It's Your Business by Cirrus Media

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MARCH - 2013 ISSUE NO.4

HITTING THE RIGHT TARGETS MAKING THE BEST CHOICES TO KEEP YOUR PHARMACY UP-TO-DATE

CATEGORY MANAGEMENT

IT TRENDS PHARMACY VALUATION

GOAL SETTING

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BUSINESS A PHARMACY NEWS PUBLICATION

Keep up to date with the latest and most relevant pharmacy business and finance information!

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Pharmacy News Team Editor: Chris Brooker T: (02) 9422 2908 E: christopher.brooker@ reedbusiness.com.au Journalists: Nick O’Donoghue T: (02) 9422 2825 E: nicholas.odonoghue@ reedbusiness.com.au Kirrilly Burton T: (02) 9422 2874 E: kirrilly.burton@reedbusiness.com.au Sub Editor: Andrea Kunz T: (02) 9422 2554 E: andrea.kunz@ reedbusiness.com.au Advertising Account Manager Fiona Duke T: (02) 9422 2721 E: fiona.duke@reedbusiness.com.au Louise Dewes Junior Account Manager T: (02) 94222812 E: louise.dewes@reedbusiness.com.au

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MARCH 2013

CONTENTS Category Management

Hilary Kahn is managing director of Frontline Strategies, and a leading expert in retail strategies and solutions.

Growing a Category

Vanessa McCutcheon is marketing manager, Healthcare Professionals at Reckitt Benckiser.

Dispensary Design

Jon Marshall is managing director of medical market resarch specialists, AsteRx.

Goal Setting

Sue Hirst is director of CAD Partners (CFO On-Call), with expertise in financial management, product and service development and human resource management.

John Koot is managing director of Willach Pharmacy Solutions Australasia, specialists in dispensary solutions.

IT Trends

Understanding Data

Pharmacy Valuation

Frank Sirianni is managing director of Medici Capital, health-sector financial services and management consultant specialists.

Paul Naismith is a pharmacy owner, as well as CEO of the Fred IT Group.

Production Production Co-ordinator: Tracy Duff T: (02) 9422 8923 E: tracy.duff@ reedbusiness.com.au Graphic Designer Nick Cox T: (02) 9422 2166 E: nick.cox@reedbusiness.com.au Managing Editor: Nicola Garrett Circulation & Subscription Inquiries T: (02) 9422 2666 or 1300 360 126 Pharmacy News does not accept responsibility for claims made by manufacturers for their products. www.pharmacynews.com.au Printing GEON 20 Baker St, Broadmeadow NSW 2019 © Copyright 2012 by Reed Business Information ABN 80 132 719 861 Tower 2, 475 Victoria Avenue, Chatswood, NSW 2067 Phone (02)9422 2999 Fax (02)9422 2822

LOCATION, LOCATION

s a pharmacy journalist, you certainly get to attend plenty of business seminars. If there is one refrain that constantly rings true from all of these sessions and all of the experts, it is that continuing to do things the ‘old way’ is no longer viable. It is simply not enough any more to rely on PBS income, supplemented by OTC health-related products (in competition with supermarkets) plus sales of cosmetics, sunglasses or whatever else you can offload. So, what do you do if you want to revamp, diversify and update? While competing on price alone can bring initial benefits, many question its long-term viability, and the dispiriting effect on well-trained health professionals working in such an environment.

Fortunately, many experts have been arguing for years about the options that are available - and this brings me to the next most common refrain: ‘There is no one size fits all model’ Basically, you need to analyse your customer demographics, store location and position, your own (and your staff’s) professional interests, and the capacity of your store, staff and resources. In this issue, leading industry experts look at the importance of being creative, looking at your pharmacy’s focus, designing your layout to allow for professional services, using data and the latest IT trends and issues. I hope you enjoy these articles, and that each of you find at least one that will help you along the road to renovating your pharmacy model. Chris

Average Net Distribution Period ending Mar ‘12 7088

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C A T E GOR I E S

which ones’ do you stand for? Retail guru Hilary Kahn explores the meaning and significance of category management, and how this can be applied in your pharmacy.

f ever a term was bandied about without explanation, then ‘category management’ is it. For some time now I have been quoting UK convenience store and supermarket researchers who have claimed that ‘category management is dead – mission management is the future!”

