E
ELEMENTS
VIRAL THREAT What will the coronavirus do to the pharmaceutical supply chain?
IS THE PRICE RIGHT? How to find fair market value when purchasing a pharmacy
Analog Advertising in the Digital Age How to use traditional advertising to earn more business than you’ve ever had
VOL. 9 ISS. 1 | MARCH 2020 | PBAHEALTH.COM/ELEMENTS
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CONTENTS ON THE COVER nalog Advertising in the 19 FEATURE | A Digital Age
How to use traditional advertising to earn more business than you’ve ever had
DEPARTMENTS
07 NEWS | Viral Threat
What will the coronavirus do to the pharmaceutical supply chain?
08 TRENDS | Cease and Assist
Help patients quit smoking with cessation interventions from the Surgeon General’s 2020 report
10 RETAIL | Trending Innovations
Lessons in innovation from pharmacy trendsetters at NCPA NICE Awards and beyond
FEATURE | Analog Advertising in the Digital Age
obile App: Always-On 14 SOLUTIONS | M Advertising
How to use your mobile app to increase patient engagement,
29
adherence, and loyalty
26 SPOTLIGHT | From Hospital to Home This pharmacy’s four-week discharge program earns new business while keeping patients out of the hospital
29 MONEY | Is the Price Right?
How to find fair market value when purchasing a pharmacy
32 OUTLOOK | Training Up Techs
An online training program prepares technicians for certification
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
MONEY | Is the Price Right?
3
E
ELEMENTS
The business magazine for independent pharmacy
ON THE WEB Find more strategies, tips, and expert advice to improve your business at pbahealth.com/elements
VOLUME 9, ISSUE 1 MARCH 2020
Here’s How to Overcome Pharmacy DIR Fees and PBM Reimbursements
PUBLISHER & EDITORIAL DIRECTOR Matthew Shamet EDITOR
High DIR fees and low PBM reimbursements
Greyson Honaker
don’t have to mean the end of your pharmacy’s profitability.
ART DIRECTORS Anna Brooks Amy Mendenhall Mansfield CONTRIBUTING WRITER
7 Pharmacy HIPAA Violations That Might Surprise You
Erin E. Rand
Learn seven little-known patient privacy pitfalls to protect your pharmacy from costly fines for
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HIPAA violations.
elements@pbahealth.com
These Are the Most Profitable Pharmacy Services to Offer Independent pharmacies need to earn revenue in new ways. Attract more patients by offering the profitable pharmacy services they want and need.
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Pharmacy SPOTLIGHT
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NEWS
VIRAL THREAT
What will the coronavirus do to the pharmaceutical supply chain?
T
he recent coronavirus from China has disrupted more than the health of its victims. The epidemic has shaken stocks, halted parts of the economy, and unsettled the global supply chain for all kinds of industries. Because of quarantines, prevention measures, and spreading hospitalizations in China, manufacturing companies have faced closures for periods of time, forcing other manufacturers and producers downstream to halt production as well. Hyundai, the world’s fifth-largest carmaker, suspended production lines at some of its car factories because it relies on Chinese partners for many of its auto parts. Apple’s manufacturing hub, Foxconn, was shut down for weeks as a preventive measure for its warehouse workers, a move some say could cost the company five million iPhone sales. The growing threat and uncertainty have many pharmacy owners worried the supply issues will affect them soon, and for good reason. Nearly half of pharmaceuticals and 80 percent of chemical ingredients in all US drugs are imported—the majority of those coming from China. The country’s monopoly on our pharmaceutical supply even has US defense officials calling it a national security risk. In a letter to the FDA, two Senators voiced the anxiety of many healthcare professionals on this issue: “Given the strain this virus has placed on China’s healthcare system, we are concerned there could be reduced resources available to US healthcare providers that rely on products manufactured in China.” In response, some pharmacies are trying to pinpoint medications that will be affected by Chinese manufacturing slowdowns, hoping to pile up stock. Some worry prices will become too high as supply suffers shortages.
“Pharmacies should always partner with legitimate, authentic, and honest suppliers who can guide them through the process when supply wavers.” In times like these, owners shouldn’t panic, said Mark Waltrip, RPh, manager of trade relations at PBA Health, an independently owned, VAWD-accredited distributor and pharmacy services organization. “Trying to predict supply chain changes and maneuvering your inventory could result in overstocking and overpaying, since we don’t know what is going to happen,” he said.
“Instead, trust that the supply chain will work itself out to keep supply going.” Most suppliers have policies in place to deal with unforeseen incidents that could cause supply disruptions. For example, they often keep up to four to nine months of inventory to minimize chances of a shortage. These buffers allow adequate time to keep supply flowing while suppliers seek alternative measures should the incident outlast the safety stock. Waltrip also noted that the large wholesalers are continuously shopping the market to make sure they have consistent supply. “The only time this fails to meet the customers’ needs is if there is a market-wide shortage,” he said. WHAT CAN PHARMACIES DO? Although shortage situations are out of pharmacies’ control, there are a couple moves you can make to keep your business profitable and your patients safe. Most importantly, pharmacies should never attempt to secure medicine from any supplier without thorough vetting since not all suppliers are the same, even though they may have the appropriate licenses. “It may be tempting to reach for the most inexpensive or cheaper items from secondary suppliers to fill the gap, but do a thorough analysis prior to purchasing the pharmaceutical,” said Nicholas Smock, PharmD, MBA, president and CEO of PBA Health. “Always get the ‘pedigree’ and track-and-trace documentations on the medications you are purchasing and ask yourself, ‘Would I dispense these to my family or friends?’ If the products have been bought and sold through a number of pharmacies and/or distributors, it should have you question the quality of the products you are purchasing.” China has a recent history of distributing contaminated drugs, including the blood thinner heparin, which killed 149 Americans in 2008, and the recently recalled blood pressure medication Valsartan, which was found to contain a cancer-causing substance. Pharmacies should also keep an eye on substitutions, which may kick in without your knowledge and end up costing you. If you have automatic substitution turned on, your supplier may send you a different NDC during times of shortages and the substituted product might be substantially more expensive. Sometimes, though, price hikes are inevitable. And pharmacies should be prepared to pay more. But having the right wholesaler partners will help you find the best path forward. “Whether it’s caused by a coronavirus, a recall, or a shortage of manufacturers, the supply chain is always at risk of disruption,” Smock said. “So pharmacies should always partner with legitimate, authentic, and honest suppliers who can guide them through the process when supply wavers.”
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
7
TRENDS
CEASE AND ASSIST Help patients quit smoking with cessation interventions from the Surgeon General’s 2020 report
T
he US Surgeon General’s office in January released its first report
$59 for a smoking cessation assessment and $49 for a follow-up,
on smoking cessation in 30 years. The new report outlines the
revealing what some patients are willing to invest in the service.
latest evidence on quitting smoking, which has continued to accrue
Many employers will pay for their employees to enroll in pharmacy
since the Surgeon General’s revelatory 1964 report on smoking and
cessation programs. Moreover, cessation counseling and resources
health that linked the habit to a host of diseases.
increase patient loyalty, and smoking cessation programs bring
Fifty-six years after the dire diagnosis, how well is America is
new people through your doors who may become lifelong patients.
doing with smoking? The good news: Since 1965, cigarette smoking has dropped 67 percent. Some reports estimate eight million lives have been extended by that decline. The bad news: Smoking remains the leading cause of preventable disease, disability, and death in the United States. An estimated 480,000 Americans die from smoking each year, accounting for nearly 1 in 5 deaths. Around 16 million Americans live with a smoking-related disease and 34 million American adults still smoke cigarettes daily. With decades of demonstrable evidence of tobacco’s harmful effects, why do so many people continue to smoke? Research
“We know what works to prevent and reduce tobacco use, including how to best help smokers quit for good.”
