Elements Magazine - Vol.2 Iss.3 Sept 2013

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ELEMENTS

Loyalty Rewards Programs How to launch a successful program at your pharmacy

5 Tips to Hire an Outstanding Pharmacy Team

Vaccines & Immunizations

Are your patients starting to request this rapidly growing pharmacy service?

VOL. 2 ISS. 3 | SEPT 2013 | PBAHEALTH.COM

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ELEMENTS

The Magazine of PBA Health

Contents

departments 5 News:

Important updates and information for your community pharmacy.

6 TECHNOLOGY:

Negative Feedback How to handle unfavorable online reviews about your pharmacy.

8 Bricks & Mortar:

Staffing Your Pharmacy Tips to hire a pharmacy team that will improve your business.

17 ACTIVE INGREDIENTS:

Price Spikes Discover the factors that are causing fluctuations in generic drug pricing.

ON THE WEB //

18 More for your money:

Practices For Better Purchasing Increase profits at your pharmacy with these seven purchasing tips.

23 community:

Rewards Programs How to launch a successful loyalty rewards program at your pharmacy.

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26 outlook:

Welcome, Member The benefits of joining your state pharmacy association.

30 notes:

Community Outreach Promote your business by participating in community events.

Feature: Vaccines & Immunizations If you don’t already offer immunization services at your community pharmacy, you might want to consider this growing area.

Explore exclusive online content to improve your business at www.pbahealth.com.

How to Bill the Different Parts of Medicare

Filing a drug claim incorrectly through Medicare can increase administrative costs and create problems in the event of an audit. Learn more about correctly billing Medicare. Find the article on the TriNet section of www.pbahealth.com.

ELEMENTS is published quarterly by PBA Health. CopyrightŠ 2013 PBA Health. All rights reserved.

Neither this publication nor any part of it may be reproduced without written permission by PBA Health.

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NEWS The HIPAATrack solution includes: • Policies and procedures to comply with the final HIPAA rules • Enhanced online employee training and tracking • Disaster recovery program • Risk analysis and management program • Seamless auto-updating • Email notification when new tasks need to be completed, when there have been updates to policies and forms, and when employee re-training is due • Monitoring of important initial set-up tasks by PRS specialists • Industry-leading customer service

To learn more about HIPAATrack and to get a special offer on the product visit our vendor directory at www.pbahealth.com and click on “HIPAATrack”.

Are You Compliant With HIPAA Changes?

All pharmacies need to take action to replace or revise their existing HIPAA Compliance Program by September 23, 2013, to avoid repercussions of non-compliance.

The publication of the final HIPAA rules in January 2013 stipulated that pharmacies must comply with the new requirements by September 23.

The Office of Civil Rights has been authorized to conduct on-site compliance audits at pharmacies. It can assess non-compliance penalties and exclude non-compliant facilities from programs funded directly or indirectly by federal healthcare dollars.

HIPAATrack from PRS Pharmacy Services offers a solution to stay HIPAA compliant. The new solution provides the simplest, most cost-effective way to comply with these changes, and it’s endorsed

by PBA Health.

PBA Health Provides Exclusive Industry Updates When you order products through the PBA Health warehouse, you receive more than just your orders.

All PBA Health customers who use one of our ordering services earn access to exclusive marketplace information every time they log in to place an order.

You’ll find out when new products are coming on the market—and you’ll know when they arrive in the PBA Health warehouse. We’ll let you know when there’s a drug recall or an import ban on certain products.

You’ll know when manufacturers are having supply issues and we’ll even suggest alternative choices. We also provide you with information about upcoming patent expirations and price changes that are likely to affect your business.

We provide this information to help our customers make better purchasing decisions for the benefit of their businesses. These marketplace updates are also the place to find out about sales and specials going on through the PBA Health warehouse.

With an inventory of more than 6,000 SKUs, including brands, ge-

nerics, narcotics CII-CV, cold-storage products and OTCs, the PBA Health warehouse can meet your pharmacy’s specific needs— whether you need a secondary supplier or primary distribution services.

Are you already a PBA Health customer? Head over to www.pbahealth.com and log in to check out the updates. If you’re not already a customer with us, call 800-333-8097 or email dcsupport@pbahealth.com to learn more about placing your next order with us.

October is American Pharmacists Month The entire month of October is dedicated to celebrating your profession!

American Pharmacists Month offers a special opportunity for you to educate your patients, share information with the public and celebrate your vocation. Don’t let this year’s American Pharmacists Month pass you by without recognizing it.

Look out for upcoming ideas and tips to promote this special month at your community pharmacy on our website at www.pbahealth.com and on our Facebook page. For our Facebook fans, we’ll also be creating an exclusive cover photo for American Pharmacists Month that you can use for your pharmacy’s Facebook page.

Join us in celebrating pharmacists and the services they provide this October!

Remember to check out our Facebook page on October 1 at www. facebook.com/pbahealth to get the cover photo.

Get daily news updates on issues that matter to your community pharmacy by following us on Facebook at www.facebook.com/pbahealth and on Twitter at www.twitter.com/pba_health.

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TECHNOLOGY best practices the next time you come across a negative online review about your pharmacy.

Respond promptly When you spot a negative online review about your pharmacy, reply quickly. Don’t let the patient’s complaints go unanswered for long. (If the review makes you angry, give yourself a little time to cool off.) In your response, invite the person to continue the conversation privately by phone or email, and make sure to provide your direct contact information.

Negative Feedback

How to deal with unfavorable online reviews about your pharmacy You know how it goes. For all of the patients who appreciate your pharmacy’s extra efforts, you always have a few who still aren’t happy. Maybe a patient complains about a long wait time. Or, a patient faults you for an expensive prescription. Sometimes the negative feedback is for a legitimate reason, and other times it’s not. You likely deal with patients’ complaints every once in a while in your store. But it’s important to remember that patients might talk about your pharmacy on another more public platform—the Internet.

Eighty-one percent of U.S. adults use the Internet and 30 percent of Internet users have consulted online reviews or rankings of healthcare services and treatments, according to a 2012 Pew Research Center survey. Patients are using the Internet to look up health advice, to scope out treatment options and to search for providers. It’s likely then that they also use the Internet to look for pharmacies. What does the Internet tell them about your business?

