Create new revenue streams


Learn how Towncrest Pharmacy partnered with a payer to prove pharmacy’s values

In brief:

  • Towncrest Pharmacy in Iowa City faced a common challenge: low prescription reimbursement.
  • Co-owner Randy McDonough pursued an uncommon solution: partner with a major payer on a pilot to prove pharmacy’s value.
  • This pilot involved providing Continuous Medication Monitoring and other services to improve adherence and outcomes. It produced significant savings for the payer.
  • Towncrest is proactive and creative in constantly seeking new revenue streams, which is driving growth and better margins.

Beyond dispensing prescriptions

Towncrest Pharmacy has three pharmacies in Iowa City and Solon, Iowa, and is driven by its mission to “make every encounter count.” Towncrest primarily serves patients ages 50 and older who are medium to low income, and also serves residents in group homes with intellectual disabilities, mental health issues and traumatic brain injuries.

Town PharmacistsAfter years of generating revenue by dispensing prescriptions, co-owner Randy McDonough saw this model eroding. Towncrest faced a common challenge experienced by independent pharmacies — receiving low payments on prescriptions from a major pharmacy benefit manager (PBM). In fact, Towncrest was losing close to $1,000 every time it filled a prescription for one patient under Wellmark Blue Cross and Blue Shield due to an exceptionally large increase in price of the medication (over 2000%) and the PBM’s continued reimbursement at the cost prior to the price increase.

McDonough wanted to produce revenue in ways beyond merely dispensing prescriptions, and saw a growth opportunity for Towncrest by proving that the pharmacy could improve patient outcomes.

Taking the initiative

McDonough wrote to the CEO of Wellmark and asked him to look at community pharmacy in a different way. After a face-to-face meeting, Towncrest Pharmacy and Wellmark agreed to conduct a pilot program to see whether pharmacy interventions could reduce the total cost of care.

Health MartThis pilot involved Towncrest taking a tiered approach to patient care, where patients are essentially triaged based on their situation and needs.

  • Every patient receives Continuous Medication Monitoring (CoMM). By monitoring all patients continuously, Towncrest is able to identify patients requiring additional care.
  • Mid-level patients are those with moderate risks who receive interventions based on their medications or conditions. For example, Wellmark wanted to ensure mid-level patients were taking the right dose of statins. So, when a patient picked up a statin, Towncrest asked to do a risk assessment and collected lab data to make a recommendation to the physician about the proper dose. At other times Towncrest has focused on mid-level patients who may be overusing proton pump inhibitors and patients who may be at risk for falls.
  • High-risk patients are those with multiple conditions, taking multiple medications. These patients receive case management and Towncrest ensures they have comprehensive medication reviews.

“It’s important not to ignore the [mid-level] patients. If you can prevent those patients from going to the high-risk level, you just saved the payer tens of thousands of dollars every year.”
—Randy McDonough, Towncrest Pharmacy

At the end of the 12-month pilot, 600 Wellmark patients had been enrolled and served by Towncrest. Analysis showed that Towncrest’s interventions had:

  • Saved the payer $300 per member per month for the 600 patients enrolled in the pilot. In total this saved Wellmark more than $2 million.

    Towncrest’s interventions saved a major payer more than $2 million in one year.

  • Improved medication adherence and persistence of patients with a range of conditions, including cardiovascular disease, asthma and depression.

Based on this successful pilot, Wellmark created a value-based pharmacy program that has expanded to 70 pharmacies in Iowa. In this program, bonus payments to pharmacies are largely based on a pharmacy’s ability to affect patient outcomes and the total cost of care.

During the pilot, Towncrest Pharmacy pharmacists documented their care activities. Collectively Towncrest’s pharmacists completed 17,000 clinical interventions during the 12-month period — for all Towncrest patients, not just Wellmark members. Towncrest’s analysis shows that:

  • 50% of interventions resulted in pharmacists identifying a drug therapy problem.
  • 60% of interventions were not directly related to the specific drug being dispensed, because pharmacists took time to ask about other medications the person was taking.

Constantly working to create new revenue streams

“We’re looking at every way we can to build relationships with other providers, because at the end of the day, our success will come as a result of working together collaboratively to help patients.”
—Randy McDonough, Towncrest Pharmacy

In addition to working with Wellmark, Towncrest has taken other steps to boost revenues. Over the past decade, Towncrest has added staff and technology, and has remodeled stores almost every year. Efforts by Towncrest to generate additional revenue include:

  • Conducting CMRs for group homes and charging for consulting at nursing homes.
  • Implementing a Medication Adherence Program, currently the fastest-growing area of the business.
  • Receiving referrals for continuous positive airway pressure machines (CPAPs), diabetic shoes and support stockings.
  • Operating under Collaborative Practice Agreements that allow Towncrest to provide new clinical services such as immunizations.

Towncrest’s creative steps to grow revenue have worked, as revenue growth has outpaced staffing increases. At one point, payroll was 18.5% of total sales, but after adding staff, payroll costs were down to 14.5% of sales, showing that revenue was growing even faster than payroll.

Success at Towncrest is based on being entrepreneurial and creative, operating efficiently (with more than 1,000 patients in the pharmacy’s medication synchronization program), and working closing with providers.

To learn more about Towncrest’s success, join Randy McDonough at McKesson ideaShare and see the more detailed Health Mart® case study about Towncrest.


Note: The information provided here is for reference use only and does not constitute the rendering of legal or other professional advice by McKesson. Readers should consult appropriate professionals for advice and assistance prior to making important decisions regarding their business. McKesson is not advocating any particular program or approach herein. McKesson is not responsible for, nor will it bear any liability for, the content provided herein.