suggests that nicotine may be as addictive as heroin, cocaine, or alcohol, according to the Centers for Disease Control and
HOW TO HELP PATIENTS QUIT
Prevention. More people in America are addicted to nicotine than
More than 50 years of data have given us “more knowledge on
to any other drug. The new report found that more than two-
quitting smoking than ever before,” the report says. It’s enough
thirds of US adult cigarette smokers report interest in quitting. The
data for the Surgeon General to claim that “we know what works
majority try to quit each year, but only 10 percent succeed.
to prevent and reduce tobacco use, including how to best help
This presents an opportunity for patients’ most accessible
smokers quit for good.” The report provides these strategies for
healthcare provider to help achieve their goal. Evidence from
effective cessation, all of which pharmacies can implement in one
the report shows that “partners throughout the public health
way or another.
community are extremely effective at preventing and reducing tobacco use.” Today, only 23 percent of independent community pharmacies
The simplest and most effective thing pharmacies can do is help patients take and adhere to their nicotine-replacement medication. Research shows that the FDA-approved medications actually work.
offer smoking cessation programs, according to the 2019 NCPA
Although pharmacists in most states can’t prescribe cessation
Digest. That low participation rate isn’t only a blow to the public;
medications, some allow full prescriptive authority and others
it’s also a missed opportunity for pharmacy business. Through the
allow collaborative practice agreements with physicians granting
sale of cessation prescriptions and front-end products, you can
the authority. The chance of success increases when multiple
earn revenue from a needed service. According to some pharmacy
therapies are used, which means recommending appropriate OTC
sources, you make about $23 in profit on varenicline, for example,
products like patches or lozenges can go a long way in helping
and up to 80 percent margins on nicotine suckers. CVS charges
patients kick their habit.
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The 5-Step Tobacco Intervention Another effective technique is behavioral counseling, which
Follow these easy steps to conduct a brief tobacco intervention
can be provided in person or over the phone, one-on-one or
with your patients.
in a group. Pharmacists can also refer patients to the National
1. Ask about tobacco use 2. Advise the patient to quit 3. Assess readiness to quit 4. Assist the patient in quitting 5. Arrange for follow up
Cancer Institute’s quitline (1-800-QUIT-NOW) where they can talk confidentially with a trained counselor and receive additional resources. Combining medication and counseling makes the most potent recipe for cessation, the report said, even doubling one’s chances of successfully quitting. Text message cessation support and online web support can also be helpful. One of the most surprising findings, the Surgeon General said,
Source: Adapted from “The Brief Tobacco Intervention” from the Centers for Disease Control and Prevention
is how many people aren’t being advised by healthcare providers to quit smoking. Four out of every nine adult cigarette smokers who saw a health professional during the past year did not receive advice to quit, the report said. Pharmacies should make it a routine policy to ask patients if they smoke and advise them personally on the advantages of quitting. Smokers may not realize that
Resources to Help Patients Quit
quitting can extend their life expectancy by 10 years and reduce the risk for many adverse health effects, including poor reproductive health outcomes, cardiovascular diseases, chronic obstructive pulmonary disease, and cancer. IMPLEMENTATION APPROACHES Pharmacies can implement these cessation strategies in a variety of ways, whether on a personal, case-by-case basis or through a full program with structured one-on-one or group meetings. Two community pharmacies in Oklahoma offer a 12-week program with 6 weeks of hourlong group meetings followed by 6 weeks of one-on-one meetings in person or over the phone. A clinical pharmacist in Massachusetts offers recurring workshops every week for two hours that patients can attend at their convenience. The American Pharmacists Association recommends incorporating cessation into the appointment-based model and provides a detailed sample schedule for doing so. It also provides a continuing education course on cessation and other materials at pharmacist.com/tobaccocessation. The National Community Pharmacists Association also provides resources specifically geared to community pharmacies, such as an example four-week curriculum, printable materials, and sample bag stuffers. On the CDC website, pharmacists can find a collection of resources, such as handouts for patients, downloadable posters, frequently asked questions for health care providers, a video on how to conduct a tobacco intervention, and additional resources for referring patients.
Personal counseling or structured programs might be barriers for some patients who don’t have the time or motivation to commit or for those who prefer a more private approach. Web-based and text-message cessation support resources can provide them an alternative means of quitting.
Websites smokefree.gov CDC.com/tobacco
Smartphone Apps/Text SmokefreeTX: text message-based support program quitSTART: tips, information, and challenges to help patients quit QuitGuide: helps understand smoking patterns and build skills
Telephone Quitlines 1-800-QUIT-NOW 1-855-DÉJELO-YA (Spanish) 1-800-838-8917 (Mandarin and Cantonese) 1-800-556-5564 (Korean) 1-800-778-8440 (Vietnamese) Source: Centers for Disease Control and Prevention
RETAIL
TRENDING INNOVATIONS Lessons in innovation from pharmacy trendsetters at NCPA NICE Awards and beyond
F
or the third year, representatives for the NCPA Innovation
INVEST IN COMMUNITY
Center gathered to review the year in pharmacy and reward the
The trending innovations in independent pharmacies take
independent pharmacies who have pushed boundaries and made
advantage of the assets they’ve always had: their community
changes to improve the overall patient experience. The best of the
connections. “These folks reside in the same town as their patients,
best are recognized by the NICE Awards.
go to church or synagogue there, walk the streets and grocery
The awards fall into seven categories, from big-picture
shop there,” Wendland said. “They’re extending the reach of their
approaches like external and internal remodels to smaller
marketing right into the homes of the patients who are visiting
endeavors that make pharmacies more patient-friendly, like
their pharmacy. It’s really awe-inspiring.”
marketing promotions, customer convenience, and signage. Before 2020’s NICE Award winners were revealed, Elements
Community-focused marketing means more than letting patients know what products and services you have available in
caught up with judge Dave Wendland, vice president of strategic
the pharmacy. Smart independent pharmacies are making patients
relations at Hamacher Resource Group, to chat about the trends
feel like they are a part of something bigger. One tactic Wendland
he spotted among the entries. “I’m always impressed by these
suggests is making a big to-do about pharmacy milestones. “Being
innovators in the independent pharmacy community. This year was
in business for 25, 50, or even 100 years shouldn’t go without any
no disappointment,” he said. “The pharmacies that entered show
fanfare.” This kind of event doesn’t just celebrate the longevity of
a commitment to individualization and patient care, and it really
the pharmacy, it also celebrates the people who helped them make
reinforces that this segment of the market can continue to flourish
it this far. There may be multiple generations of a family that have
for those who are thinking outside the four walls.”
been coming to the pharmacy for decades. Invite those figures to
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speak at milestone events and attest to how the pharmacy has affected their lives. The holidays are also a great time to invest in customer loyalty. Wendland mentioned pharmacies taking food or care packages to their homebound patients and helping them celebrate the holiday. “There’s a special touch that extends beyond the homebound patient, to their family and friends and the community at large,” he said. Your product selection can also show your community that you care. By incorporating locally made products, pharmacies demonstrate that they are a driver for the economy around them. Or pharmacies can stock items they know their patients will appreciate and create a community event surrounding it. Wendland
“Failure builds additional success. You should learn from the failure, pick yourself back up, and be willing to get back into the deep end.” Wendland recalled visiting a pharmacy in the United Kingdom
gave an example of a pharmacy that launched its new CBD pet
who committed the most valuable and prominent shelf space to
products with an event that included a photographic studio for
a single product because of its 80-percent margin. The product
pets. “Pretty innovative, when you think about the fact that one of
sat stagnant for nine months, and the pharmacy wasn’t willing to
the most important members of a patient’s household might very
replace it because they were excited about the margin. “Well, that
well be their pet,” Wendland said.
