White Paper: Opportunities in Becoming a Long-Term Care Pharmacy
In pursuing new revenue opportunities, many retail pharmacies see opportunity in LTC
Independent retail pharmacies face a multitude of challenges: reimbursement continues to decrease, margins continue to decline and the large national chains continue to flex their muscles.
In search of new revenue opportunities
Owners of independent pharmacies — who are entrepreneurial by nature — are reinventing the business of pharmacy, providing new types of services like medication therapy management and medication synchronization. In addition, retail pharmacies are exploring new growth opportunities and are looking to diversify revenues, with particular interest in high-margin, growing markets.
Trends are driving LTC growth market
Long-term care consists of a continuum of medical and/or social services outside of hospitals, designed to help those with chronic care needs or disabilities. Services may be short- or long-term, and may be provided in individuals’ homes or in residential settings, including skilled nursing and assisted living facilities. About 11 million people age 18 and over receive some type of long-term care services each year.1
Based on the aging population in the United States and the increasing prevalence of chronic diseases, the long-term care market is expected to see sustained growth. Because long-term care facilities need services from and relationships with pharmacies, the opportunity for LTC pharmacies is likely to be significant.
Some facts about long-term care pharmacies from MHA’s 2014 and 2015 studies:2
- The average independent LTC pharmacy dispenses 12,369 prescriptions per month.
- On average, residents receive 12 prescriptions per month (3 branded and 9 generic).
- With 12,369 prescriptions per month and 12 prescriptions per resident, this means the average LTC pharmacy is serving about 1,030 residents per month.
- The average independent LTC pharmacy is serving 10 to 13 facilities, with 80 to 100 residents per facility.
- On average, LTC residents also use three to five OTC items per month.
Why independent pharmacy owners are considering LTC
For owners of independent retail pharmacies, a long-term care pharmacy may represent a way to increase and diversify revenues. Long-term care pharmacy can also provide attractive margins and represents an opportunity for long-term growth.
How independent pharmacy owners can pursue the LTC opportunity
A retail pharmacy can serve LTC facilities through its existing operations, but many owners are electing to create closed-door LTC pharmacies. Among the advantages of setting up a closed-door pharmacy for LTC are:
- Getting access to a broad portfolio of brand and generic pharmaceuticals and accessing non-pharmaceutical contracts, specific for closed-door pharmacies.
- Enjoying financial advantages of enhanced reimbursement from Part D contracts, which would only be available to closed-door LTC pharmacies, and access to pricing discounts as well as rebates.
- Being able to participate in special programs just for closed-door LTC pharmacies. An example is McKesson’s OneStop® Generics Alternate Site Pharmacy program, which offers special products, packaging sizes, pricing and promotions specifically designed for closed-door LTC pharmacies.
However, establishing a closed-door LTC pharmacy takes careful consideration. Among the many important factors to learn about include the need to obtain separate licenses and to meet various state and federal requirements. There is also a need for separate contracts, inventory, staff, and possibly separate systems (or technology licenses).
Pursuing this opportunity takes due diligence and investigation of the market, planning, learning about purchasing and pricing, understanding the technologies that are needed and the packaging requirements, and possibly establishing a relationship with a GPO. Success in this market also requires significant sales and marketing activities.
To learn more about the LTC opportunity and the operational requirements, and to hear about experiences of independent pharmacies that are having success in the LTC market, download the white paper: Becoming a Long-Term Care Pharmacy: Opportunities and Important Considerations.
1 “Long-Term Care: Consumers, Services, and Financing.” National Health Policy Forum. November 28, 2008. Cited by McKesson in Long-Term Care Pharmacy 101
2 MHA Independent Long Term Care Member Study, 2014 and 2015, LINK.