Chances are you’ll be able to find a few online reviews about your pharmacy. Customers often take to social media, and to websites like Yelp, Google Places, YellowPages.com and CitySearch to vent about a business. (Or, to talk about a great experience. It’s not all negative.)

Look regularly for any mentions of your business online because, unlike face-to-face feedback, online reviews are open for anyone to see, including potential patients.

If you encounter negative comments on a review website or on Facebook or Twitter, how you handle the feedback will reflect on your business. Use the following

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Offer honest explanations Try to empathize with the negative reviewer, even if the complaint seems unreasonable. Find something within the complaint that you can respond to favorably. For example, say a patient complains about a long wait time when she went to your pharmacy at 5 p.m. to fill a new prescription. Politely respond by saying that your pharmacy offers store hours beyond just 8 a.m. to 5 p.m. to accommodate patients with regular work schedules, but note that the pharmacy often gets busy around 5 p.m. Give an explanation of the options you provide to patients to avoid long wait times, like automatic refills. Apologize and then provide the person with some feedback on additional ways you will work on the problem in the future.

Know when to compensate—and when you shouldn’t It’s tricky to determine when you should and when you shouldn’t provide patients who complain with compensation. If you do it too often, people may post negative feedback just to receive the discount or freebie. A good practice is to only offer online reviewers compensation if you or your employees made a legitimate mistake or oversight. Any obvious customer service issue, like unfriendly techs or clerks, also warrants some kind of compensation. But do it privately, through email or by phone.

Collect positive feedback Negative feedback happens. You can respond to all of the negative comments you come across online, but the negative reviews will still be there—for anyone to see.

Balance your business’s online reputation by making sure patients also write positive reviews about your pharmacy. Contact your best customers and ask them for a testimonial. Then, post their responses on your website and on your Facebook and Twitter pages. When you spread the word about your business in a positive way, you can cancel out those negative comments.

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BRICKS & MORTAR

5 Tips To Hire an Outstanding Pharmacy Team

By Kirsten Hudson

When you hire the right pharmacists, pharmacy techs and cashiers, you save your pharmacy time and money. Hiring employees who are a good fit for your pharmacy—and for the positions—can improve your business. The right team will boost morale, increase productivity and keep patients coming back. Hiring right is often easier said than done, however. No community pharmacy owner offers someone a position knowing that person is completely wrong for the job.

You usually find that out later.

How do you hire the right person for the right job— the first time? Be willing to put the effort needed into the hiring process. Don’t view it as taking time away from what you should be doing. Hiring the best employees you can find is what you need to focus on—for the good of your business. Use these five tips to hire an outstanding pharmacy team.

1. Be on the lookout It’s a good idea to always keep your eyes open for potential employees, even when you’re not hiring. Positions often come open unexpectedly. Ask for referrals from trusted employees, pharmacy schools, your state

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pharmacy association and other community pharmacy owners. So, the next time you’re down one tech and your pharmacist is stressed, you can more easily fill the open position with a quality individual.

2. Create a process Streamline your hiring process by setting a standard procedure. How long will you accept applications? How many people will you ask to come in for interviews? Knowing what steps you’ll take throughout the hiring process will save you time. Once you set a process, give yourself time to call references and do phone interviews before you bring candidates in for face-to-face interviews. Ask the right questions during your phone interviews, so you don’t waste time bringing in a candidate who won’t work out. Some key questions include: • What are your career goals? Where do you want to be in five years?

• Why do you want this job?

• What challenges are you looking for in a position?

• What are your best skills?

• What are you not good at or not interested in doing?

BRICKS & MORTAR

The Problem Of Going With Your Gut Feeling Many people hire based on their gut feelings. They simply decide whether or not they like the person—and then they hire. It’s the most common method for hiring, and it’s also one of the most common reasons for hiring failures. Hiring because of “gut feelings” leads to about a 50 percent hiring failure rate, according to an article on Business Insider, a business and technology news website. Basing your decisions only on gut feelings can cause you to hire someone who’s good at interviewing, but not right for the position. Or, it can lead to rejecting a candidate because you personally didn’t connect with the individual. When doing interviews, ask tougher questions to the candidates who you like and dig deeper with candidates who you don’t think are right. You may be surprised by the results that occur by changing your perspective.

3. Prepare for interviews Before a face-to-face interview, you’ll already know the ins and outs of the candidate’s résumé, so don’t focus solely on past work experience. Dig deeper. The point of doing an in-person interview is to determine if the candidate will fit with the culture of your pharmacy, and to find out if he or she will get along with your other employees. Really think about the questions you want to ask and how they’ll help show you more about that person. Some questions to bring out a candidate’s personality include: • What would your best friend say about you?

• If you could take back one career decision, what would it be?

• Tell me about a significant project or accomplishment that you completed.

• What questions do you have for me?

4. Get perspective Hiring a mediocre employee will cause your business to suffer from that employee’s mistakes, failures and missed opportunities. Think lost patients, poor custom-

er service and weakened customer loyalty. To prevent hiring an unsuccessful employee, it’s a good idea to get multiple perspectives about a potential hire. Ask trusted employees, like your long-time pharmacists, to sit in on an interview or to conduct separate interviews with the individual. Get their honest feedback about candidates before you make any decisions.

5. Continuously train Your staff is likely one of your pharmacy’s best assets, especially if your business focuses on providing topnotch service to patients. Hiring the right people is an ongoing process.

Once you hire your employees, you have to make sure to set clear expectations and standards. Even the best employees won’t meet expectations if they don’t know what those expectations are. Consistently monitor your employees to make sure you have the right people doing the right tasks—the ones they’re good at and that they find enjoyable. Be generous with praise and let your employees know when they can make improvements. A positive work environment paired with the right employees will only improve your business.

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Vaccines & Immunizations Inoculate your business with this fast-growing pharmacy service

By Kirsten Hudson

Before Walgreens started its Take Care Clinic and CVS had its MinuteClinic, D&H Drugstore in Columbia, Missouri was offering vaccines and immunizations to patients. The pharmacy, which has two locations, hired a registered nurse to administer vaccines by appointment more than 10 years ago. The new service offering did so well that the pharmacy hired a second nurse to work full time about five years later.