no longer has 80-percent margin,” Wendland said. “Just because it
MITIGATE THE RISKS Even if a pharmacy puts all of its heart and belief into a new product or service, there’s always a chance that it won’t get off the ground. “Not every innovation, new trend, or product that is brought into the pharmacy will succeed,” Wendland said. “Failure
Trending Topics
a lot by listening and you learn a lot by looking around,” Wendland
At the 2020 NCPA NICE Awards, four trends emerged from the outstanding entries, according to Dave Wendland, vice president of strategic relations at Hamacher Resource Group. This is what he says savvy pharmacies will be incorporating into their stores in 2020 and beyond.
said. “Observe what others are doing and find a gap. Then, listen
Fresh and Local Products
builds additional success. You should learn from the failure, pick yourself back up, and be willing to get back into the deep end.” As you face the potential to fail, certain moves can cushion the risks that come along with introducing something new. “You learn
closely to your customer base so you know you will have pent up demand when you bring the product or service in.” If a pharmacist wants to bring in a specific product category like pet care, Wendland suggests asking patients questions like: If I were to bring this product in, would you be willing to give it a try? Have you tried these products before? Where do you usually buy pet care products? Another key is to start small. Don’t convert an entire corner of your store to pet care products before you’ve proven there’s a demand for it. Instead, bring in a small display and see how it performs. If it does well, expand. If it doesn’t do well, don’t wait too long to pull the plug. It’s crucial to recognize when a new innovation is wasting shelf space, time, and energy. Wendland recommends setting a time limit and sticking to it. “Put a specific stake in the ground that says, ‘It needs to achieve success in X amount of time,’ whether that’s six months or one week. Whatever that time limit is, if it doesn’t succeed,
“There is some really innovative and experiential thinking going into how to incorporate unique local products into an independent pharmacy’s front-of-the-store operation.”
Easy to Navigate Spaces “It’s everything from new and improved drop-off and pickup areas to consultation areas to wayfinding and navigation in the aisles. There’s even some technology that has helped reinforce convenience.”
Unique Offerings “It’s beyond the ingredients themselves. It’s the reinforcement from the pharmacist through signage and education that draw attention to these emerging products.”
Highlighting Community Commitment Wendland says pharmacies are creating marketing promotions that “underscore the major differentiator between independent community-based pharmacies, which is a personal commitment to the community.”
discount it, get it out of your store, and move on.”
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
11
carries an 80-percent margin the day you buy it, the day you sell it, that might be down to a negative number. You’ve wasted all that space and all that time, and all that commitment.”
Eyes on the Horizon
“You should never be a follower, always be a leader.”
Although independent pharmacies should be leading the charge, they need to be aware of the moves their competitors are making, said Dave Wendland. “Learn about what they are doing, then stick to what you’re really good at,” Wendland said, “which is innovating quickly, better serving patients, and bringing value to the community.”
KEY TO SUCCESS
CVS HealthHUB
Whether a pharmacy is considering implementing something massive like an entire store remodel or something small like a new service or product, they need to be all-in. “If a pharmacy or pharmacist is not committed to the innovation or the trend, it will never be successful,” Wendland said. “And I usually don’t use words like never, but this is an absolute.” This goes for all members of the team, not just the owners. Success rates increase when staff members have a special connection to a new solution or innovation. “Pharmacies that are going to make a commitment should make sure it’s a product or service that they can stand behind and recommend with confidence,” Wendland advised. If they aren’t willing to fully throw themselves into the advertising and promotion, it won’t work. A successful innovation should also be the first of its kind in the community. The more quickly it can be implemented, the better, because the ability to introduce new services fast is one of the main advantages independent pharmacies have over chains. “You should never be a follower, always be a leader,” Wendland said. “Leading is far more dangerous, but if you lead with conviction, you can end up with success.”
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CVS is currently in the process of expanding its HealthHUB service, which offers new products like durable medical equipment, digital and in-store health tools, and personalized healthcare advice.
Walgreens Walgreens has partnered with the weight loss service Jenny Craig to offer new weight and health management services inside the pharmacy in 2020.
Amazon After acquiring the mail-order pharmacy PillPack, Amazon has rebranded it as PillPack by Amazon Pharmacy.
Dollar General and other discount brands Discount retailers like Dollar General are thriving, and they’re breaking into categories like beauty and wellness that could eat at the front-end profits of independent pharmacies.
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SOLUTIONS
MOBILE APP: ALWAYS-ON ADVERTISING How to use your mobile app to increase patient engagement, adherence, and loyalty
C
onsumers today want everything on demand. When they need
want to engage with you over the web, be there. And if they want to
a ride to the airport, they expect a pickup within minutes.
engage via an app, be there.”
If they’re hungry, a few taps on their smartphone means a meal
In fact, most prospective patients will engage with your website
from their favorite restaurant is on the way. And if they need to
long before they think about downloading the app. “People don’t
order a refill for a prescription, they want to do it as soon as they
typically download an app before they’ve become a customer,”
remember—even if the pharmacy is currently closed.
Humphreys said. Before they visit a pharmacy in person, patients
People have come to expect these needs to be met 24/7 on the
will probably search for a pharmacy on their smartphone—and
mobile device they use every day. More specifically, they want it in
independent pharmacies need to greet them with an easy to
a format optimized for mobile use: an application. In 2019, people
navigate mobile experience. And ideally, that website experience
downloaded an estimated 194 billion mobile apps. Consumers
will be unified with the experience on the app. When the pharmacy
spend more than two hours per day on mobile apps, compared to
website and app work together seamlessly, they become more
just 11 minutes on mobile websites. Nearly 85 percent of people
usable individually.
prefer using apps because they offer a better user experience, more convenience, and easier browsing. Every major retail
IMPROVING ADHERENCE
company, including your competitors like CVS and Walgreens, uses
By driving adherence, pharmacies can get more out of their
an app to increase customer engagement.
existing customers. Using a pharmacy app equipped with two-way
With an app, patients can handle pharmacy transactions like
messaging, pharmacists can better understand and reach their
refills or transfers, find information about the pharmacy’s hours
non-adherent patients. Right now, text message reminders are
and location, learn about any special services offered, request
the standard intervention for improving patient adherence. And
delivery, read up on health news, download coupons to save
according to a study published in JAMA Internal Medicine, they are
money, and communicate directly with pharmacy staff. And all
effective, approximately doubling the odds of adherence.
that leads to more traffic and loyalty to your pharmacy. “It’s an
But for the patients that remain resistant to text message
always-available touchpoint for customers,” said Glenn Gruber,
reminders, new technology can be the push they need. After a
senior digital strategist from Anexinet, a technology consultancy
patient has received multiple notifications about refilling their
that helps companies develop digital solutions. “An app enables
prescription with no action, that becomes a cue for the pharmacist
you to communicate everything you have available, like coupons,
to ask more questions—something that is now much easier with
specials, and sales, and then you are able to marry that with the
HIPAA-compliant methods of communication via a pharmacy app
information that prescriptions are ready. These are things you can
or website.
do collectively to get people into the store.”
“It is critical that pharmacists understand the particular reason a patient is not taking or picking up a medication,”
FULL DIGITAL SOLUTION
Humphreys said. “That is why we believe the future of pharmacy
An effective pharmacy app starts with a comprehensive
is conversation. It’s really important that we move beyond saying
approach to digital strategy. “In order to win in today’s competitive
‘Hey, your prescription is ready,’ to ‘I’ve noticed you haven’t picked
environment, you need to reach your patients where they want to be
up your prescriptions—what’s going on?’ The net effect is more
reached, and in a format that is most convenient for them,” advised
prescriptions sold for the pharmacy and better health outcomes for
Dustin Humphreys, CEO of Digital Pharmacist, which provides
the patients.”
multi-faceted digital solutions for independent pharmacies. “If your patients want to engage with you via text message, be there. If they
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Another way to improve adherence and retention with your app is to incorporate video counseling services. Telemedicine is one of
the most popular features of the Canopy Health app, Gruber said,
sure users have “clear instructions on using the app” will make
which was created by Anexinet for Canopy Health System to make it
them more likely to use it.
easier for patients to take control of their own healthcare decisions.
