What are the top five inexpensive and fast acting initiatives available to offset the impact of PBS cuts?
Price disclosure is a continuous PBS cost shaving process. It requires pharmacy to take great care to avoid the pain inflicted by the cuts, Bruce Annabel and Mal Scymgeour outline some techniques to offset the impact.
Despite the good news presented by the 6CPA AHI fee, the bottom of your pharmacy’s income/GP$ per script will be much lower than it currently is after majority of the trading terms are erased over the next two or three years. In other words, you might have costs greater than your income.
Generic clawbacks, via both net price reductions and curtailing head office rebates, mean the 1 October cuts are estimated to take GP$/script back to where it was last year, prior to the 1 July ’15 AHI introduction.
It means a drop of over $20,000 income per annum for a pharmacy dispensing 55,000 scripts per annum.
Therefore, you either live in hope that script volumes will grow enough to offset the reduced GP$/script while trying to contain overheads (we refer to that as doing nothing which is certainly the most popular option, although it isn’t working terribly well) or offset the pain by pursuing the top 5 inexpensive and fastest acting initiatives available to all:
- Raise gross profit dollars:
- Revise pricing/margins of non-sensitive health solution lines particularly S3/2, surgical and other non-dispensary front of practice health departments where value added advice reduces the patients focus on price. Discounting is radically overdone in community pharmacy.
- Ensure ‘appropriate and relevant’ pricing of KVIs (known value items – there are only a handful)
- Increase retail health transaction per patient: Train pharmacists (particularly owner managers) in how to solve minor ailments including lifting beneficial patient health solution product recommendations focussing specifically on schedule 3 medicines, the most helpful, highest margin and overlooked category in pharmacy. Add evidence based complementary items including practitioner lines, schedule 2, surgical, digestion, eye and lens, ear care, therapeutic skin, therapeutic hair and blockbusters such as diabetes, weight management (not simply selling meal replacement boxes), specialist wound care, compression therapy and there are many, many others…
- Grow patient visits by giving them a reason to return: place pharmacists in the white jacket (clearly designates the trusted advisor) ‘out the front’ to engage patients and solve/improve health issues. Assistant(s) can support and triage plus move to the dispensary trained as dispensary technicians to process scripts thus ensuring wages don’t increase. Every script must be given out by a pharmacist and pharmacists are not permitted in the dispensary.
- Recommend fee for service community DAAs, perform clinical interventions (target 5% of script volume) and conduct minimum 10 MedsChecks per month. Make sure ALL of these are recorded in GuildCare. Collaborate with local GPs in the interests of improving patient health. Work on and use systems designed to lift patient adherence and compliance.
- Print a list of retail items that haven’t sold for 6 months or longer and consider their value to you. Perhaps replace with items that are selling faster through facing up and increasing depth.
These suggestions cost little to implement and must be clearly delineated as strategies that grow top line (income), patient visits and credibility. That is in stark contrast to ‘hygiene factors’ which everyone must do anyway such as ensuring stock swap over avoided any unintended price change losses and adhere to buying/replenishment policies.
Patient and script volume growth has been modest for years and reflects community pharmacy continuing to lose patient relevance. So use the challenges as the call to action and get on with transforming your business.
Pitcher Pharmacy client series data collected online for a large cohort of ‘like for like’ community pharmacies indicates the following trends for year ended 30 June 2016 compared with prior year:
Average dispensed price
Patient volume growth
Script volume growth
Retail items sold per patient
GP$ per script
1 October est loss GP$/Rx
Est GP$/Rx 1/10/16 – 31/3/17
Using our shaving analogy, we have been looking in the mirror and watched all the cuts appearing first hand. As the cuts continue and the bleeding starts again, we start to realise that we must change. In the case of shaving we either change to an electric razor or we grow a beard. Uncomfortably, the pharmacy industry finds itself in exactly the same position. Either do something different or continue to endure the pain of continued cuts and whatever other external shocks impact your business. It’s your choice.