Vaccines and immunizations have been a good profit center for D&H Drugstore. “When Zostavax® came out about seven or eight years ago, that was big for us,” said Gene Forrester, R.Ph, owner and pharmacist at D&H Drugstore. “That was way before pharmacists could administer vaccines. So, we became one of the first pharmacies in town to do that,” he said.

Now, the vaccine landscape is evolving for community pharmacists.

Since 2009, all 50 states have allowed pharmacists to administer vaccines and immunizations in some form. Depending on the laws in the state, pharmacists may be restricted to only flu vaccines, or they may be able to administer other vaccines, such as Gardasil®, Zostavax, pneumococcal and other vaccinations for travel. The patient age range for vaccines administered by pharmacists also varies by state. Some states don’t allow pharmacists to administer vaccines to children younger than 10 years old, for example.

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Missouri passed legislation that allowed pharmacists to dispense vaccines and immunizations in 2007. “When they first allowed pharmacists to do it, my thought was, ‘Well, we have nurses to do vaccines,’” Forrester said.

“Then, Walgreens started offering it and you started seeing CVS and the other players out there doing it. That’s when I decided that we needed to look into our pharmacists administering them.”

The legalization of pharmacists to dispense vaccines and immunizations created an opportunity for D&H Drugstore to expand its already well-received immunization services. At the same time, it also created a problem. The pharmacies were currently offering vaccines by appointment or through flu shot clinics, but as patients became more open to receiving immunizations at pharmacies, they were starting to want them on demand.

D&H Drugstore only had one full-time nurse and one part-time nurse to handle vaccinations at both locations. The nurses were often unavailable during

certain times considering that the stores were both open 80 hours a week. “I’ve especially noticed in the last year people coming in and asking for either a Zostavax shot or a flu shot, and we didn’t have anybody able to do it,” Forrester said.

To better serve patients, D&H Drugstore is currently working to certify its pharmacists to administer immunizations. That way when patients come in, they can receive the vaccines and immunizations they need with no appointment necessary.

Specialized services As more pharmacists become certified to administer vaccines, community pharmacists have opportunities to specialize their vaccination services to gain more business.

Hometown Pharmacies, a regional chain of 25 pharmacies located throughout Wisconsin, offers something unique when it comes to pharmacy vaccinations. The Hometown Pharmacy location in Oregon, Wisconsin is

As more pharmacists become certified to administer vaccines, community pharmacies have new opportunities to gain business.

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home to Safe Travels, a travel vaccination program that gives patients pre-travel consultations, as well as travel vaccinations.

“This program provides travelers with destinationspecific information, including potential health risks, basic country specifics, personal safety information, and the necessary immunizations and medications to keep travelers safe and healthy abroad,” said Ryan Bender, Pharm.D., director of clinical services for Hometown Pharmacies and manager of the Hometown Pharmacy location in Rio, Wisconsin.

Outside of the Safe Travels program, all of the Hometown Pharmacy locations also administer seasonal flu shots and vaccinations against shingles, pneumonia, hepatitis B, HPV, tetanus, diphtheria and pertussis.

“Providing immunizations is a service our patients appreciate,” Bender said. The pharmacy started its vaccination program in 2006.

Good for business If you don’t already provide vaccines and immunizations at your community pharmacy, you might want to consider this emerging area.

The majority of patients still get vaccines at doctors’ offices, but increasing numbers are heading to the pharmacy. Early estimates of the 2012-2013 flu season show that 34.5 percent of adults went to doctors’ offices to get their flu shots, while 18.4 percent visited a pharmacy, according to the Centers for Disease Control and Prevention.

As more patients choose to receive vaccines at pharmacies, it’s time to get ahead and start providing vaccination services now—before patients ask and you don’t have these services. The big box store and national chain pharmacies are all actively providing and marketing vaccines and immunizations, particularly flu shots.

“It’s starting to be something people expect from their pharmacy,” said Forrester of D&H Drugstore.

Besides keeping up with the competition, an immunization program also offers a good source of revenue. Last year D&H Drugstore provided around 800 flu shots and 300 Zostavax shots. “It will be interesting to see what going from two nurses with limited availability to adding six pharmacists will do to those numbers,” Forrester said.

Unlike third party reimbursements for traditional prescriptions, providing vaccinations is a service your pharmacy can usually earn a decent margin on. Medicare reimburses for pneumonia and influenza vaccinations, Medicaid reimburses for children to receive influenza and other vaccinations and some commercial health insur-

Resources For Community Pharmacists Launching a successful immunization program requires multiple elements. Pharmacists have to undergo extra training and maintain CPR certification. Your physical store needs a private area to administer the vaccines and you need a marketing program to let patients know about this service. Here are a few resources to help you get started.

American Pharmacists Association www.pharmacist.com/immunization-resources Tips and information for pharmacy-based immunization delivery Centers for Disease Control and Prevention www.cdc.gov/vaccines/hcp.htm News, clinical resources, patient education information and immunization training Immunization Action Coalition www.immunize.org Handouts for patients and staff, coding and billing information, storage and handling recommendations State Boards of Pharmacy Check with your state board of pharmacy for immunization training information and statespecific requirements

ance payers provide reimbursements for select vaccines.

Let patients know what health insurance providers you do and do not accept. Also, be sure to check with your third party network or review your PBM contracts for this year’s vaccination schedules.

In cases where insurance doesn’t cover patients’ vaccinations, they’ll have to pay out of pocket. It’s a good idea to let these patients know that they can get their vaccines and immunizations less expensively at your pharmacy than through their doctor’s office.

Patients like going to their pharmacy to get vaccines because they often get charged less than they would at their doctor’s office. “For flu shots, there is no appointment necessary at our pharmacies and the cost to patients is the same or lower than what they would pay at their clinic,” said Bender of Hometown Pharmacies.

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Patients are increasingly turning to their local pharmacy to get their flu shots. Early estimates of the 2012-2013 flu season show that 34.5 percent of adults went to doctors’ offices to get their flu shots, while 18.4 percent visited a pharmacy.

It isn’t all about cost-savings though. Many like the convenience factor pharmacies provide. Community pharmacies often offer extended store hours. When doctors’ offices only stay open 8 a.m. to 5 p.m., going to the pharmacy to get vaccinations becomes the more convenient choice for patients.