Some pharmacists may feel like pushing an app onto patients makes the experience with the pharmacy too cold and impersonal,
“The net effect is more prescriptions sold for the pharmacy and better health outcomes for the patients.” In addition to benefiting all patients with convenient counseling from the comfort of their homes, video counseling is especially helpful for those with mobility problems and those living in rural locations. This accessible service provides another touchpoint for patients and pharmacists, providing more access and comprehensive care, and it is a unique way to build trust without having a face-to-face experience. DOWNLOADING AND USING THE APP No matter how wonderful your app is, patients can’t benefit from it if they don’t know about it. “This is not one of those ‘if you build it, they will come,’ situations,” Humphreys said. “You have to talk about it with pharmacy customers and encourage them to download it.” To do that, focus on how the app will make their experience better and more convenient. In a study from Google, the most
but by taking care of menial tasks the app actually creates more time for pharmacists to provide personal care. “Today’s pharmacist needs to be spending time caring for patients and operating at the top of their license,” Humphreys argued. “Getting patients to engage digitally not only frees up time for the pharmacy and pharmacy staff to focus on more important things than handling a refill request, but once patients learn how to engage, they prefer digital as well.”
App Use By the Numbers • Users spend 50% of their time on digital media using apps • 49% of people download at least one new app a month • 66% of millennial users wish they could do more with smartphone apps • More users visit retailers’ mobile apps than desktop sites • Users spend an average of 2.3 hours on mobile apps every day Source: ComScore
frequently used apps were those that made the user’s life easier. Highlight features like easy refills, live chat, and simpler medication management. “For customers that are taking a lot of medication, it becomes like having a pharmacy in your pocket,” Humphreys said. “You can take your phone out, quickly see your medication regimen and request refills. Prescriptions can be an easy thing for patients to manage.” Marketing the app isn’t over after the first download but should continue as you add new features. That will not only increase engagement from current users but also renew engagement from those who downloaded the app but have stopped using it. “Using email campaigns or in-app notifications to tell patients about new capabilities and features that are now available to them can help get new people to use the app for the first time, because it now may do something that they value highly,” Gruber said. “Or if you have people who already have the application, you can tell them about new things they can now do with it. Then people will use it more frequently and drive more value into the store.” Discounts and exclusive content can also encourage patients
Characteristics of MostUsed Apps • Makes life easier • Clear instructions for using app • Appealing design and aesthetic • Consistent experience on multiple devices • Always has new content Source: “Mobile App Marketing Insights: How Consumers Really Find and Use Your Apps.” Google and Ipsos MediaCT. 2014.
to come back to the app, according the Google study. And making
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
15 13
Push Notifications: The Essential Way to Engage Users A message that pops up on your phone or tablet from an application is called a push notification. The app is “pushing” information to the user who is not in the app, and it is meant to prompt you to action and stay top of mind. Facebook sends friend suggestions and posts you might be interested in. Instagram alerts you to new stories. Fitness apps remind you to get up and walk. Netflix informs you of a new release. Push notifications increase app engagement by as much as 80 percent. Here are some push notifications you can send to keep patients engaged: • • • • • • •
Notifications that a prescription is ready for pickup Reminders to refill a prescription Reminders to take medications Exclusive offers New stories from your blog or newsletter Announcements of new or seasonal services Reminder of rewards points, if using a loyalty program
Push Notification Best Practices Keep these best practices in mind to maximize engagement and minimize opt-outs. Make the case Users have to choose to receive push notifications. You’ll need to present a compelling case for why they should add their pharmacy’s notifications to the dozens of other apps already bombarding them daily. Concisely as possible, summarize what they’ll receive and how it will benefit them. Start with the obvious and most convenient, which are notifications that a prescription is ready. But also make sure to outline less obvious benefits, such as exclusive offers. Utilize exclusivity and urgency Exclusivity creates an illusion of scarcity and is a proven way to generate action. Send special offers to users who opt in for push notifications. Make it clear that other customers won’t be receiving the same offer. And give all offers an expiration date, which creates urgency, another effective method to prompt action. Find the right frequency You want to strike a balance of being top of mind but not irritating. Users are exposed to around 60 notifications a day. Given the ubiquity of notifications, pharmacies should use them modestly. Reminders will have to be sent as-needed, but promotions and updates shouldn’t be sent more than once per week except to users who are highly responsive. You should always risk sending too few than too many because once a user opts out of notifications, their chances of opting in again are slim. As for the best time to send push notifications, shoot for some time between noon and five o’clock on weekdays.
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Keep it short A study from Localytics, a customer engagement company, found that messages under 10 words get the most clicks. As you add more words the click rates fall. Always make sure the entire message can be read on the lock screen without having to click through. Communicate the benefit clearly and make it a statement, which is twice as effective as a question. Track and measure Make sure you have analytics in place before sending push notifications. A data-driven strategy will maximize engagement. You’ll be able to abandon strategies that aren’t working and enhance those that are. Which notifications get the most clicks? Which ones are falling flat? What day of the week works best? Segment With actionable data at your fingers, you can start to send notifications tailored to specific groups of users. For example, you can segment users with low click rates from those with high click rates, making sure to send fewer notifications to one and more to the other. One user may be especially responsive to coupons while another cares more about health news. A user with several medications might get numerous reminders and alerts about medications, which means they should receive fewer promotions. The more relevant the message, the more likely they are to click.
PRIVACY CHALLENGES: KEEPING YOUR APP HIPAA COMPLIANT “One of the biggest issues is finding a balance of information that we need to display to the user without compromising personally identifiable data,” she explained. Striking that balance involved listing out all the information healthcare providers use to care for patients, and then determining whether or not it was necessary to display on the app.
Because pharmacists are dealing with patients’ private health information, creating an app that gives them access to information they need without running afoul of HIPAA can be difficult. Geena Marquez, strategist and solution architect at Anexinet, knows this challenge firsthand. She helped develop an app for Canopy Health System that makes it easier for patients to take control of their own healthcare decisions.
“Modern communication is asynchronous, and exchanging messages back and forth is the Achilles’ heel for HIPAA. You can’t use asynchronous communications like email and text messages to have a secure conversation.”
So, while patients may be asked for information like their date of birth and health plan member ID when they sign up, that information won’t necessarily be displayed or stored within the app. With patient privacy and HIPAA regulations in mind, Digital Pharmacist found an opportunity to improve privacy for patients with new digital solutions. “It’s very hard in today’s world to try and track people down on the phone,” Humphreys explained. “Modern communication is asynchronous, and exchanging messages back and forth is the Achilles’ heel for HIPAA. You can’t use asynchronous communications like email and text messages to have a secure conversation.” To confront these privacy problems, Digital Pharmacist built a secure, HIPAA-compliant two-way messaging system. Pharmacists can now initiate a text conversation with patients, and patients can now send and respond to messages from their pharmacist— all while giving patients peace of mind that their health information is kept private. The Canopy Health app also includes a feature allowing patients to connect virtually with their healthcare provider, and Marquez said, “This is a very popular service and something that increases benefits for the user.” These personalized services provide another touchpoint for patients and pharmacists, providing more access and comprehensive care, and they are a unique way to build trust between patients and providers without having a face to face experience.
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INDEPENDENCE FOR INDEPENDENTS Pharmacy Providers of Oklahoma (PPOk), PBA Health, and the Oklahoma Pharmacists Association (OPhA) are once again teaming up to host a one-of-a-kind pharmacy event that will focus on your pharmacy business and what it takes to be independent and successful. We will offer a little something for everyone—industry experts, innovative speakers, continuing education and networking events. So please mark your calendars “out of office” for June 12-14 and prepare to be motivated, educated, connected and inspired.
