Adapting to changing circumstances is particularly relevant to independent pharmacy owners, as retail pharmacy is an industry in major transition. Understanding and acting on the following trends will help independent pharmacy owners survive and thrive in this turbulent environment.
Medicare Growth Continues
As America's population ages, serving Medicare beneficiaries becomes increasingly important. In 2015, 41 million people were expected to be enrolled in a Medicare Part D plan.1 Seniors fill an average of 27.9 prescriptions annually at retail pharmacies, more than double the number of prescriptions for adults ages 19 -64.2 More than a quarter of all prescriptions in 2014 were purchased through Medicare, and Medicare or Medicaid covers more than half of the prescriptions that an average independent pharmacy dispenses.3 Medicare will cover another 19.1 million people within 11 years.4
Indicated action: Make targeting seniors a concerted focus. Because serving seniors is increasingly important, retail pharmacies should make the most of Open Enrollment season by marketing their business and helping seniors review their plan options to make better-informed decisions. Since new seniors are entering the system throughout the year, they should reach out to seniors in their community with events at senior centers and build relationships with prescribers who may refer seniors to their pharmacy.
Preferred Networks Have Exploded
In 2015, 87% of Medicare Part D plans included preferred pharmacy networks, up from just 7% four years earlier. And, the criteria to participate in preferred pharmacy networks have changed; they now include performance on key quality measures.
Indicated action: Gain and maintain access to preferred networks. Participating in preferred networks is necessary (even with the tradeoff of lower reimbursement) in order to have access to Medicare patients. Failure to participate in preferred networks will limit a pharmacy's access to Medicare beneficiaries in Part D plans. Because consumers generally have high satisfaction with their current pharmacy, pharmacies believe their customers will remain loyal. However, most Part D participants are likely to switch to in-network pharmacies. In fact, 85% of senior consumers say they would switch pharmacies to save even $10 or less on a co-pay.5 Maintaining participation in preferred networks requires constant vigilance of strong performance (in the top 20%) on key Star Ratings measures. Related: Improving your pharmacy performance ratings.
Prescriptions are Becoming a Smaller Piece of the Pie
For big pharmacy chains such as CVS and Rite Aid, prescription sales accounted for about 65 -70% of revenue in 2014.6 However, in an average independent pharmacy, more than 90% of the revenue came from prescriptions, according to the 2014 NCPA Digest.7
Indicated action: Focus on the overall value of the patient and broaden the products and services offered. Independent retail pharmacies should find other ways to serve their customers and generate revenues and profits, such as clinical services, front-end sales, new product lines and more. Independents are diversifying revenue streams, with 62% now offering immunizations, for example.8
Specialty Medications Will Dominate Drug Spending
While fewer than 4% of people use specialty drugs, those medications comprise nearly a third of drug spending, and that is expected to rise to at least 50% by 2020.9
Indicated action: Develop a strategy for accessing this growing slice of the market. Although the bar for entering the specialty market can be high, partnerships offer a way for independents to use their unique capabilities of high-touch care and tap into a significant revenue stream. Related: How retail pharmacies can offer specialty pharmacy.
Independent retail pharmacy businesses have already experienced some of the impact from these changes, and now it is them to plan for the evolving challenges and seize the opportunities ahead.
To learn more about these top trends and how independent retail pharmacies can adapt their business model amidst a changing landscape, visit smartretailingrx.com.
Related: Learn about McKesson's retail pharmacy solutions.