CATEGORY VERSUS MISSION The focus of all supplier negotiations is the effect on turnover of the category as whole, not just the sales of individual products. One key reason for the introduction of category management was the retailers’ desire for suppliers to add value to their (i.e. the retailer’s) business rather than just the supplier’s own. The introduction of category management imposed the condition that all actions undertaken, such as new promotions, new products, revamped planograms, introduction of point of sale advertising etc. were beneficial to the whole category, the retailer and the shopper in the store. Suppliers are expected, indeed in many cases mandated, to suggest only new product introductions that would not unnecessarily duplicate existing lines in the category. How often did that happen? The important thing here is the name of the category. Usually the focus is entirely on products. Mission management, on the other hand, recognizes that the customer is on a mission to do something, solve a series of wants and needs they may not even realize they have. For example, in the convenience/ supermarket scenario it might be to ‘get something for

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lunch’. There are several ‘categories’ within that from drinks, to salads, to sandwiches, to lollies. Weakness in any one of the areas listed, would lead to weakness in the whole ‘lunch’ mission. Unsurprisingly, large supermarket groups now have a ‘Lunch Bar’ where a strong range of products (appropriate to lunch) are there, in one spot, easy to sell and easy to buy. Of course the same merchandise may also be duplicated elsewhere in the store such as the drinks aisle (or category).

WHAT IS THE DIFFERENCE? There is a big difference between the two concepts – category management focuses around product mix and range, whereas mission management focuses around the customer’s specific wants and needs. The key is to understand what the major or core missions are for the business and not attempt to achieve ‘missions’ for everything the customer may want to do, achieve or buy. The whole notion of ‘mission’ management is absolutely vital. So, which missions do you focus on? The overriding mission may relate to health. In larger format pharmacies, it may also relate to beauty. In others it may relate to wellness. There is always the overriding, very broad area covering several missions, or sub-categories. Obviously, as the cliché goes, you can’t be all things to all people, or as yet another cliché goes – when you focus on everything, you focus on nothing! You must narrow these down. – because within

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Case Study: Eye care category Making the Eye Care category a destination; - Clearly identify to consumers where it’s located in-store.

Review your planogram; - Is the product layout conducive to how consumers actually shop? - Does it guide consumer self-select purchasing? a/ Are dry eye products separate to red and allergy eye products? b/ Are preservative-free unit dose products grouped within brand portfolios c/ Are preserved multi-dose products grouped within brand portfolios? d/ Are your best-selling products allocated appropriate shelf space?

Empower Dispensary Staff: - Do they understand which health issues and medications cause/exacerbate dry eye? - Are they initiating a discussion with patients at risk of suffering with this condition? An industry source said rationalisation of this, and many other, categories was long overdue in many pharmacies – they need to increase their understanding of their customer base, which products are selling and which aren’t selling. For example, “with increased use of extended wear contact lenses there is less demand for cleaning solutions and protein tablets but more need for lubricating eye drops, yet I’ve visited many stores with shelves and shelves of contact lens solutions, which come in large boxes and take up valuable space”. Providing more personalised service in key categories was a must as a value-add for customers and a means of differentiating your service offering from your competitors, experts agreed. Chris Brooker

isn’t understood, for example introducing spectacle frames to be made up as glasses. Assuming the customer would ‘split the mission’ by going to the optometrist or specialist, then take the script into the pharmacy for cheaper glasses was doomed to fail. 5. Would the addition of specially skilled people (like herbalists, naturopaths, nurses) and programs plus marketing provide a real position of expertise? This series of questions narrows the choices down into very few. One, brilliantly done mission area is certainly better than six half-baked ones.

In your face or half pregnant? In order to deliver the huge and dominating impact in the store, you need plenty of space and powerful signage– to hold the wider range that meets the mission, enough staff, in store demonstration and activity areas, potentially consulting and test areas. Part of that space must be given over for information covering how customers would typically achieve the outcome they desire., what program/s you offer to

assist, information about specific, highly recommended products, new ways of dealing with the issue and up-todate information on latest research. Specialists in the area need to be acquired and trained. It’s unlikely that existing staff will have the skills you need at the moment of decision. Then you need to tell the world. There’s really not much point in being the ‘best kept secret in town’! An aggressive campaign of in-store and community based activities needs to be planned and put into gear including speakers, radio, interviews and competitions. It needs dedication, commitment, funds and probably a program manager. To be first choice in anything takes energy and commitment.The alternative is to be half-baked and half-pregnant, standing for nothing in particular and unable to fulfil any customer’s total mission. u If you haven’t heard about Tic Toc Time to Shop (www.tictoctimetoshop.com), you’re missing out on giving your staff the retail ‘smarts’.