The easier access and lower costs of vaccines and immunizations at community pharmacies give patients more reasons to come to your store. And that means more business for you. “Some patients who get vaccines are our regular customers and some are people coming through our doors for the first time,” Bender said.

Protect your patients Vaccine and immunization services drive additional business, but they also contribute to a higher calling. They enable you to further improve your patients’ health.

Your patients likely visit your pharmacy more often than they visit their doctor. An American Pharmacists Association estimate showed that the equivalent of the entire U.S. population visits a pharmacy each week. As such an accessible touch point for their patients, pharmacists are in the unique position to serve as advocates for vaccines and immunizations.

You can easily integrate immunizations into the other patient care services you provide. Remind patients who you see regularly for blood pressure monitoring or dia-

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betes education that they need to get their flu shot, for example. You can also help support completion of vaccines that require multiple doses. When a mother comes in for a refill and you noted that her daughter needs the last dose of an HPV vaccine, you can remind her about it. Pharmacists are also better able to identify high risk patients based on their medications and let them know that they need to get their immunizations.

“Immunizations are a very important part of the health of our communities,” Bender said. “Our pharmacies are located in small towns and provide a safe and convenient place for our patients to obtain this valuable health service.”

For pharmacists who have been practicing for a number of years, immunizations might still seem outside the realm of pharmacy. But the data suggests that it’s a trend that isn’t going away anytime soon. “I learned about it 40 years ago in pharmacy school, but it was one of those things that you never thought would concern you,” said Forrester of D&H Drugstore. “You didn’t think it was going to be a big deal for what your future practice was going to be.”

“Today all of the students have been trained in immunizations in the pharmacy schools,” he said.

“That leads me to believe that the profession needs to endorse this and we all need to step up and be a part of this valuable process.”

Your

source for flu vaccines.

Preparation is a form of prevention…and profit. Don’t lose patients due to an under-stocked inventory.

Through our association with the Federation of Pharmacy Networks (FPN), PBA Health is giving your pharmacy the ability to pre-book and receive contracted pricing on the flu vaccinations you need. Our endorsed vaccination partners are: • Novartis • FFF • InSource

Selections include pre-filled syringes, intradermal patches, sprayers, multisource vials and a full range of dosage choices for all your patient’s specific needs and ages. Pre-book your vaccines as soon as possible—orders are shipped on a ‘first come, first served’ basis.

A full list of manufacturers, up-tothe-minute pricing information, and forms can be found on the PBA Health website. Don’t wait, order today.

Because being prepared is one more way you can be profitable.

Download an order form online today.

www.pbahealth.com/vaccine

ACTIVE INGREDIENTS

Price Spikes For years now the U.S. health care system has looked to low-cost generic drugs as the means to save patients, the government, and the industry as a whole billions of dollars. And, generics have done so. In 2012 the total cost of medicines in the U.S. declined by 3.5 percent, according to IMS Health, a research firm that provides information, technology, and services dedicated to making healthcare perform better. That decline in costs was primarily due to the increased availability of cheaper generics, which now account for 84 percent of all prescriptions dispensed in the U.S. Patients, payers and pharmacies have all benefited from the low costs of generic drugs. Recently though, prices of some generics have skyrocketed—sometimes thousands of percentage points in a matter of months—causing confusion for both pharmacies and patients. Fluctuations in the prices of generics affect the entire supply chain, including wholesalers, distributors, health insurers, government payers and retail pharmacies. So, what’s causing these extreme price swings? Take a look.

Fewer generic drug suppliers One reason behind the increasing prices of certain generic drugs comes directly from the reduced number of generic drug suppliers in operation today. When there aren’t enough suppliers to manufacturer the drugs, shortages occur. And, shortages spike the price of the drugs.

The number of drug shortages—for both generic and brand name drugs—has been steadily climbing in recent years. Since 2004, the number of drugs with major shortages has more than quadrupled. There were 251 drug shortages in 2011 and 121 in 2012, according to the Food and Drug Administration (FDA). That’s a huge increase from the 58 shortages in 2004.

Shortages of raw ingredients Disruptions in the supply of raw ingredients needed to produce certain drugs contribute to drug shortages. This in turn leads to higher prices, whether the drug is brand or generic. Shortages of raw materials especially cause problems when the primary or sole supplier of a raw material delays or discontinues production.

When the sole supplier of a raw material disrupts

What’s behind the fluctuations in generic drug pricing?

production, it affects all of the manufacturers who produce the finished product.

Drug manufacturers are increasingly importing raw materials from other countries, including Europe, India and China. When they rely on the global supply chain, any problems in a foreign country could disrupt the U.S. drug supply. Anything from political disturbances to trade disputes to contamination could cause a disruption in the supply chain of raw ingredients. It often happens quickly and unexpectedly.

Lack of investments Many pharmaceutical manufacturers, both foreign and domestic, have failed in recent years to invest in the technology and quality control improvements they need to meet FDA standards and to stay open. Supply disruptions, such as we’re seeing with generic drugs, commonly occur when a manufacturing facility completely shuts down or shuts down for an extended time. Quality concerns were an issue in nearly two out of every three drug shortage cases in the U.S. since 2006, according to the FDA. If generic manufacturers invest in the required improvements, it would reduce the risk of partial or complete facility shutdowns and corresponding skyrocketing prices.

Future outlook Price declines coupled with the FDA’s backlog of new generic facilities and drug approvals have caused the number of generic suppliers to dwindle and drug shortages to increase. Over the last year the Generic Pharmaceutical Manufacturers Association has worked with the FDA to decrease the backlog by providing extra funding. While the steps have been put in motion to fix these problems, in the meantime you can expect the prices of certain generic drugs to increase dramatically when only one or two manufacturers remain producing that specific drug.

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MORE FOR YOUR MONEY

7 Practices For Better Purchasing & More Profits

By Clark Balcom

Supplier price increases are affecting pharmacies at unprecedented levels. Prescription growth remains flat while downward pressures on reimbursements persist.

Payroll expenses push upward as pharmacies compete for quality professionals. And to remain competitive, larger investments in technology are required to enhance efficiency, improve patient care, and strengthen communications. While increases in competition and costs may seem daunting, you can effectively offset these pressures and increase profits at your pharmacy with a few best practices.

