A pandemic can bring the upheaval that tips a crisis into a revolution. Bruce Annabel and Mal Scrymgeour
discuss whether this is the future for community pharmacy
Quite without any forewarning, a cholera pandemic hit France in the early 1830s. It wiped out nearly 3% of Parisians in a month. Hospitals were overwhelmed by patients’ whose ailments doctors could not explain.
Much to the surprise of everyone, the end of the plague prompted an economic revival, with France following Britain into an industrial revolution.
But, as anyone who has read Les Miserables knows, the pandemic also contributed to another sort of revolution. The city poor, hit hardest by the disease, rallied against the rich, who had fled to their country homes to avoid the contagion.
History suggests three major outcomes result from a pandemic:
- While people are keen to go out and spend, uncertainty lingers
- People and businesses try new ways of doing things, upending the structure of the economy
- As Les Miserables shows, political upheaval often follows with unpredictable political consequences.
It all sounds broadly familiar. It is also worth asking—is pharmacy facing a broadly similar situation?
Opportunity and crisis
Like the 1830s in France, the ‘poor’, who we shall define as the employed pharmacist, have seen stress and dissatisfaction rise to ‘crisis’ levels. Increased patient volume and demand means this is no surprise.
We explained the reasons last month in our May AJP column, which in essence boiled down to poor remuneration, slavish conditions and lack of development that curtailed the number of pharmacists working in the community pharmacy sector. Suddenly employers struggled to find enough pharmacists to cover the demand, and many were forced to pay high hourly rates just to get dispensing chemists.
The pharmacist ‘crisis’ exposed by a pandemic of crisis proportions had been allowed to develop over many years, with the peak bodies and industry failing to deal with pharmacist poor remuneration, owners who took advantage, absence of development via education geared to career pathing and the role of pharmacists in practice remaining largely technical.
Despite the difficulties and stress, it was a boomer time for most owners. It hasn’t been so for employed pharmacists. Owners will need to figure out where income growth will come from as the virus inspired fear winds down. How to motivate, remunerate and train pharmacists as a critical resource is a mounting and unresolved issue.
The solution is twofold:
- Short-term solution implemented by owners in collaboration with culture fit pharmacists.
- Longer term structural change involving ALL stakeholders that we will discuss next month.
As the saying goes you cannot cut your way to success. While most think cost cutting delivers a result, it places a cap on growth and service quality that often has the opposite effect and lowers profit instead! Fortunately, some innovative owners are trying new ways of doing things—and its proving successful:
1. Establish a patient purpose
Provide every patient with a professional health solution experience delivered by a pharmacist, the best and most qualified person in the pharmacy.
2. A productive resource
Pharmacists are regarded as a resource to be invested in. The evidence shows that these pharmacists are more productive than assistants in terms of health solution advice and income growth. These pharmacists fit the patient purpose and do not spend time dispensing, because the administrative portion of their role is delegated.
In return they are remunerated accordingly, and the most successful ones become owners and brilliant, innovative leaders.
Examples of income producing activities engaged in include:
• Services—both 7CPA and patient funded
Case example—a pharmacy turning over $4 million, 65,000 Rx, services > $300,000 and employing five FTE pharmacists. Maximises every $ of 7CPA , services 200 community DAA patients charging $6.60/week, offers sleep disorder services, vaccination and wound care.
• High retail health sale/patient
Through a booming minor ailment and a large practitioner integrated health business, the health-related product sales per patient (all patients who transacted with the pharmacy, not just retail) is just under $20.
• High income return
Services do not require discounting and nor do health giving products recommended in solving minor ailments. The result is margins of more than 40%. These pharmacists generate strong net profit returns even after higher wage outlays.
For more, look at our April 2020 AJP article in which we outlined the top 10 ways to grow income. We commend it to you as a good place to start.
3. Grow patient visits and attract new ones
Pharmacists who can deliver patients a health experience that THEY value. Our clients found this approach resulted in gaining new patients and getting them and existing patients to come back more often. It is far more successful than soft discounting.
4. Remunerate accordingly
In most professions, remuneration is based on knowledge and experience that are applied in performing more advanced work, which generates greater value to both the business and the customer. Customers typically pay more in return. Correspondingly the practitioner is paid more.
In community pharmacy this is not so. An absence of career pathing, a disconnected box-ticking CPD system, and commercially uneducated owners who firmly believe that meeting financial challenges is achieved simply by cutting wages and hours, is the norm.
More innovative owners have instead set their own internal career path structures and remunerate according to capability and productivity. The result is highly competitive pharmacies, patients receiving a health experience, pharmacists enjoying financial and professional reward plus a very profitable pharmacy. Everyone wins.
5. Employ more pharmacists
Check these case examples: a pharmacy dispensing about 500 scripts per day employs 11 FTE pharmacists generating > $600,000 services income per annum; another dispensing about 70,000 scripts per annum, employs six FTE pharmacists generating > $300,000 services income per annum; and one with sales > $5 million per annum with five FTE pharmacists earning > $250,000 services income per annum. All three are in suburban strip locations with discounters nearby, earn > 40% GP, grow patient visits every year and generate net profit/sales of 15% to just below 20%.
The key to their success is great leaders embracing points 1 to 4, who employ a lot of the ‘right’ pharmacists, not dispensing chemists.
6. An employer of choice
While sourcing the ‘right’ pharmacist is very difficult, the task can be easier as those interested in the pharmacist professional service practice model will often apply. The innovator leader pharmacy owners end up with a superb professional service team, which proves persistence eventually pays off big time for the pharmacists and employer.
Data proves outperformance
Our observation is that more pharmacists employed, treated as the most vital productive resource and well remunerated, is the key to today’s professionally and financially successful pharmacies.
Pharmacies imbued by the productivity model are clearly more profitable, are able to do more for their patients, and outperform most bigger turnover pharmacies.
Many find the productivity model foreign, even confronting, as cost cutting is easy. Don’t. Cost cutting is outdated and has led the pharmacy profession to lose its way in what to us resembles a rush to commoditisation, where price and cost reign and professional service is allowed to wither.
We’re not making a song and dance about nothing. Getting the model wrong will lead you to your very own ‘Les Miserables’. It is a time for revolution, but a revolution driven by you, not forced upon you. But you need to act. Now