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A PHYSICAL BARRIER SCIENTIFICALLY PROVEN TO KEEP ACID IN THE STOMACH1,2 Most patients with heartburn don’t excrete excess acid.2 In fact, up to 80% of reflux disease (GORD) episodes are caused by transient relaxations of the lower oesophageal sphincter (LOS). This allows acid, pepsin and bile to reflux into the oesophagus and cause pain and damage.2-4 Gaviscon starts to soothe reflux symptoms within four minutes and lasts for four hours.1,5

References: 1. Chevrel B. J Int Med Res 1980; 8(4): 300–2. 2. Lowe RC. GI Motility online 2006. Available at www.nature.com/gimo/contents/pt1/full/gimo54.html. Accessed 14/02/2013. 3. Howden CW and Freston JW. Gastroenterology Today 1996; 6(2): 32–7. 4. Kahrilas PJ. Cleve Clin J Med 2003; 70 Suppl 5: S4–19. 5. Aubertin G et al. Dietology 1985; 4: 27–30. Always read the label. Use only as directed. If symptoms persist see your healthcare professional. ® Gaviscon is a registered trademark of Reckitt Benckiser Australia. 44 Wharf Road, West Ryde, NSW 2114. RBGA6869/IYB/FP. 02/13

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DATA DOWNLOAD: Examples AsteRxbring product categories back to life. Vanessa McCutcheon shows how youofcan data reports.

“ minimusam, quis consequid molor atempores natempor sitasima idio officia quiae laut latur ad ut omninimolu ptaquam, conseonseonsequibus, etur ”

WE FORM A PHYSICAL BARRIER SCIENTIFICALLY PROVEN TO KEEP ACID IN THE STOMACH 1,2

References: 1. Chevrel B. J Int Med Res 1980; 8(4): 300–2. 2. Lowe RC. GI Motility online 2006. Available at www.nature.com/gimo/contents/pt1/full/gimo54.html. Accessed 14/02/2013. Always read the label. Use only as directed. If symptoms persist see your healthcare professional. ® Gaviscon is a registered trademark of Reckitt Benckiser Australia. 44 Wharf Road, West Ryde, NSW 2114. RBGA6869/IYB/B. 02/13

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s we become busier balancing work and home life we often find ourselves working ‘in the business’ rather than ‘on the business’. Certainly, we can still be highly effective in the short-term, but as it becomes increasingly difficult to generate profits and grow the business it is time to examine the options. Highly profitable categories still exist in pharmacy. Some are largely untapped, for example GI and S3 products, while others such as analgesics may be substantial in size but may not be reaching their full potential. There are some simple steps you can take to make these areas of your business work harder for you.

OBSERVATION AND RESEARCH When was the last time you spent time outside your pharmacy observing the consumers who live, work or shop in your immediate vicinity? Much can be gained by having a good understanding of who shops, when they shop and how they shop. You can also gain some valuable information from other local sources. Which shops are doing well and which are not? The local paper has a wealth of information about local issues and changes in the community. Building knowledge about community services such as aged care, day care or hospital in the home can help to re-focus your efforts to more closely meet the needs of the community. Many pharmacies have taken up these opportunities. One of the more common services is providing a healthcare nurse for babies.

INTEGRATED SERVICES A question to ask yourself in every situation is: am I offering a complete health solution? While the baby is weighed and measured is mum being offered advice about her health? Taking the ‘mum and bub’ service one step further is to offer a complete health review of the family and offer support and recommendations, including pain relief, nappy rash, and supplements. If you find this is working you may wish to consider expanding the service and bringing other health care professionals in, such as a dietician or nutritionist, to support you. This example can be a year round service that you offer, supplementing it on a seasonal basis with other offers.You will build a reputation very quickly through word of mouth and establish a loyal customer base that you can continue to access in the future.