How do you improve profits in the face of increases in costs and competitive pressure? Don’t rely on strategies like reducing investments and capital spending, raising your prices or cutting wages and terminating employees. These options don’t result in positive growth or optimal business performance.

Relying on these strategies for too long will actually guarantee success for your competition. Your competitors—especially big chains and mail order—are increasing capital spending, adding employees, investing in technologies, offering competitive wages and benefits, and actually providing more services and value at lower prices year after year.

To outperform your competitors and grow profits, you must implement best practices in purchasing. And to become one of the best purchasing pharmacies in the business, you have to accept that it happens little by little, day by day. Prices constantly change and you have to work to spot and respond to each increase or decrease in price. Improving your profits takes a commitment to measuring and managing costs, but if you put in the effort, the positive effects can be substantial.

Through years of working with the nation’s bestperforming community pharmacies, PBA Health has developed the following seven best practices for purchasing. By measuring the performance of pharmacies that implement these practices, we’ve found that we help our pharmacies increase profits by as much as 5 percent.

1. Build business relationships with vendors Supplier relationships and levels of competitiveness are not static. They change from year to year. While your relationships with suppliers should be amicable,

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professional and mutually beneficial, they should not be overly cozy. The key to an effective supplier relationship is to find a medium between the two. Free lunches, tickets to a ball game, and fun business trips are great as long as your supplier is delivering superior cost improvement along with them. Work to collaborate with existing suppliers while staying open to potential new ones.

Don’t forget to meet with your suppliers at least twice a year to examine the quality of the business relationship and develop additional plans for reducing costs. The best suppliers will understand this concept and enjoy working with you.

2. Evaluate supplier proposals and pricing Suppliers want to sell product at the highest price the market will bear, and you want to buy at the lowest price available. This inherent conflict of interest does not mean your relationships with suppliers have to be negative. It simply means that each party looks to its own interests.

When market conditions change rapidly or when you become unsure of your current supplier relationship, consider issuing a request for proposal (RFP).

This is an effective tool to verify the competitiveness of current supplier arrangements. RFPs also allow you to learn about opportunities for improvement with potential new suppliers. Profitable pharmacies appropriately honor relationships by extending rights of first refusal (or first bid opportunities) to current suppliers, but always with the expectation that they will consider other suppliers if their current suppliers don’t give them the best overall cost.

Evaluations of supplier proposals and performance should not be arbitrary. Perform comparison analysis of pricing and build scorecards to accurately capture and communicate the differences you find. For example, measure the differences in off-invoice generic pricing when comparing generic rebates. Don’t limit this analysis to a number of items. Instead, do it for the entire portfolio of items you purchased over the last 90 days.

When looking at generic contract performance, make sure to evaluate the number of items available

MORE FOR YOUR MONEY

When you improve your pharmacy’s purchasing, you’ll grow your profits and outperform competitors. Try our seven best practices for better purchasing. on each supplier’s generic contract—it makes a difference. When evaluating brand off-invoice discounts, be sure to factor in differences in net-billed items for which standard discounts don’t apply.

3. Keep to your preferred suppliers When negotiating a supplier relationship, you need to recognize that you are not merely purchasing products.

You are selling dollars. You only have so many dollars to sell, so be prudent in how you distribute them. The supplier willing to buy those dollars with the best overall offer is the supplier you reward with your business.

Pharmacies often work with too many suppliers or buy from suppliers calling with a deal of the month.

Unfortunately, pharmacies often don’t recognize the effects these decisions have on overall cost. For example, pharmacies may save $100 on a one-time offer from a non-preferred generic supplier without recognizing that redirecting the purchase volume away from the primary supplier’s generic incentive structure costs 1 percent or more. For a pharmacy that purchases $35,000 a month in generics from its primary supplier, that means trading $100 for $350 or more. And, that’s only if it

happens one time. Imagine the lost dollars these bad decisions can accumulate over time.

Profitable pharmacies buy with a qualified primary supplier along with an equally qualified broad line backup supplier. The primary supplier should meet your everyday needs while the backup supplier ensures ongoing price protection and reliable service levels during periods when inventory pricing and availability unexpectedly fluctuate. Both suppliers should provide not only the best market pricing, but also guarantee the quality and safety of their products.

This means the products need to come directly from the original manufacturer.

4. Build an effective purchasing team Few pharmacies have had the benefit of formal negotiation training or extensive negotiating experience.

Don’t make the costly mistake of relying solely on internal experience, skills and abilities for purchasing. Similar to selecting a surgeon or a tax advisor, profitable pharmacies seek out expert assistance in purchasing negotiations. You should always look for certain qualifications, such as the number of success-

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MORE FOR YOUR MONEY ful negotiations and profit increases the company has achieved when selecting a negotiation firm to join your purchasing team.

5. Fully engage your top management Effective purchasing doesn’t just happen. If you leave it up to nobody in particular and don’t have an effective operational plan, then you should expect no particularly good result. Your employees who handle purchasing for your pharmacy should report to the owner or to your highest-level trusted manager. This person should understand the direct relationship between effective supplier price management and profit. He or she should also regularly provide insight and feedback into daily, weekly and monthly fluctuations in price, while maintaining a plan to respond appropriately. Top management must have overall responsibility for measurement and management of the plan. It’s also important to find meaningful ways to reward your employees for following the plan.

6. Use volume for better pricing When it comes to negotiating the best pricing for your pharmacy, size matters. Take a look at large national chains compared to non-chain pharmacies. Large chains buy the same inventory every day, but at pricing levels that are 30 to 50 percent less. The difference isn’t the suppliers. The difference is the volume and experience in negotiating and purchasing management.

So how does your pharmacy gain chain-like pricing?

Take a look at ProfitGuard, PBA Health’s contract negotiation and purchase management service. This service groups community pharmacies together to enable them to achieve a better cost of goods all around. You may have a good volume at your store, but your volume alone is not better than your volume combined with others.

ProfitGuard not only groups pharmacies together to achieve a greater volume—and therefore better pricing— but the service also negotiates for you. You have visibility and input with key details of the negotiations, while PBA Health deals with the intricacies of the negotiation process to get you the best cost of goods.

