Independent pharmacies in Canada are using data to improve the performance of their clinical services and business operations. As part of the process, they are building stronger, more personal relationships with patients and positioning their small businesses to effectively compete in the future with pharmacy chains, big-box stores and online retailers.
It’s a journey independent pharmacies in the U.S. can follow to create clinical value for patients and business value for themselves.
Independent pharmacies in Canada and the U.S. are dealing with similar trends
Independent pharmacies, regardless of country, all face the same four trends, which threaten their traditional business models yet create opportunities for forward-looking pharmacy operators:
- Reimbursement pressure. Payers, whether they’re the government, employers or commercial health plans, can’t afford to keep doing what they’ve done in the past. Tighter drug payment policies are exerting downward pressure on the profit margins of independent pharmacies.
- Prevention and wellness. Patients all around the world are growing more interested in better ways to manage and improve their own health. You see that reflected by the boom in mobile health applications and the use of wearable health-tracking devices. You also see that reflected in the interest in behavioral and lifestyle coaching and counseling.
- Patient engagement. Related to prevention and wellness, patients are looking for stronger relationships with health care providers and other stakeholders who can help them with their prevention and wellness goals. Patients want help that’s effective and convenient.
- Digital disruption. Patients have developed higher service and price expectations based on their buying experiences with online retailers like Amazon. Online retailers have disrupted the in-person business models of traditional retailers, particularly small businesses like pharmacies.
Use data to drive business model innovation
Independent pharmacies continue to be viable businesses in both Canada and the U.S. The trick for pharmacies in both countries is transitioning from a traditional business model, built on prescription revenue, to a new business model built on personalized service.
Pharmacies must make this new model their competitive difference. Pharmacies that continue to compete solely on the price of prescription drugs risk losing out to online retailers that get into the prescription drug business and make pharmacy competition all about the price.
What we’re doing with our pharmacies in Canada is using data to help them make that transition in a number of operational and clinical areas:
1. Workflow. We all know the negative connotation of the phrase “we do it that way because that’s how we’ve always done it.” It’s no different for many independent pharmacies whose workflows are based on habit rather than on the most efficient processes. We go into pharmacies and monitor and measure all their workflows. We compare their performance against benchmarks for their peers. We then give them tools and help them implement new processes that enable them to become more efficient. It’s the creation of extra time—maybe from reducing the time it takes to fill a prescription from 10 minutes to seven minutes—that gives them the opportunity to develop their new business model.
2. Pricing. We often find a similar legacy approach to pricing. Many pharmacies we work with charge the same prices for prescription drugs and other products as they’ve always charged. Some haven’t updated their prices in as long as three years. We go in and use a pricing model based on a number of data points—geography, type of medication, competition, availability, seasonal—to determine where they’re undercharging, overcharging or not competitively priced. Then they can use that model to automatically update prices based on those variables. That, again, creates extra time to devote to their new business model.
3. Front-end sales. Like pricing, some independent pharmacies don’t give much thought to front-end sales and how they sell things beyond the pharmacy counter. We work with pharmacies in Canada to optimize front-end sales by using a point-of-sale system that collects, tracks and analyzes sales data. We then take that data and run it through an artificial intelligence program that recommends where products should be placed, which products should be grouped together and which products the pharmacy should promote each week in the store and through advertising. This data-driven process allows the pharmacy staff to focus on execution and customer service rather than on back-end calculations, if they do them at all.
4. Drug inventory. What many pharmacies have lacked in this area are data. Often, the end result is a shelf full of drug inventory that may not be prescribed for weeks, months or ever. Using data from its pharmacy management systems and other sources, we can say a pharmacy with a particular profile should have a particular formulary on hand at any given moment. What the pharmacy saves on inventory costs can be reinvested in the new business model.
5. Clinical services. Any pharmacy can offer any type of clinical service to its patients, whether that’s a vaccine program, disease management program or lifestyle counseling program. They’re available off-the-shelf and are almost cookie-cutter in their approach. It’s not about having more and more programs. It’s about having the right programs for the pharmacy’s patient population. That’s where data come in. Using data available from the pharmacy management system and complemented by data from a mobile health app and a patient engagement program, the pharmacy can focus on programs of most benefit to its patients based on health need, whether that’s cardiovascular, diabetes or mental health support. That approach also allows the pharmacy staff to develop expertise in a particular clinical area.
Reward pharmacy patients for healthy behaviors
Unless a pharmacy gives its patients something different than competing on price with an online retailer that’s diversified into prescription drug sales and delivery, the pharmacy is putting itself at risk. That “something different” is a strong personal relationship with each patient, something that an online retailer or even a big-box retail pharmacy chain can’t provide.
We work with our pharmacies in Canada to develop those strong personal relationships with each patient using two primary tools: a patient engagement program and a mobile health app.
We’re piloting a patient engagement program that rewards patients for healthy activities. Most pharmacy loyalty programs give customers rewards based on purchases—spend $100 and get a $10-off coupon. Instead, our program triggers rewards for use of digital tools that foster good therapeutic behaviors. A patient is rewarded for using the pill reminder function on their app, booking an appointment to synchronize their medication, and being more adherent to their drug therapy . What we’re trying to do is drive health and wellness on the front and back end, with the pharmacy being the facilitator of both.
Deploy a mobile app to support patient engagement
A new mobile app ties directly into the patient engagement program and feeds data into the pharmacy management system. Patients can use the app for the basics like tracking their medication histories, ordering prescription refills, scheduling prescription pickups and making appointments for clinical services. Patients can also use the app to manage their participation in the engagement program.
All the while, the app is collecting data and feeding them into the pharmacy management system. The pharmacy can use that data two ways:
- Macro level. The first is on a macro level to learn more about its patient base and whether it’s offering the right mix of services for that base. It also will learn what’s working and not working in terms of services and whether it should merchandize itself differently.
- Micro level. The second is on a micro level to develop individual medication and health profiles for each patient. The profiles provide the information the pharmacy needs to build that strong personal relationship with each patient.
The days of throwing everything at everybody are over. Pharmacies can no longer send candy promotions to diabetic patients. Instead, they should be sending applicable diabetic information and offers to them.
Ultimately, the key performance indicator for this new data-driven business model is whether the pharmacy made the patient and his or her family healthier. If the answer is yes, it will be operating a successful business whether that’s in Canada or the U.S.
Related: Learn more about McKesson Canada’s services for independent pharmacies