Surf’s Up


Pharmacies have found themselves in unpredictable waters over the past couple of years. Those who have navigated them most effectively have mostly followed a similar path to success

Australian triple world surfing champion Mick Fanning knows better than most people how to deal with uncertainty. For 15 years, Mick was a surfing professional plying his trade around the world, winning an impressive number of events.

The sea is an unpredictable ally at the best of times; trying to “read” the waves doesn’t always mean you get it right. Waves can come in sets of three or seven or anything in between depending on the beach and the tide. Or in no predictable sets at all. There’s also the uncertainty of not knowing what is lurking in the water beneath.

Famously, in 2015 while surfing at South Africa’s Jeffrey’s Bay, Fanning took exception to a great white shark biting through the leg rope securing his leg to his surfboard. A punch to the shark’s snout, help from fellow surfer Julian Wilson, and Fanning escaped an uncertain situation unscathed.

Recovery, change, uncertainty

Pharmacy faces similar unpredictability, uncertainty and the fear of what lurks in the shadows in the form of the different variants of SARS-CoV-2 and the economic ramifications that it brings. In our June 2020 AJP article, ‘The shape of things to come’, we speculated on what shape the SARS-CoV-2 recovery would resemble.

After Australia was well on the way to a spectacular U-shaped recovery only a couple of months ago, we find ourselves confronted by the Indian origin ‘Delta’ variant. It may have arrived via an unvaccinated Sydney limo driver and, if so, made it possibly the most expensive limo trip ever recorded.

Although it might seem hard to find, there is a silver lining and that is the vaccination ‘call to arms’ as we realise the virus is still around, which prompted community pharmacy finally being allowed to administer the vaccine. Given Australia’s very conservative approach to managing the virus, the only solution is rapidly raising the vaccination rate.

A ‘W’ or ‘Ws’ recovery?

After the Delta variant destroyed our U‑shaped recovery prediction, we look like experiencing a W, or series of Ws, shaped recovery as we lurch from one lock up and border shutdown to another with an uptick only occurring as we get to 70–80% of the population of people aged over 16 vaccinated.

As the vaccination rate grows, the economic recovery we witnessed a couple of months ago should recommence after which we can get on with the post pandemic phase and a return to ‘normal’ times.

Meanwhile the massive economic damage done to the private sector will leave a huge hangover and debt legacy for current and future generations. The business sector which pays most taxes and other imposts, having been smashed over the past 18 months, will, perhaps unfairly, be expected to carry more than their fair share. Pharmacy owners will not be immune.

Whichever way you look at it, things have changed rapidly, instilling huge uncertainty in business, governments and the future of community pharmacy. It will not be business as usual. It will be business as unusual.

Outperformers

During the pandemic we noticed the majority of pharmacies did well, largely thanks to finding themselves in a sort‑after location, the population scared witless seeking help and a higher concern for their state of health. Pharmacy has been an indispensable service.

In this period of business as unusual, we’ve discovered some pharmacies demonstrating way above market KPIs including:

  • patient visit and prescription volume growth
  • high and growing retail health sales/patient
  • gross profit dollars and services income growth
  • wages/income % falling, and
  • extraordinary net profitability.

This performance was not down to luck, rather it’s the result of very deliberate work that had been going on for several years.

The common thread

We discovered that the outperformers shared the same trait—and that is their purpose. They all have the purpose of being the provider of professional health solutions and services. By way of contrast, most pharmacy owners think their purpose is to make money. Making money is simply the outcome of the right purpose executed precisely.

By comparison, in the ‘purpose driven’ pharmacy everyone lives and breathes the purpose of helping people, and every person’s role is vital in achieving it.

These owners lead with a passion that flows into their business strategies, premises, staff/skills mix, health assortment, professional service standards—particularly pharmacists engaging patients, delivering a lot of services and communication.

The combination creates a culture that pervades the entire pharmacy. These pharmacies compete on health, not price.

By focusing on executing the purpose patient to patient, hour to hour, day to day, these pharmacies far outperform professionally and financially.

Table 1 compares the market KPIs of the reactive operator with the purpose driven model. As someone said many years ago, look after your patients and the dollars will follow.

 

Traditional reactive operator

Purpose driven

 

Patient visit growth

(3.25%)

7.4%

Script volume growth

0.24%

5%

Dispense GP$ / script

$13.25

$16.32

Prof Serv income per script

$0.59

$2.28

Retail health sale/patient

$10.21

$15.46

Salaries & wages/income %

41.3%

40.4%

Net profit/sales *

10.4%

17.3%

*One simple fact: Purpose driven pharmacies are 70% more profitable than traditional community pharmacies. (source: Pitcher Pharmacy Services client series and BA client base)

Prepare now for post pandemic

The EBELTOFT 2021 Global Retail Trends & Innovations lists four critical innovative strategies:

  1. Omni integration—all customer touch points connected and consistent
  2. Extreme convenience
  3. Extreme experience
  4. Sustainable practices

The two critical innovations for community pharmacy are accentuating both convenience (location and other time-saving innovations) and lifting the quality and consistency of the health experience offered to patients. Our outperformers are doing well with both, particularly the latter.

In our view, purpose driven pharmacies will have ‘an unfair advantage’ when vaccination rates reach 80% and the new normal arrives.

Uncertainty brings changes. Overcome that uncertainty by determining your own destiny.

Our message is to start getting ready now and here are our top 10 tips for doing just that:

  1. Purpose. Rediscover your purpose and make it drive everything in your business.
  2. Plan. You’ve already managed business as usual; reflect on that and plan for more of the same.
  3. Consumers. Their habits and expectations have changed. Design your business for how they shop now, not how they used to shop.
  4. Speed. Things are changing fast. Pre‑COVID-19 we looked at business performance monthly or quarterly. One of us is involved in a business that monitors trends not weekly or daily, but hourly.
  5. Digital. There’s a revolution in patient engagement, information, efficiency and communication. For example, there is, without question, a rapid and dramatic shift to online sales and sourcing information. Coming soon will be the impact of artificial intelligence and robotics. More business as unusual.
  6. Range. Review and revive. Sundries have moved online and to competitors. Health related lines are growing in pharmacy.
  7. Stock. Being in stock is “the new black”. This often means carrying some additional stock of the most important lines, or where supply is challenged. Toilet paper isn’t one of those lines, however!
  8. Engagement. Skilled pharmacists’ focus must be on engaging patients as advisers. Patients want pharmacists to be providers of services, health solutions, minor ailment services and condition managers. These are in demand, timeless and profitable and a key part of your purpose.
  9. Advice. If being in stock is the new black, health advice is the new gold. It’s what people want.
  10. Retail basics. These are as important as ever. If you are a health professional, your pharmacy must reflect your professionalism—and your purpose.

Pharmacy has successfully surfed the wave of uncertainty and unpredictability. We don’t know what lurks ahead of us. Manage that uncertainty and business as unusual with a clear purpose and deliver what patients want. Do that and you’ll find the surf’s up.

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