7. Adopt a “measure and manage” mentality Effective purchasing doesn’t happen with a “set it and forget it” mentality. To increase your profits, you need an effective and efficient way to measure and manage your suppliers’ performance—every day.

Improving your purchasing performance takes mea-

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surement and management. Measurement should occur at a line item by line item level to ensure the supplier is performing to the pricing, contract status and rebate qualifications stated in the negotiated agreement. If you do not have an effective process for measuring, then you really can’t know if you’re getting what you’re promised.

However, measurement alone is not enough. For example, measuring may indicate that a supplier’s pricing is not in conformity with the negotiated pricing, but if you can’t do anything about it, then all you have is a greater awareness of a problem. This is where the principle of manageability comes in.

Manageability enables you to identify and resolve complex problems to control the expected business performance. For example, if your measurement indicates that your purchase of a particular brand name drug did not receive the appropriate contracted discount, then manageability is what finds that line item across the complexity of thousands of line items, brings it to your attention and gives you the ability to act and claim a credit for the difference between the extended price and the expected extended price.

By using the right technology, such as ProfitGuard from PBA Health, you can gain a competitive advantage and secure capabilities similar to what larger chains have. If you don’t have a service that keeps track of this information for you, then you probably can’t reliably perform these tasks on your own. That’s why ProfitGuard includes reporting tools that tell you if you’re getting your contracted pricing. It also lets you know when you can make routine adjustments to buy less expensive equivalent items and obtain the maximum possible rebate.

--You may not immediately recognize it, but you do have what it takes to increase your profitability. Start implementing these best practices to propel your profits upward—even in the face of higher costs and competition.

Executing a plan to do something different will lead to positive changes and increased profits for your business.

Clark Balcom is the Senior Vice President and Chief Operating Officer of PBA Health. PBA Health identifies savings opportunities, negotiates with suppliers and provides essential business processes and technologies for pharmacies to implement profit improvement initiatives. PBA Health has helped pharmacies achieve more than $7.5 million in annual savings.

Emdeon covers all the bases. Nearly 80 percent of the business end of my practice is third party.

They help me get the full reimbursements on my claims.

- Larry Meyers Holdrege Pharmacy

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Discover more. Contact an Emdeon representative at 877.707.0024 to learn how Emdeon Edit can help your pharmacy receive the maximum claims reimbursements possible.

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877.707.0024 www.emdeon.com © 2013 Emdeon Business Services LLC. All rights reserved.

COMMUNITY

Rewarded The benefits of offering a pharmacy loyalty rewards program How many loyalty rewards cards do you have in your wallet?

Probably quite a few considering that the average number of loyalty program memberships per U.S. household is a whopping 22. Chances are your patients are enrolled in multiple loyalty rewards programs too. They probably earn points for shopping at their local grocery stores and frequenting their favorite restaurants. They’re also likely members of loyalty programs for airlines, hotels, clothing shops, convenience stores—you name it.

Loyalty rewards programs are a growing feature for businesses—both large and small—to offer to customers.

Memberships in U.S. loyalty rewards programs topped 2.65 billion in 2012. That’s a membership growth of 26.7 percent from 2010 to 2012, according to Colloquy, a research group that publishes information on loyalty marketing. The loyalty rewards trend isn’t just for grocery stores and restaurants. Memberships in drug store loyalty programs increased 45 percent from 2010 to 2012.

These staggering numbers suggest that now is the time to start a rewards program at your community pharmacy, if you haven’t already. “All of the big box store pharmacies are doing loyalty programs,” said Theresa Neal, sales/ new business development for RepeatRewards, a loyalty program services provider. “CVS has a program. Wal-Mart has a program. Target has a program. It’s the number one thing right now to keep that competitive edge.”

A bonus for business Keeping up with the competition isn’t the only reason to look into a loyalty program. Community pharmacies strive to build personal relationships with their patients. What better way to show your patients your appreciation than with a loyalty rewards program? “The hardest goal for any business owner to achieve is that of retaining, thanking and rewarding their dedicated customers,” Neal said. “A good loyalty rewards program will do all of that for them.”

What’s even better building stronger relationships with patients also increases business. A loyalty rewards program drives more business because your best patients stick with you—and, even better, they keep coming back.

“When a company builds customer loyalty through rewards it’s actually securing guaranteed future sales,” Neal said.

“Loyalty programs have gained popularity with businesses because it’s much easier to keep an existing customer happy and coming back than it is to persuade a new customer to come in.”

This idea goes with the 80/20 rule that 80 percent of your business comes from 20 percent of your customers.

A loyalty rewards program is a great way to keep those frequent customers happy.

Launching a successful program Consumers may sign up for dozens of loyalty rewards programs, but the real question is whether or not they use them. Less than half of loyalty program memberships per U.S. household are active, according to Colloquy. So, how do you make sure that your pharmacy’s rewards program is one that your patients actually use?

Start with branding. Everything about your loyalty rewards program should be customized to fit your pharmacy. “Don’t have it look like your program is coming from

What’s in your wallet?

Many loyalty program services today don’t require that people actually carry a physical membership card. Customers can earn their points by simply giving the clerk their telephone number. Before going paperless at your pharmacy, you should consider that customers might like the physical card. “We’re finding that people really want that card,” said Theresa Neal, sales/new business development for RepeatRewards, a loyalty program services provider. “It makes that person feel like they belong. It’s that reminder in the wallet. The card actually has a huge importance to make people feel like they’re part of that pharmacy club.”

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COMMUNITY

Better Marketing

You can do so much more with your loyalty rewards program than just the earn-pointsget-reward system. Drive traffic to your pharmacy and increase sales with these ideas for promotions and special events for loyalty members.

Birthday reward Give patients an extra reward during their birthday month. “Everybody loves to get something on their birthday,” said Theresa Neal, sales/new business development for RepeatRewards, a loyalty program services provider. “With loyalty programs, the birthday reward is usually number one with redemption.

It’s a great way to show your appreciation.”

Senior citizens day Drive more foot traffic to your store by offering senior citizens double points if they make a purchase on a certain day.

Front-end promotions During a slow month, offer a promotion on certain items that you want to move in your front end, like 10 percent off a line of vitamins. Stipulate that only members of your loyalty program can receive the discount.