Unify Conference | June 12-14, 2019 River Spirit Casino Resort Tulsa, Oklahoma
UNIFY Empowering Pharmacy and Business Today
PPOK • PBA HEALTH • OPHA
FEATURE
ANALOG ADVERTISING IN THE DIGITAL AGE
How to use traditional advertising to earn more business than you’ve ever had
ELEMENTS | The business magazine for independent pharmacy | JUNE 2019 ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
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I
n an era where people spend 11 hours per day consuming
traditional/offline advertising and digital/online ads,” the report
media, every business is vying for a share of consumers’ digital
stated. “The five most trusted channels were all traditional channels
attention. Spending on digital advertising is steadily outpacing
while the bottom eight channels were all digital.”
analog advertising and will account for more than two-thirds of total ad spending in the US by 2023. Overall US spending on traditional advertising is expected to drop nearly 20 percent this year as digital advertising grows by the same percentage. Since 2000, US print newspaper advertising revenue has dropped more than 75 percent, falling to its lowest levels in 2014. These trends leave many savvy pharmacy owners allocating their marketing budget and time to digital advertisements and abandoning many of the traditional analog methods like radio, direct mail, billboards, and print publications. But “analog marketing, often referred to as ‘offline marketing,’ is still highly relevant in the digital age,” says Debora Haskel, vice president of
“The most effective marketing campaigns use analog marketing as a complement to digital marketing.”
marketing and corporate communications at IWCO Direct, a direct marketing firm. Even as analog marketing’s usage is declining, its effectiveness
Science also testifies to the unique benefits of analog marketing. Something about the physical aspect of the ads triggers a greater
is rising. Response rates for direct mail are the highest they’ve
emotional response, increases motivation, and burrows deeper
been in a decade, triple those for digital channels like email, social
into people’s memories. That’s from a study by the US Postal
media, and online advertisements. A study from Nielsen, a global
Service, which concluded by saying, “Most importantly, physical ads
performance management company, discovered that newspaper,
triggered activity in the area of the brain (ventral striatum) that is
radio, and billboard ads all surpassed online ads in trustworthiness.
responsible for value and desirability for featured products, which
In a MarketingSherpa survey, analog ads were considered
can signal a greater intent to purchase.”
trustworthy by up to 82 percent of people, while digital channels were as low as 25 percent. “There was a clear schism between
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Analog advertisements are more suited for small local businesses with geographically limited prospect pools. Unless
a pharmacy offers mail order, its patients will be people who
something on Amazon for next day shipment or go to the drug
can physically travel to the pharmacy’s location. Analog is more
store? For these types of products, you just need to remind the
effective at homing in on those people in your city, in your town,
consumer that you carry them and make it simple and easy for
in your neighborhood. Digital advertising throws a net to cover an
them to find what they need. Analog is great for this purpose.”
ocean when you might only need to cover a pond. “When an independent pharmacy operator understands the
Haskel recommends deploying analog ads to capture new business and saving customer communications for digital. “Since it
local community, analog advertising can be a better tactic than
is the most expensive channel, it may be more cost-effective to use
digital marketing, said Brian Owens, senior vice president and
digital marketing when communicating with existing customers for
leader of global syndicated health and wellness and drug channel
retention, cross-sell, referral, and loyalty initiatives,” she said.
research at Kantar, a marketing research and consulting firm. None of this is to say community pharmacies shouldn’t include digital advertising in their marketing strategy. Every expert interviewed for this article emphasized the importance of using both mediums in tandem. But pharmacies will benefit from knowing how to use an analog approach to get more customers. WHEN TO USE ANALOG MARKETING For most community pharmacies, your main advertising will simply
BEST PRACTICES The best practices for analog advertising are the same for every kind of marketing. “The fundamental principles of marketing do not change,” Cairns said. You must identify your target, know their needs, and craft a message to address it. “Finally, you need to have creative executions that can break through the clutter so your target can hear/see yours.” Haskel and Owens both emphasized the importance of
need to alert people to your existence, because the vast majority
personalizing your approach to your particular community.
would choose you over the national chains and big box stores if
Depending on your target, your messages and methods will vary.
only they knew about you. More than 90 percent of people would
Besides personalization, Haskel said pharmacies should leverage
rather shop at a local business than a national chain, according to a
data and testing. “These best practices are strong when they stand
2015 UPS survey. That means plenty of patients are waiting to give
alone and massively powerful when used together.”
you their business. You just need to get the word out. But every pharmacy is different, and whether you’re trying to let people know you offer vaccines or you want to get your name out there, your advertising strategy should be firmly guided by your individual goals and target audience, Owens said. “For instance, if you’re really trying to get more people into the store, a billboard would be very effective if you understand where those high traffic and high visibility areas are within the local community,” he explained. “If you’re really trying to get the word out amongst people who might not have the same digital savvy or are more of a close-knit community, leveraging more local tactics which people value more and appreciate more are a better, more effective marketing opportunity than maybe a social media push or
Master Your Message 1. F ocus on the benefit to the patient, not the feature of your offer It’s not about what you give but what they gain.
Facebook ad.” For community pharmacies, older people tend to be the most profitable patients, and they “tend to lean more on traditional mediums,” according to Nielsen. If you are hoping to attract more seniors, analog campaigns using direct mail, radio, and newspaper ads are more fitting than social media or online ads. Analog is great for building general awareness of your store and driving traffic, said Brian Cairns, founder and CEO of ProStrategix Consulting, a consulting firm that provides guidance and expertise to small businesses. “Analog is more akin to staying top of mind when people are thinking about a convenience purchase. So, when an acute condition hits, you are the first store they consider,” he said. This is especially true for front-end products. “E-commerce has roughly an 11 percent share of total retail sales, but only 3 to 5 percent of OTCs. When you have a cold, are you going to buy
2. A ddress the heart, not the head Don’t take aim at the surface desire. Pinpoint the underlying drive. 3. Keep it short and simple For most analog ads, you have three to five seconds to win people over. 4. K now your audience Different people want different things. Know your audience to know what they want. 5. T est your message Use A/B testing to figure out which message best engages your audience.
Analog Advertising Mediums Here’s an overview of the various options for analog advertising to help you determine which medium is best suited for your pharmacy’s advertising goals. Consider enhancing your ad efforts by using multiple analog methods in tandem and by seamlessly incorporating digital advertisements in your campaigns.
Radio Even with the rise of streaming music services like Spotify and Pandora, large numbers of Americans still turn on the radio every day. According to a Nielsen report, “In a time of intense competition for audience attention, radio reaches more Americans each week than any other platform. Ninety-three percent of adult consumers (18+) use radio on a weekly basis, more than TV or smartphones.” Perhaps surprisingly, millennials tune in at the highest rate. But boomers spend the most time listening. Nielsen said advertisers can expect an average of 12 times the return per dollar spent on their radio ad. Another study concluded that on average radio spots resulted in a 22 percent lift in store traffic. Tips for radio advertising Radio ads typically run at 15, 30, or 60 seconds. Experts say 60 seconds is the most effective length, but 15-second ads allow you to run more frequently. Leighton broadcasting, a radio marketing firm, recommends 21 ads per week, 52 weeks per year. It is better to bunch your ads together than spread them apart. Top times to advertise are between six to ten in the morning and three to seven in the evening. The most popular station isn’t necessarily the best station; choose stations whose listeners match your target demographic. For small businesses, it’s likely best to hire someone else to create the ad, such as the radio station, a professional company, or a freelancer. For a more affordable option, consider creating a script and having the radio host read the ad, which listeners are more likely to hear than a pre-recorded ad.