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CHECK YOUR DATA The next step is to access the wealth of information at your finger tips.Your script information can provide an objective view of who comes into the pharmacy, what they buy and when they buy it.You can also use category management tools, such as AsteRx to identify how you are performing compared to other stores and to a national average. This data helps you to analyse key categories such as analgesics, which for all intents and purposes are ‘going well’ but could be actually be under-performing! Reports like AsteRx (see page 22) do the hard work for you and provide easy to read, and understand, data on your pharmacy. You can use the data to compare some important measures from your pharmacy with other pharmacies in the same area, or with other pharmacies in the banner group or the national average. Once you implement a strategy you can use this data to track your success, so you know exactly what the results of your efforts are in real time.

HOME IN ON CATEGORIES You need to become familiar with which categories are growing and why, and which categories are underperforming and why.You should also know what your margins are and, based on shelf space, what your ROI is for each category. This will help you cast a critical eye over your current shop layout and assess whether you are allocating sufficient resources and ‘real estate’ to your more profitable areas. Lastly, don’t forget your prescription sales which may allow you to offer a total solution for customers, for example, PPI’s and OTC GI medicines. Combining the information you have in the pharmacy with the observations you have made externally, you can start to build a picture of possible opportunities.

CONNECT THE DOTS The final area to understand, before you make a decision about which opportunity to pursue, is the level of activity in the category. Are the big players spending money to support the category and drive consumers into your store? The level of competition often determines how fiercely brands will fight for shelf and promotional space. Can you leverage this investment or seek additional investment from one or more of the companies? A highly prized category is the vitamin category. Swisse, Blackmores and Nature’s Way are competing

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fiercely for your recommendation and the promotion of their product. This category, and investment, continues to grow and provides you with considerable leverage to access promotional materials, opportunities and potential financial support.

TOP FIVE TIPS:

PREPARE TO DELIVER

2. Don’t make assumptions

Now you have all your ‘ducks in a row’ it’s time to determine if you can deliver on the opportunity. An idea or strategy is only as good as good as the execution of the plan. There are so many businesses that have a great idea but fail to do the basics. It is time to take an inventory. Do you have the staff with the skills and capabilities to bring this strategy to life? Will the pharmacy team buy in to the idea or will you need to work with them and provide training to get it across the line and possibly consider incentives? An option may be to bring in specialty staff to act as consultants to bolster the skill set. Now for the pharmacy. Let’s break it down into digestible pieces:

1.THE FRONTAGE What does it communicate about your pharmacy, your services and your style? Do you advertise your services? Should you utilise your street frontage more to your advantage?

2.THE ENTRANCE Is your pharmacy easy to access or inviting for your target customer? Clutter and narrow entrances can hamper easy access, especially for the elderly or mums with prams.

3.THE PHARMACY LAYOUT Can customers find what they are looking for easily? Is the category sign-posted? Market leading brands can act as a good signpost for customers. Supermarkets invest large amounts of money to track consumer traffic around their stores. They know

1. Deliver on a real need, not a perceived need 3. Do the basics well 4. Know who you are targeting 5. Be prepared to spend some money

which direction customers take when they enter, how long they spend in each aisle and what sort of stimulus is needed to optimise the buying experience, such as lighting, colour and music.

4.THE SHELF Do you have the right range and volume of products in the category? Are the market leaders arranged to hold the premium shelf space according to their market share? Remember, brand is king.

BRING YOUR IDEA TO LIFE You have decided ‘who’ you are targeting and with ‘what’ and you and your staff know ‘why’, the next area to address is the ‘how’. What are you going to use to promote the category? Will you be able to source promotional materials from suppliers, or will you need to design your own materials? If you belong to a banner group, are you able to

WE FORM A PHYSICAL BARRIER SCIENTIFICALLY PROVEN TO KEEP ACID IN THE STOMACH 1,2

References: 1. Chevrel B. J Int Med Res 1980; 8(4): 300–2. 2. Lowe RC. GI Motility online 2006. Available at www.nature.com/gimo/contents/pt1/full/gimo54.html. Accessed 14/02/2013. Always read the label. Use only as directed. If symptoms persist see your healthcare professional. ® Gaviscon is a registered trademark of Reckitt Benckiser Australia. 44 Wharf Road, West Ryde, NSW 2114. RBGA6869/IYB/B. 02/13

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“It is all about engagement, with staff and with customers. Engagement needs to be led by you, and from the front. Staff need to see your approach to discussing health related issues with customers.” leverage any materials designed for the group? Some suppliers and banner groups are open to promotional ideas and may support you with local area marketing. Setting up the pharmacy with promotional material, providing staff with uniforms and having a designated area of the pharmacy for promotions (off location) may focus staff on making the most of the opportunity. Let’s go back to analgesics, a category that has become increasingly self-selecting over the years and now receives very little attention from the pharmacist. However, with a number of high selling brands that have moved behind the counter or to Pharmacist Only medicines, it may be time to look at how you manage this category. Training is mandatory for all staff , however once you have trained them or they have been through online training, for example, Pain Pod (unashamed plug) what else can you do to boost their performance.

