What You Can Learn from Small-Chain Pharmacies


Ideas from NCPA’s Multiple Locations Conference that can impact single stores

By Jim Springer, Vice President of RxOwnership® — South Region

Owners of small, regional pharmacy chains gathered recently in Naples, Florida, for the 2014 NCPA Multiple Locations Pharmacy Conference. Owners heard from industry leaders, shared best practices and discussed their top priorities.

But many of the thoughts and ideas shared don’t just pertain to owners of multiple pharmacies; they are relevant for all owners of independent pharmacies. Here are five key takeaways:

  1. All pharmacy owners should “Know Your Quality Numbers.” Previously, payers created preferred networks based on providers’ willingness to accept lower reimbursement. This is changing. With Medicare Advantage plans now measured on clinical quality (via star ratings) and rewarded for improvements (through bonuses and marketing benefits), payers are placing more emphasis on the ability of all providers — including pharmacies — to drive patient outcomes when making their network decisions. (For more information see “Star Ratings Explained” and “How Narrow Networks Are Changing Pharmacy.”)

    This matters to community pharmacists because pharmacy can directly impact a health plan’s quality measures, especially those Part D measures related to medication adherence and safety. David Nau, President of Pharmacy Quality Services, whose organization produces reports that measure quality, stressed to pharmacy owners that third parties are already measuring your quality. Health plans have access to reports generated from claims data that show if prescriptions are filled and refilled. As pharmacy owners, you need to know your pharmacy’s current quality scores and know where performance improvement is needed. (See “How Health Plans and PBMs Evaluate Pharmacy Performance.”)

  2. Pharmacy owners have opportunities to improve front-end sales and profits. Best practices exist in numerous areas that can help drive front-end sales. Front-end guru Gabe Trahan, NCPA’s senior director of store operations and marketing, emphasized common ways to improve front-end sales, which include improvements to external signage, lighting and flooring; product assortment; pricing zones; end caps; and much more. (See “9 Ways to Help Increase Front-End Sales” and “Is Your Appearance Turning Customers Away?”)

    Trahan also shared that one important best practice for a pharmacy owner — who is often so busy managing the pharmacy that front-end opportunities are overlooked — is to have a dedicated front-end manager who is responsible for overseeing all aspects of the front end (or the 4 P’s of product, pricing, placement and promotion). It is important to select the right person, train them, provide the right incentives, and surround this manager with a team that works together in helping maximize front-end traffic, sales and profits. (See “The CEO Approach to Your Success” and “Tips for Building a Winning Team.”)

  3. Pharmacies should continue to take steps to decrease prescription errors and improve safety. Don McGuire of Pharmacists Mutual, during his presentation titled “Putting the Patient First: Improving Patient Safety in the Community Pharmacy,” said there were 77 million prescription-related errors in community pharmacies in 2009. About 85% of all errors are “mechanical” and are associated with the wrong drug, strength or directions. The most common errors are related to order entry and at filling. Pharmacists detect about two-thirds of all errors during a final check, and patients discover 5–15% of all errors.

    Most errors are not related to a pharmacist’s competency, intelligence or skills. Rather, errors are often related to processes, workload and stress. By realizing that so many errors occur and by understanding what causes them, pharmacies can change their processes and employ technology to reduce their errors.

  4. Pharmacy owners can affect policy through grassroots advocacy. In 2013, federal legislation was passed that preserves the ability of community pharmacies to continue offering compounding services. Also significant are proposed changes to Medicare Part D that could be beneficial for community pharmacies. These proposed changes would improve the ability of community pharmacies to participate in preferred networks, eliminate preferred pricing for mail order, and expand situations where community pharmacies could bill for MTM services.

    These legislative successes have come about because community pharmacists have made their voices heard at a local, state and federal level. Both NCPA President Douglas Hoey and Steve Pfister, senior vice president of government affairs at NCPA and director of the NCPA Advocacy Center, encouraged pharmacists to continue to speak up. Community pharmacists are respected and listened to by political leaders as small business owners, healthcare professionals and members of the community. Continuing to be heard on important policy issues is critical. (See “Grassroots Efforts Advance the Pharmacy Profession.”)

  5. Collaborate with other local business owners on promotions to drive sales. The competitive environment is difficult for all small, independent, locally owned businesses. Chains have purchasing power, marketing clout, brand recognition, access to capital, and an insatiable desire to continue to grow. In this challenging context, local, independent businesses can work together on creative, collaborative promotions that benefit all participants.

    Former small business owner and founder of the 3/50 Project, Cinda Baxter, described the project. 3/50 is an initiative where participating businesses encourage consumers to identify three local businesses they want to support and then spend $50 that they were already planning to spend with each of these businesses each month. Participation in this project, as well as other types of collaborative promotions involving multiple local, independent businesses, is helping businesses increase their customer base and drive more sales. Baxter shared multiple success stories of small businesses that had worked together to dramatically increase sales via extremely low-cost promotions. Community pharmacies can play a key role in initiating and participating in these types of successful community-based promotions.

While these themes were discussed by owners of small chains, they are relevant for all independent pharmacy owners and can help you think about the most appropriate priorities to drive the future success of your pharmacy. If you have a single store with a solid business model that has proven successful, maybe it’s time to expand that business model to multiple locations.

Share with us important lessons you have learned from others in the industry, including stores with multiple locations, and let us know your top priorities for the year ahead.

DISCLAIMER: The information provided here is for reference only and does not constitute legal advice. We make no representations with regard to the content’s comprehensiveness. You are solely responsible for investigating and complying with all applicable laws that govern the operation of your business.