Outdoor Outdoor or out-of-home advertising includes billboards, benches, posters, bulletin boards, branded vehicles and buses, and more. If people see it outside the home or office, it’s outdoor advertising. These ads are more effective for promoting general awareness than specific actions. Outdoor ads have the advantage of staying put no matter what, unlike emails that can be deleted, online ads that can be blocked, or mail that can be thrown away. They grant repetitive exposure to your audience who travel the same route every day. Almost half look at outdoor ads when passing them, and 70 percent of drivers consciously look at billboards while driving. One survey found that nearly a third of people went to a business after seeing their outdoor ad.
Tips for outdoor advertising People will typically only see these ads briefly and will likely be on the move. That means copy must be digested in seconds and the graphics must grab their attention. Try to keep the copy under seven words and the pictures bright and big. Good spots for outdoor ads include areas close to your pharmacy, near a competitor, next to popular destinations, and on busy routes. Other spots to consider are near assisted living facilities, where patients regularly need medications, and hospitals and clinics, where patients will be leaving with prescriptions in hand. Banners at sporting events, school events, and community events make for affordable spots with guaranteed traffic. Putting your pharmacy logo on your delivery vehicle, either with a decal or magnet, can get your name in front of a lot of eyes, and the ad doesn’t have an expiration date.
direct mail “Direct mail is proven to be the most effective form of analog marketing across all verticals, including retail,” said Debora Haskel. The mailbox has less competition than the inbox. Many people receive fewer than 10 pieces of mail in their boxes each day. Compare that to the 100 emails consumers receive daily on average. Direct mail always enters the hands of your target, always catches their eye, and at a minimum, sticks with them from mailbox to trashcan. More often, though, that direct mail lingers in the home for 17 days on average, which provides more exposure to the residents and to anyone else they have over. Tips for direct mail advertising For direct mail, create graphics that pop. People’s eyes first find the dominant visual element before moving on to the copy. Make one clear statement and one clear call to action. Use a QR code for redemption of an offer, so you can measure response rates. You can purchase a mailing list from a list house or mailing organization. You can buy them demographically (by age, profession, habits, or business), or geographically (by location, state, and zip code), the Small Business Administration says, or you can buy a list with both qualities. On average, you should pay between four to five cents a name.
Print publications
Although print reading has declined since the turn of the millennium, millions of people still read newspapers and magazines daily. And because print numbers have fallen, so have prices, making print advertising an affordable route. Seniors read print publications the most, and they also happen to be pharmacy’s most lucrative demographic. The American Marketing Association also points out that the remaining print readers are the most engaged, “which is a desirable trait, from an advertising standpoint.” Of all advertising mediums, print ads are the most trusted by consumers. Tips for print advertising The best day for a newspaper ad is Sunday. An op-ed on a relevant topic is the best kind of print ad because it’s free and it builds credibility. Publishing ads in local publications, such as a town news periodical, a free city magazine, a trade magazine, or a local food magazine captures audiences prone to shop at local community businesses. Those ads are also less expensive. Depending on the size of your city, there could be dozens of local print publications to take advantage of. In terms of ad placement, the earlier the page the better. For magazines, the inside cover and back page are also good spots.
Booths/stands Booths serve as a simple, unaggressive advertising tactic. Whether it’s at a trade show, community event, or festival, hosting a booth is a way to get your name in front of thousands of people in a short amount of time with a small amount of cash. A booth can be as simple as a table and a banner. Print materials and branded gear are relatively inexpensive. Because booths focus on informing rather than selling, people are more likely to engage with them.
Tips for booth advertising Use a booth for building general awareness rather than advertising something specific. You want people to know that you exist and to remember your name. Use a large banner with a clear logo of your pharmacy. Hand out free, branded swag people will take with them to their homes, cars, and work. Offer enticements for children, like snacks and games, who will drag their parents along. Raffle off a prize for email signups, making sure the prize is worthwhile, like an iPad or gift card. Tie it to social media by having people check in on Facebook to be entered into a contest. Don’t be pushy, and don’t sell anything.
Sponsoring Sponsorships are extremely effective at the local level. A single investment in jerseys for a club soccer team will get your name in front of not only those players’ parents but every parent of every team they play. Most local sponsorships do double duty: they build awareness and they bolster community reputation. Sponsoring a school event shows your community support while also exposing you to hundreds of people in your neighborhood. Far and away, people nowadays connect emotionally with companies who are community-centered and socially-concerned. Sponsorships are gold from a labor standpoint as well, as they typically don’t require creating an advertisement—your logo does all the work. Tips for sponsor advertising There is almost no end to the ways you can use sponsorships to advertise. Sponsor a 5K fundraiser for a logo on the t-shirt, a booth in the prime position, and your name on the print collateral. Help pay for a school’s field and equipment fees in exchange for placing a banner in the building or on the field with your pharmacy’s name. The ideal sponsorship will get your branding in front of your ideal prospects, including those who live near your pharmacy.
Although analog can be powerful on its own, all of the experts emphasized the importance of using a multi-channel approach. “The most effective marketing campaigns use analog marketing as a complement to digital marketing,” Haskel said. “Response in both channels is proven to be higher when they are used together versus using them in a stand-alone fashion.” For example, you might pair a direct mail campaign with a QR code or send a follow-up email. Or you might have people at your event booth “check in” on your social media to be entered for a prize. In every case, analog and digital should behave synergistically. “The campaigns must be developed to complement each other with matching branding, offers, and calls-to-action that work together in a seamless fashion,” Haskel said. IN-HOUSE OR OUTSOURCE? One of the toughest marketing decisions for community pharmacies is how much you should do in-house. Some pharmacies do everything on their own, from copy to graphics to printing, while others outsource it all. Hiring a company can be very expensive, but a poorly made ad can result in opportunity costs from underperformance, Cairns said. He recommends evaluating each phase of the development on its own to decide which parts should be outsourced. Maybe you can craft compelling copy but don’t know design, or vice versa. You can handle one of those inhouse and hire a freelancer for the other one. “When thinking of a community pharmacy, where every penny counts, it’s hard to argue for a marketing firm, but the money may be well spent to hire a good, freelance designer,” Cairns said. “First, I’d try my hand at writing the copy myself and having it designed. If the promotion doesn’t go as well as I would have liked, then it’s worth exploring a marketing firm. For independent operators, they’ll have to do their own patient research.”
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A/B Testing: Maximize Your Advertisement’s Success In its simplest form, an A/B test sends two different advertisements to two small test groups. Whichever ad gets the best response “wins” and is used in your full campaign. This experiment gives you data to decide between variants of an advertisement—like your copy, your graphics, or your promotion—so you can know which ad will be most effective. It’s best to keep each test to one variable so you can isolate the difference in effect. “Testing may include a simple A/B test of copy or offer or format,” Debora Haskel said, emphasizing the “or.” For example, send two mailers with the same image and same call to action, but different copy. But don’t send two mailers with a different image, different copy, and different call to action. Let’s say you want to send a direct mail campaign to 3,000 prospects. You want to know which promotion will be more effective: 50% off one cold and flu item or buy-one-get-one-free. For the test, you could send 50 mailers with one offer (A) and 50 mailers with the other offer (B). Give the promotions a two-week expiration date and see how many of each coupon gets redeemed. The one with the highest redemption rate is one you’ll use for the full campaign.
