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Challenging The Pharmacy Paradigm
Bruce Annabel
Why innovation and action, not experience, is the key to pharmacy success.

I have been working with community pharmacy for almost 30 years during which time I have seen many challenges faced and overcome. However, the combined pressures of government PBS price cuts, price competition, supermarkets renewed push into the sector, digital revolution and pharmacy’s hitherto inadequate response have red flagged the need for immediate change. The government has said the age of entitlement is over so there is unlikely to be a solution without confronting a fundamental change.

Why innovation and action, not experience, is the key to pharmacy success.

Challenging the pharmacy paradigm

The rump of PBS price cut dollars will take about three years to wash through before a new much lower level of dispensing income is established significantly lower than today’s $14 - $15 gross profit dollars per script (includes dispense fee, premium free incentive, mark-up and wholesaler and generic trade discounts). According to the JR Pharmacy 2014 client series most pharmacies generate well over 60% of their net profit before interest and tax (EBIT) purely from ephemeral dispensary supplier discounts and rebates. The reality is while pharmacy has done well out of the gap between the generic PBS dispensed price and the low net into store cost this has begun to narrow with multiple price cuts to the PBS price. Therefore, discounts will become minor; resulting in little difference from revenue earned dispensing the generic versus originator. Clearly pharmacy must look for opportunities elsewhere in quality service, remunerated services and specialist health recommendations aimed at delivering valuable patient health outcomes.

Pharmacies who have already innovated and applied ‘extreme focus’ to customer outcomes will suffer less at the hands of price disclosure. They see the disruptive issues described in the first paragraph as opportunities and are growing. In effect it is the pure product/technical model that is threatened.

For the rest, a fundamental change in thinking and behaviour is needed toward a customer health service model founded on an ‘extreme focus’ on customer health outcomes – not just short term gains.

Some key points for owners to consider in transitioning to customer health outcomes model:
• Pharmacists, not assistants, engage the customer focussing on health solutions.
• Pharmacists work at scripts at the counter and the medicines/minor ailments area.
• Train assistants as dispensary technicians who will handle script in, assembly, picking, replenishment and administration duties.
• Train pharmacists in various minor ailments that enhance patient health including advice, quality service and services recommendations.

What I have outlined about training speak to Peter Switzer’s reference to Tom O’Toole, the Beechworth baker. Pharmacy must change to a knowledge-based business and training, particularly of pharmacists, is axiomatic to that. Well trained and available pharmacists placed in front of the customer at all times will utilise the third most respected professional, expertise and arguably the number one for customer satisfaction.

Sure, pharmacy has plenty of challenges but pharmacy owners and leaderscan overcome this by, for a start, not obsessing over an environment and competition they are unable to control. Instead do as people like David Dixon at Gympie and others such as ‘Aussie’ John Symond: look at how you can be different from the rest and yet at the same time vitally important to a significant customer group looking for the solutions you offer.

David changed his pharmacy’s strategy and business model to achieve both of these facets, supported by new systems and routines that resulted in new habits being formed. Your habits will determine your success.

I have seen many well-intentioned pharmacy strategic plans that lack implementation rigour due to an absence of an action plan and blocked by whatI term the ‘culture of chemist’. That culture is the entrenched habit of the dispensing chemist formed over decades, because only a technical dispensing role was necessary to be relevant in the community, explaining why so few pharmacies have adopted the customer health outcomes service model.

Challenging the pharmacy paradigm

Leadership is the answer at both peak body and, most critically, pharmacy level with the owner being the person ultimately responsible for success. Cost cutting and hard work alone will not do it.

The PSA is to be congratulated for having the foresight to run the Health Destination Pharmacy Trial innovating dispensary practice and role of the pharmacist. It was successful and the first attempt by a peak body in my experienceat actively facilitating a change in the role of the pharmacist and the dispensary towards customer health outcomes. This type of facilitated program is what community pharmacy needs to help owners and pharmacists innovate their role that will increase services, give patients a reason to return and provide the services platform needed for the future of pharmacy.

If pharmacies are to benefit, and be taken seriously be Government, they must innovate their dispensary practice, role of the pharmacist, and service(s) with an ‘extreme focus’ on customer health outcomes. As Abraham Lincoln said ‘The best way to define your future is to create it.’