ENGAGEMENT It is all about engagement, with staff and with customers. Engagement needs to be led by you, and from the front. Staff need to see and hear your approach to discussing health related issues with customers. You will begin to build a team of pharmacists and pharmacy assistants who have a culture of customer care. Staff can also be motivated by incentives, particularly in the early days, to go the extra mile. Whether you are a manager who believes that it is their job, or you see true value in incentives as a motivational tool you need to consider how you employ incentives and how you manage them. Rewards or incentives do not need to be excessive. They can be as simple as shouting coffee, or buying a coffee machine, to taking staff out together to build team spirit. A word of warning - be careful not to allow an incentives programme to begin to dictate behaviour, as

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it can quickly turn against you and become a liability rather than an advantage. Showing appreciation for the additional effort staff are making is the key ingredient for developing a successful team.

TIMING Finally, you need to determine when to run the promotion. There are a variety of disease awareness days throughout the year that you can leverage. The Department of Health and Ageing calendar, at http://www.health.gov.au/internet/main/publishing. nsf/Content/health-pubs-calendar-index.htm, and the Pharmacy Guild can also provide great health promotion ideas for you to leverage. You may also look to social or other events throughout the year that might fit your promotion. Whatever you decide, keep your target customer in mind and apply the learning you gained from observation and research. Simple lifestyle events, such as the start of football season for analgesics and topicals or the ‘silly season’ for gastro products may be just as effective.

ADDING VALUE When considering a category promotion remember to add value.Value for money is often what retailers believe they are offering when they discount. In fact, they are only de-valuing the product or service. By adding ‘real value’ in the form of advice, service, range or gift with purchase, you are differentiating yourself and building your business. It has been proven time and time again, that price is not the primary driver for a medicinals purchases. Challenge yourself and challenge your staff to deliver value to your customers and you will see that by exceeding their expectations you will exceed your own. ◆ Vanessa McCutcheon is marketing manager, healthcare professionals at Reckitt Benckiser.

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Today, perhaps more than ever, it is vital to deliver personalised customer service, says John Koot from Willach Pharmacy Solutions.

Dispensary

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Customer Interaction

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lobally, the benchmark for customer service is continuing to escalate, with more and more consumers demanding fast, value-added and convenient care, tailored to individual needs and delivered to a consistently high standard. What’s more, today’s consumers are equipped with more knowledge and have more choices than ever before. In an environment where competition is high and margins are being eroded, it’s important to provide a level of service that will set your pharmacy apart. In the harried pace of a pension day morning in the dispensary, it is wise to remember patients are not an interruption to work – they are the purpose of it. Your patients are the backbone of your business – and the key to retaining current customers and attracting new ones is patient relationships.

BUILDING RELATIONSHIPS Developing relationships is one of the easiest ways to positively influence your business and ensure that your customers not only come back, but also tell their family, friends and colleagues about your services. Research has proven that consumers satisfied with quality behave positively toward the provider by: • Talking positively about the business; • Showing loyalty to the business; and • Increasing the amount they purchase. Sure, there will always be people who will come to your pharmacy because it is convenient, but it is your regular customers who will deliver real value for your business. In fact, it is much easier (and approximately seven times less costly) to keep current customers than to cultivate new ones. Providing customer interaction through professional services and advice can also help to ease the burden on the health care system and ensure a healthier community.

DESIGN FOR INTERACTION So we’ve determined customer relationships are imperative, but how do you ensure your pharmacy set up is conducive to customer interaction? Evidence shows that designing an environment that supports the type of interaction the consumer is expecting in that particular retail context, positively impacts on the consumer’s value perception. This, in turn, is related to satisfaction with quality. Hence a pharmacy with the look and feel of a health destination, where ‘clinically focused’ interactions would suitably occur, contributes to the customers’ perception of ‘value’ gained during their shopping experience. But this can only be achieved by designing this right environment. When you have hundreds of scripts pouring in in a day it can be difficult to step away from the dispensary and think through what needs to be done and where to start – let alone put this into action. You may wish to be dedicated to patient counselling and professional services, but it’s likely you can’t physically find the time to spend with customers due to the increasing demands being placed on you.