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SPOTLIGHT
FROM HOSPITAL TO HOME This pharmacy’s four-week discharge program earns new business while keeping patients out of the hospital
N
early 14 percent of all patients discharged from the hospital will be readmitted within 30 days, according to the
The assistance doesn’t stop once they leave the healthcare facility. At home, the patient will receive a follow-up call every
Nationwide Readmissions Database. That number is even higher
Saturday for the next three weeks. The pharmacists even send
for Medicare patients, who often juggle multiple medications given
patients relevant videos to their smartphone, so they can watch
by different prescribers. Independent pharmacist Alok Patel serves
them until they feel comfortable using their medical devices
a large population of Medicare patients in his New Jersey-based
at home.
pharmacies, and he saw the problem first-hand. “A lot of people would come home from healthcare facilities and
“If we give them one month of medication but don’t do the follow-up call, we don’t know whether the patient is adhering or
they would have no clue about their medications,” he explained.
not,” Patel said. “But when we make the phone calls, we have a
“There would be chances of them duplicating their therapies or
set of questions to ask them and a set of reminders to help them
negative drug interactions.”
adhere to their therapies.” These follow-up calls have increased
So he founded a program to help discharged patients better understand, manage, and adhere to their medications and
medication adherence by 80 percent, Patel said. The program’s services are provided to patients and nursing
devices—Discharge Rx Care. The program partners patients with
facilities free of charge. The only expense patients ever see is the
pharmacists who guide them through the process of discharge from
copay for their prescriptions, which they would have to pay at their
a healthcare facility, such as a nursing home or a hospital, and helps
regular pharmacy without the benefit of getting discharge counseling.
them resettle back at home. While the program increases adherence and reduces hospital
PREVENTING CONFUSION
readmissions, it pays off for Patel’s business, too, because it
“In my community, there are a lot of seniors, and seniors have
provides a steady stream of new patients to his pharmacy. Patients
a bunch of medication sitting in their medicine cabinet,” Patel
are impressed by the service and give him their prescription
said. “Any time they visit any hospital, they get another list of
business once the program ends. “It’s a compounding kind of
discharge medications.”
effect,” Patel said. “I have more and more patients coming back to me after discharge for the program.”
Many times, a medication prescribed at the hospital is a duplicate of a medication the patient is already taking. Their primary care doctor might have prescribed them something for
HOW IT WORKS
their cholesterol, but when they were admitted to the hospital,
The key to the Discharge Rx Care program is continued contact. A
the hospital physician prescribed them a different medication to
pharmacist first visits patients before they are discharged from their
treat cholesterol.
healthcare facility. During this visit they go over how to take their
Because of this, Patel said, “There’s definitely a need for a
new medications and how they might interact with any medications
program that can do a complete, thorough reconciliation of
they were taking before being admitted to the hospital.
their medications to avoid any complication of their therapies.”
The education isn’t limited to oral medications. Patients might
Without the pharmacists scrutinizing these medication lists and
be going home with new medical devices like nebulizers, inhalers,
helping patients understand what they need to be taking, the
or insulin pens, which can sometimes prove to be overwhelming.
risk of re-hospitalization rises.
Discharge Rx Care has created more than 200 videos that show patients how to use the devices. “What we have found is when we show them the videos, they
That’s why the Discharge Rx Care program appeals to nursing homes in addition to appealing to individual patients. “A lot of nursing homes are looking for these types of programs because
more clearly understand how to use those devices when they go
Medicare will penalize them if they have a re-hospitalization of
home,” Patel explained. “In the healthcare facility, they have nurses
their patient after they’ve been discharged,” Patel said. “This is a
to help them administer everything, but at home, they can get
quality-evaluated program for the nursing home. They can share
confused with all these new medical devices.”
their data with the hospital and Medicare and show that when
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“There’s definitely a need for a program that can do a complete, thorough reconciliation of their medications to avoid any complication of their therapies.”
and that single client, and five years later Discharge Rx Care works with patients from over 60 nursing homes and employs nearly 50 people. “What I’ve found is that there is a ‘wow’ effect,” Patel said. “A patient could be 70 years old, but they’ve never had the experience of a pharmacist coming to them and providing
we provide education before and after discharge, it ensures patients don’t miss a dose and adhere to the therapy.”
personal care and education.” This “wow factor” is what makes Discharge Rx Care sustainable in the long run. It allows patients to experience the human touch
FIVE YEARS OF GROWTH
of independent pharmacies. Many of the Discharge Rx Care
Initially, the Discharge Rx Care program was a hard sell to the
patients switch to one of the five pharmacies Patel owns after
nursing homes. “They all loved the program but they weren’t sure
their counseling sessions are over instead of returning to the chain
whether it would be possible,” Patel recalled. “It was challenging to
pharmacy they had been using before.
convince other healthcare professionals that the program would
As an incentive, Patel’s independent pharmacy offers the same
survive after they implemented it at their facility, because I would
adherence packaging and home delivery patients were receiving
hire a pharmacist to stay at my location, then I would go out to the
while they were being counseled by Discharge Rx Care. That way,
building to meet patients.”
even though the program is free, Patel said, “The financial benefit
But Patel managed to convince that first nursing home to give him a chance. He began the program with two other employees
is that I see people coming back to us. Over the years, I’ve seen an increase in patients returning after receiving our services.” ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
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MONEY
IS THE PRICE RIGHT? How to find fair market value when purchasing a pharmacy
W
ith big pharmacy chains slowing openings and even closing
get a true valuation, you have to look at the most important factors:
stores, and fewer pharmacists retiring, young pharmacists
what are the operating expenses, what are the profits, and what is
are striking out on their own. “We’re seeing a lot of younger
the cash flow,” Weaver said.
pharmacists looking to get into pharmacy ownership,” says Scott
Because the retail pharmacy market can be so variable, it’s hard
Weaver, vice president of pharmacy at PRS Pharmacy Services, a
to benchmark what numbers are good and what numbers are bad.
consulting firm that specializes in helping pharmacy owners.
A traditional retail pharmacy is going to have different operating
Pharmacists looking to go into business for themselves will
expenses and profits than a pharmacy that sells durable medical
be faced with a tough decision: start from scratch or purchase a
equipment or provides compounding services. Because of that,
pharmacy that’s for sale. To Weaver, the decision is simple. “If you
Weaver said, “We tend to really determine a valuation by net profit.”
have the option of opening up a start-up pharmacy on this side of
To get the most accurate valuation, PRS Pharmacy Services
the street or to go across the street and buy an existing pharmacy,
uses five different formulas: one based on return on investment;
definitely buy the existing one,” he said. Typically, a start-up
another based on net profit; a direct assessment that adds tangible
pharmacy won’t break even for 18 to 24 months, and most banks
and intangible assets together; a percentage of sales formula that
and lending institutions require a $450,000 to $500,000 loan when
accounts for inventory, furniture, fixtures, and equipment; and an
starting up a new pharmacy, Weaver said. And because it’s a new
EBITDA-based formula.
business, there isn’t tangible data to judge whether such a large loan will be a financially wise decision. “Banks find it easier to finance acquisitions because they are able to base everything on historical data,” Weaver explained. “You
By using all these formulas, they are able to produce a low range, high range, and average that creates a good ballpark for the pharmacy’s fair market value and allows pharmacists to make educated decisions before they make an offer.
actually know how much business the existing pharmacy is doing versus the start-up, which is projecting how much business it will be doing.” Even though buying an existing pharmacy is often a better
What is EBITDA?
financial decision than starting one up, the process isn’t as simple as finding a location for sale and making an offer. Potential
When you are trying to determine a pharmacy’s value,
pharmacy buyers need to do their due diligence to find out what
you’ll probably hear the term EBITDA thrown around.
the business is worth.