Lost customer Every so often, take a look at your database and determine if you have customers who haven’t come in to your pharmacy in a certain amount of time. Send them a special promotion or offer to get them to come back.

Welcome reward Send patients a special discount when they sign up for your program, such as $5 off a $25 purchase.

New movers offer Target market to new people moving into your area. “When you do an offer to new movers, make it a rich offer,” Neal said. “Get them in, get them on the program and now you’ve got a customer for life.” Many loyalty program services can help you create direct mail pieces and target them to certain segments of customers, such as new movers.

Holiday promotions Organize special promotions on holidays throughout the year. For example, offer members double points for their purchases on Black Friday.

Member appreciation event Hold a member appreciation day where loyalty members receive a special discount or free item. “Give that member a reason to come in on that day. It makes them feel special, like they’re part of a club,” Neal said. It’s also a great way to get other people to join the program.

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COMMUNITY

someone else,” Neal said. “Use your pharmacy name in your program name. And, definitely go with custom membership cards, signage and branded brochures.” Branding helps your customers remember that this rewards program is through their favorite hometown pharmacy.

As you design the details of your program, remember to keep it simple. “The best programs out there earn one point for every $1 you spend,” Neal said. “It’s easier for the customers (and for your staff) to understand.” Make the system easy to follow with straightforward reward goals, such as offering a $10 reward when patients hit 300 points. If your patients are confused about how the program works, then they’re not going to use it.

Also, don’t forget to make patients aware that you offer a loyalty program. “The number one reason that people don’t join loyalty programs is because they were never asked,” Neal said. Make sure to train your staff about the program so they can market it to patients.

Every time patients head to the register to pay for their purchases, have your pharmacy technicians or clerks ask, “Do you have your membership card with you today?” For those patients who aren’t members, it creates an opportunity to enroll them in your program. “It really becomes second nature for your staff,” Neal said. “It’s just part of their ‘Good morning’ or ‘How may I help you?’”

One way to make the most of your loyalty program—and the information you collect—is through additional marketing. “You need to have a program that’s all encompassing,” Neal said. “Think about it not just as loyalty, but as total marketing. When you have that marketing piece behind your loyalty, you’re going to have much more success.”

With information from your database of loyalty members, you can send patients special email offers or direct mail pieces to bring in more business. Mail new patients a welcome reward for signing up for your program or send patients a discount for $5 off a $25 purchase to use during their birthday month.

Additional marketing is a great way to drive foot traffic to your store.

“You really need to touch customers more often than just that reward,” Neal said.

You can also target certain segments of your current or potential patients, such as senior citizens or people who just moved into the area, for better marketing. “It’s much better to target market than to just blanket out an offer and hope you get a good response,” Neal said.

The method you use to send the targeted marketing pieces depends on your patient demographics. “We find that in the pharmacy industry, the clientele is typically a little bit older,” Neal said. “These are their golden customers, and the best way to market to them is through direct mail.” If you have a younger demographic, consider sending them promotions and rewards through email.

Or, ask if your loyalty rewards provider can implement a mobile app with your program.

Any avenues that you can reach your patients more often than just the reward will enhance the success of your program—and your business. “Loyalty members spend more money and they visit more often,” Neal said. “And, it’s all because of the marketing behind the loyalty program.”

“CVS has a program.

Wal-Mart has a program.

Target has a program.

It’s the number one thing right now to keep that competitive edge.” said Theresa Neal, sales/new business development for RepeatRewards, a loyalty program services provider.

Easier marketing As your patients make purchases, earn points and work toward earning their rewards, you build something valuable to your business: a database. The database will tell you beneficial information, such as how many customers are coming in to your pharmacy, how much they’re spending and what their shopping habits are like. Your loyalty rewards provider should maintain this database for you, but you choose how the information gets used.

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OUTLOOK

Welcome, Member Discover how joining your state pharmacy association can benefit you— and your business State pharmacy associations may be as varied as the states they represent, but one fact remains the same.

Your state pharmacy association works for you—even if you’re not a member.

“The state pharmacy association represents the profession,” said Becky Snead, executive vice president and CEO of the National Alliance of State Pharmacy Associations. “The general mission of any state pharmacy association is to advance the profession as a whole and to enhance the public’s utilization of pharmacy services.”

Your state pharmacy association advocates for you before your state legislature; it invests in national interests that act for pharmacy; it supports pharmacy schools and continuing education. And, that’s just some of what it does for all pharmacists, even non-members.

So, what makes pharmacists want to join their state association? “Some love to be involved in their profession,” said Mike Larkin, executive director of the Kansas Pharmacists Association. “They have a passion for their profession that is carried into everything they do. Some people join just because they feel that it’s a professional obligation. They don’t join committees and they don’t come to meetings, but they feel compelled to fund the association. But whether they’re active or passive members, they know that the association is working for them—and for their profession.”

As a community pharmacy owner, you have even more reasons to join your state pharmacy association.

Everything state pharmacy associations do to advance pharmacy helps you individually as a pharmacist, and it also helps your business.

Legislative representation Perhaps one of the most observable ways community pharmacists benefit from the efforts of their state phar-

OUTLOOK

The many events and meetings held by state pharmacy associations offer members valuable opportunities to network with others in their field. macy association is through the representation their association provides before the state legislature. “Knowing that your business has a voice within the state legislature and the regulatory process is critical,” Snead said.

State pharmacy associations fight against legislation that can negatively affect pharmacies and proactively look for ways to expand pharmacy practice. “We are an advocate and a resource for pharmacies with anything that impacts their ability to provide services to their patients,” said Ron Fitzwater, CEO of the Missouri Pharmacy Association, whose membership base consists of about 45 percent community pharmacists.

You can see those advocacy efforts from state pharmacy associations across the nation. Recently, the Florida Pharmacy Association helped change Florida law to allow pharmacists to provide immunization services. “For those independents who took advantage of our efforts to make that happen, they are adding revenue to their bottom line that they weren’t able to add before,” said Michael Jackson, executive vice president of the Florida Pharmacy Association, which represents a membership base of about 25 percent community pharmacists.

In Kansas, the state pharmacy association works to develop beneficial relationships with legislators. “The folks in legislative executive branches are very interested in what pharmacists are thinking before they propose or

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advance legislation, and we’re on their call list to make sure what they do is not harmful to our members,” said Larkin, of the Kansas Pharmacists Association.

