pharmacy vaccination service has been very successful.
Aged care facility DAAs should be funded in the 7CPA because the service has become marginal resulting from price cuts and extraordinary service level requirements.
b) Condition management
Being the most readily accessible health professional, pharmacists are ideally placed to work in concert with GPs to manage patient conditions such as diabetes, mental health, asthma, cardiovascular disease, arthritis, wound care and chronic pain.
c) Minor ailments
Targeted minor ailments programs should be funded in the 7CPA as potentially they offer reduced downstream healthcare costs. Innovators have proven that delivering minor ailments services successfully through ‘pharmacist professional service’ opens up every non-dispensary health related department.
From a financial perspective, minor ailment services allow retention of margins, boosting average non-script sale by 25%1 and higher pharmacist wages.
d) New drugs and treatments
Consider which new treatment technologies could be offered to patients in the community setting, implications of which include pharmacist education, remuneration, premises layout and protocols.
Community pharmacy and pharmacists have a lot more potential than supplying commoditised off-patent drugs.
The home front
The next two points aren’t the responsibility of government yet are critical if professional services incentives and opportunities are adopted and the industry transformed:
1. Practice model change
Professional services can’t be delivered from the dispensary bench, nor can minor ailments. Pharmacist relevance lifts when special knowledge and skills are used to benefit patients not processing scripts. Working with patients and GPs to solve problems, while leveraging the new technology and information, is the future.
2. Dispensary technicians
A critical enabler of practice model change is dispensary technicians urgently taking on the admin and processing activities of the dispensary, freeing pharmacists to perform other activities.
Change must happen to many pharmacists’ fundamental practice. Few have made these changes because it’s easier to stick with dispensing. Structure and incentives via peak bodies and the 7CPA are required.
The changes have been iterative so far, but the 7CPA could be all singing and dancing—with Jazz hands.
- Pitcher Pharmacy Services client series.
- PBS Expenditure & Prescriptions Report, 30 June 2018.