It’s essentially a way to measure a business’s financial performance. All the information needed to calculate
DETERMINE PHARMACY VALUE
EBITDA can be found on a pharmacy’s balance sheet:
The process starts with a financial analysis known as a “valuation.” Typically, it takes into account three years of financial data, which includes the pharmacy’s tax returns,
EBITDA = Earnings Before Interest and Tax (EBIT) + Depreciation (D) + Amortizations (A)
income statements, profit and loss statements, and more. Once the information is gathered, it’s put into a formula that
The reason EBITDA is so valuable is because it
determines what the pharmacy’s fair market value is. “There’s
determines the impact of operations decisions
not really one perfect formula,” Weaver acknowledged.
without distractions like financing, governmental, and
Sometimes, inexperienced buyers will only look at the
accounting decisions.
pharmacy’s sales numbers or the annual prescription sales to get a sense of the value, but that doesn’t paint a complete picture. “To
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
29
While this seems like it should be a cut-and-dried process of
asking questions like, “Is there any construction of new homes
looking at finances, emotional attachments can complicate the
or apartments in the area? Or, on the negative side, are there
process. “The buyer is excited and looking forward to owning their
any employers downsizing?” Even if an employer isn’t actively
pharmacy and accomplishing a dream,” Weaver said. “For the seller,
downsizing, their actions could affect the success of the pharmacy.
it’s something they’ve built up for decades and there are emotions
If the area’s major employer switches to a preferred network,
that come with selling it.” In order to get the clearest answer to the
prescriptions currently being filled at the pharmacy could be lost.
fair market value of the pharmacy, the buyer and seller have to take personal opinion out of the negotiation and strip it down to a rational analysis of the financials. OTHER CONSIDERATIONS
Pharmacy Valuation Checklist
Financial statements are the best place to start when considering a
Before you purchase a pharmacy, you should know the
purchase, but a full valuation requires assessing a variety of factors.
business in and out. Use this checklist to make sure
Buyers should delve into the nitty-gritty details of the business and
you’ve gathered all the right information:
the contextual circumstances surrounding the pharmacy. Instead of settling for the number of prescriptions being filled, buyers should seek out the top 100 drugs dispensed throughout the year both by the number of prescriptions and by the dollar value. “Those can be produced right from the pharmacy computer,”
• Three years of financial statements • Record of three years of prescriptions dispensed by each third-party payer • Record of three years of prescriptions purchased with cash
Weaver said. Buyers should also ask to see breakdowns of DIR
• Top 100 drugs dispensed, by number of prescriptions and dollar values
fees, wholesaler statements, rebates, and accounts payable and
• Top 25 prescribers
receivable. Learn who the major prescribers and third-party
• DIR fees
providers in the area are, because they will become an integral part
• Wholesaler statements
of doing business.
• Rebate records
Buyers should also get to know their new neighborhood. Major demographic shifts can affect the long-term profitability of the pharmacy in positive and negative ways. Weaver recommends
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• Accounts payable and receivable
Pay close attention to competitors in the neighborhood, whether they are opening up or moving out. Other factors to consider include the curb appeal of the pharmacy and the composition of the inventory. If a pharmacy is selling a collection of old-fashioned gifts, a new owner will have to invest some money to get the front end up to snuff. While all these considerations are important, the most significant factor is ultimately “how badly the seller wants to sell and how badly the buyer wants to buy,” Weaver said. “That’s the thing that affects the price the most.” ADDITIONAL COSTS First-time pharmacy buyers may be surprised when they realize the cost of the business isn’t the only money they have to account for in their loan. There are attorney’s costs associated with filing a letter of intent and executing the purchase agreement. There are also closing costs for the loan, which typically cost around 2 to 2.5 percent for a conventional loan. It’s also necessary to account for the working capital that will get you started after you take over operations. “Typically you need 30 to 60 days of operating expenses, which will be a part of the loan,” Weaver explained. Any additional costs like real estate and additional items like delivery vehicles will also be included in the loan. DUE DILIGENCE After taking over a pharmacy, new owners could be impatient to hit the ground running, but by rushing through the transition process, they could find themselves facing some unexpected challenges. Transitioning a pharmacy to new ownership can be more time-consuming and challenging than new owners might expect. If licenses and third-party contracts aren’t properly transferred, Weaver said, “It could result in the buyer not legally owning the pharmacy.” He said PRS Pharmacy Services has seen pharmacy licenses and DEA numbers canceled because the owner didn’t follow through with the transfer. Third-party contracts can also get canceled, resulting in the pharmacy being unable to bill for prescriptions. These kinds of mistakes can be easy to overlook in the moment, but they can set a pharmacy back for months on end. The requirements for transferring pharmacy ownership vary from state to state, meaning pharmacy owners need to do their research to make sure the process goes off without a hitch. Because it can be easy for small details to get swallowed up in
“To get a true valuation, you have to look at the most important factors: what are the operating expenses, what are the profits, and what is the cash flow.”
the chaos of a big purchase, Weaver recommends that prospective pharmacy owners partner up with someone experienced in pharmacy transitions. They can assist with valuation, purchase agreements, transferring licenses, and transitioning third-party contracts, he said, “without any interruption.”
ELEMENTS | The business magazine for independent pharmacy | MARCH 2020
31
OUTLOOK
TRAINING UP TECHS An online training program prepares technicians for certification
E
very successful specialist relies on a trusted sidekick. Pilots
FROM REGION TO NATION
have copilots. Doctors have nurses. Lawyers have paralegals.
A longtime pharmacist and
For pharmacists, there’s technicians. From checkout duties to filling
former pharmacy owner, Dubose was
bottles, pharmacy technicians perform virtually every essential
training technicians long before PassAssured existed. For years he
function of the pharmacy except for counseling patients, verifying
instructed students at Lamar State College where he co-developed
prescriptions, and making decisions about patient medications.
the Pharmacy Technician Training Program and authored an
“It’s universal that technicians are a big asset to pharmacists,” said David Dubose, RPh, founder of PassAssured, an online
instructional manual to assist candidates to pass the PTCB exam. In the late nineties he started traveling though Texas
pharmacy technician training program. “Without technicians,
conducting seminars for technicians, which produced
pharmacists would have to be doing the remedial stuff like
successful results. Although his program was
counting and pouring and sticking labels on bottles instead of
effective, he had trouble reaching people
doing what they’re educated to do.”
outside of the state. How could he increase
As the engine of the pharmacy, technicians need to be fully
his reach to help more aspiring techs achieve
capable, reliable, and competent, not only for the business but
certification? The light turned on when he
also for the safety of patients. One way to ensure that is through
received an interactive CD-ROM in the mail that
certification. In some states, certification is a requirement for
contained a training program for an advanced
technicians, although each board of pharmacy sets its own
pilot license. It was then, in 2001, that Dubose
standards. At least 24 states require technicians to become certified
came up with PassAssured, created as CD-ROM
by passing one of the two major examinations: the Pharmacy
that could be shipped across the country. Now
Technician Certification Exam by the National Pharmacy Technician
it’s available entirely online and accessible in
Certification Board (PTCB) and the Examination for the Certification
nearly every electronic format, including on cell
for Pharmacy Technicians by the National Healthcareer Association.
phones. Students or employers pay a flat fee for
Colleges and trade schools offer technician programs that prepare students for the exams, but many aspiring technicians
the program and gain access to its entire library of materials.
don’t have the funding to pay for school or don’t have the time for traditional classes. Others already work in pharmacies and want to
EMPLOYER-BASED TRAINING
take the next step. For those aspiring technicians, PassAssured offers
The Bureau of Labor Statistics projects technician employment to
another way. With more than 240 hours of curriculum featuring
grow seven percent from 2018 to 2028, faster than the average for
interactive multimedia, the online program lets students practice
all occupations. It has been named among the nation’s leading job
at their own pace and test their readiness with a practice exam
shortages, which makes hiring competitive and finding candidates
provided by the PTCB. The program boasts an 87 percent pass rate
difficult, especially for rural pharmacies. These factors make a
for those who complete the full course and take its final exam.
home-grown approach an appealing route for many owners, and
Even with its passing pedigree, Dubose said to think of the program not simply as a means of passing the exam but
one they can implement through PassAssured. “It makes for one heck of an employer-based training program,”
also as an effective training for great technicians. The course
Dubose said. “You hire a technician and they have a good
goes beyond the exam essentials, teaching practical skills like
personality and it’s someone you want to keep, then you purchase
communicating with patients and using a cash register. “We teach
the program and you can monitor the employee’s progress. A lot of
them to be good technicians,” he said. “And as a side effect they
pharmacies, especially ones with more than one store, will want to
pass the national exam.”
set up a little training school.”
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