“One of the things we’re working on right now is reviewing a bill about pharmacy technician certification,” Larkin said. “Rather than the bill passing without our review, we were able to put together a committee that is looking closely at the ramifications of mandatory technician certification and how it’s going to affect community pharmacists.”

Educational resources Your state likely requires that you complete a certain number of hours of continuing education to keep your license current. Many state pharmacy associations provide opportunities throughout the year for their members to fulfill the CE hours they need.

“We offer electronic opportunities through our website and then we do regional meetings where we host immunization training programs and a law update for immunizations,” said Fitzwater, of the Missouri Pharmacy Association. “There are a lot of electronic CE hours available—through us and through other organizations— but a lot of times pharmacists want to be at live events where they have the opportunity to network,” he said.

OUTLOOK

Staying connected Networking opportunities are important to many community pharmacy owners. Through the events and meetings held by state pharmacy associations, members get the chance to mingle with peers and find out what others are doing in their practices.

“A lot of times after meetings, they’ll sit off in a corner and talk about issues that they might be facing,” Fitzwater said. “It’s that collective mentality, to know that others are addressing the same issues you are, that’s so helpful. Our members are pretty good about sharing information because their service areas don’t always overlap, so they’re willing to assist their friends and colleagues.”

It’s not just about business either. “In many cases they have an opportunity to meet with old friends and former classmates from pharmacy school,” said Larkin of the Kansas Pharmacists Association (KPhA). “That’s one of the things that our members say they enjoy most about KPhA. They get an opportunity to go back and renew acquaintances they made years ago. And, there’s just a host of opportunities to do that.”

The Florida Pharmacy Association offers their members an online network so they can collaborate and chat with other members whenever they want. “Our long term care pharmacists can form a group. Our independent pharmacists can form a group. And they can message each other to get answers to questions they might run into,” Jackson said. “It allows for greater connectivity among our members who share common interests.”

association is the best way for independent pharmacists to find out what’s going on in their state,” Larkin said.

Many state pharmacy associations regularly provide members with information on hot topics and important issues in pharmacy. “So, if an inspector walks into their pharmacy and says, ‘Let me see your policies and procedures on fraud and abuse,’ our members don’t have to say, ‘What are you talking about?’ They already know about it,” Jackson said. “We can’t monitor everything that’s out there, but we can get our hands on the majority of things they need to be aware of.”

Right now the Kansas Pharmacists Association is putting together a law book for its members that organizes all of the state pharmacy laws into one convenient tabbed book. This is just one example of how state pharmacy associations keep their members up to date on information they might not know about otherwise.

State pharmacy associations are also willing to help their members with questions as needed. “I’m often on the phone talking to members about interpretations of various laws and rules that affect their practice and their business. We help close some of that gap for them,” Jackson said.

“In many cases they have an opportunity to meet with old friends and former classmates from pharmacy school,” said Larkin of the Kansas Pharmacists Association or KPhA. “That’s one of the things that our members say they enjoy most about KPhA. They get an opportunity to go back and renew acquaintances they made years ago. And, there’s just a host of opportunities to do that.”

Information you need As a community pharmacy owner, you know that it’s tough to stay on top of all of the regulations, requirements and laws you have to keep up with. But you know if you don’t, it can cost you money. That’s where state pharmacy associations can help. “The state pharmacy

Helping your business Your state association offers support with anything that affects your ability to provide services to your patients. It works as an advocate and a resource for you and for your business—if you choose to use and support it.

“In order for the business of pharmacy to be successful, the profession of pharmacy has to have a role within health care,” said Snead, of the National Alliance of State Pharmacy Associations. “If independent pharmacies aren’t involved in shaping the role of the profession, they’re not going to have a viable business model for the future.”

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NOTES

Community Outreach

Promote your business by participating in community events

Your business may be a community pharmacy, but how often does your pharmacy go out into the community? Taking part in community events can bring in new patients, get the word out about your business and help promote your services and offerings. And, it’s just good fun. Remind people in your community about their neighborhood pharmacy with these four ways to participate.

Work with other local businesses to set up times to do flu shot clinics, so all of their employees can conveniently receive flu shots at work. Flu shot clinics introduce your pharmacy to new patients, get your pharmacists out from behind the counter and help build relationships with other businesses in your community. Plus, after you do one flu shot clinic, you’ll likely be asked back the next year.

Health fairs Community or school health fairs offer the ideal setting to promote your business. Health fairs enable you to participate in the community and also meet potential patients at the same time. At a health fair booth, you can offer services like free blood pressure screenings or diabetes and cholesterol education. Or, choose services that fit with the theme of the health fair. Be sure to also do a small promotion, like a raffle, or give out goodie bags to draw people to your booth.

Social media You can even boost your involvement with your community without ever leaving your computer. Social media outlets like Facebook and Twitter make it easy to build connections with other local businesses. Start by “liking” all of your local businesses on Facebook and following them on Twitter. Then, participate any time you see an opportunity.

Share the local hardware store’s status about a 20 percent off sale over the weekend. Let your fans know that your town’s arts center is hosting a kids day on Saturday. Is there a parade going on downtown?

Tweet about it. The possibilities are endless. Once you start participating, other businesses will reciprocate. They’ll begin to share

Flu Shot Clinics Show how much your pharmacy cares about the health of your community by offering your flu shot services to local businesses.

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information about your pharmacy with their followers, and that means free advertising for your business.

Small business Saturday Set right between Black Friday and Cyber Monday, Small Business Saturday is a day meant for community members to get out, shop, and show their support for their local small businesses. The event provides an easy way to advertise your pharmacy, especially to customers who may not know you exist. Even if your pharmacy doesn’t have a huge front end, you can still participate. The day isn’t just about retail shopping; it’s about bringing exposure to small businesses—including yours. Plan a small promotion and simply spread the word that your pharmacy is participating to bring more people to your store that day.

Other ways to participate in your community include sponsoring a children’s sports team, offering a free health and wellness class every month at your community center and guest speaking at school events.

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6300 Enterprise Road Kansas City, Missouri 64120 P 816-245-5700 F 816-245-5708