RETHINK YOUR WORKFLOW In reality, truly returning the pharmacist to the front of the store requires re-thinking the workflow in your dispensary. The traditional dispensary set-up – with the pharmacist located at the back of the dispensary positioned amongst shelving – can lead to significant inefficiencies, even from the physical barriers alone. What’s more, having the pharmacist located at the back of the dispensary means they are not readily available to consult with customers about their health care needs. Research has shown that many customers don’t

TOP TIPS ✓ • Invest in careful thought and consideration when re-designing your pharmacy. • Seek advice from experts in pharmacy-specific design. • Create an environment which reflects a healthcare destination and one that will support the type of interaction your customer expects in that healthcare setting. • Every opportunity to interact with your customer is an opportunity for your business – maximise its potential.

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SECTI

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want to ‘trouble’ the busy pharmacist, but they would be more likely to ask for advice if the pharmacist was readily available . This is also where opportunities lie for the pharmacist to talk to consumers about complementary products, scheduled products unique to pharmacy, and health services. So, in order to continue to compete and grow, more efficient business models are required. But in order to make effective changes, pharmacists first need to evaluate their business. In doing this, it is critical to look at how your most important resources are utilised: staff and space.

PHARMACIST OUT FRONT It is only by positioning the pharmacist out the front, surrounded by the products and services only available in pharmacy, that: (a) Pharmacies can clearly differentiate themselves from what many supermarkets are now leaning toward; a ‘health’ section, and; (b) Pharmacies can differentiate from direct competitors –

particularly in an environment where the ‘discount’ model has really prevailed in recent years. Now, establishing your business as a clear ‘clinical health destination’ both through physical presentation, adequate staff and specific services, provides opportunity for standing out and offering something different to consumers. The question remains, where to start? This may be as simple as sketching out an idea on paper. Think about service counters, stock positioning, work spaces. Where will certain tasks be carried out? Do I need a consulting room? How can I make the most out of the staff I have? Experts are available to take you through this process. Often even taking a step back, reviewing and making seemingly minor changes can make a significant difference.

CUSTOMER SATISFACTION The pharmacist is considered one of the most accessible healthcare professionals in the community and there are many valuable reasons – for both patients and pharmacists

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COMMUNICATION: Customers will seek your advice if you are available.

“The key to retaining customers and attracting new ones is customer satisfaction”.

– why pharmacies should focus their business model around customer interaction and the delivery of professional services. The key to retaining customers and attracting new ones is customer satisfaction – something that can only be achieved if you regularly interact with your customers and understand their wants and needs. In order to develop relationships with customers that result in repeat business, referrals and high life-time value, pharmacists needs to be at the forefront of the dispensary. However, this requires a structured framework and functional dispensary set-up and workflow.

THE KEY TO GROWTH It is crucial for pharmacy to make steps toward these changes now as a means of future proofing the business. Yes, traditional profit margins are shrinking, but a proactive approach to counteract this will ensure financial sustainability, while maintaining the status quo will only make it more difficult to invest in order to meet the requirements of tomorrow.

Investing time and money in creating a work environment that places the pharmacist in direct contact with customers, is the key success factor to differentiate and grow your business. Doing this will allow you to position yourself as a health specialist by building close and continuous relationships with consumers and offering a holistic portfolio of products and services. ◆ Willach is Australia’s market leader in dispensary storage systems and efficient workflow design. Company owned, they invest heavily in a national team of locally based pharmacists and technicians to deliver exceptional customer care and support.Their understanding of the local market and an unrivalled product range designed to best suit Australian pharmacies, mean they can provide the ideal solution for any sized pharmacy and budget. Contact them for a free, no obligation consultation and learn how you can capitalise on your pharmacy’s opportunities. E: info@willach.com.au W: www.willach.com.au T: (03) 9429 8222

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IT TRENDS

Technology trends Pharmacy IT guru Paul Naismith lists his five top IT trends to watch

eeping an eye on the technology horizon can be a challenge when you are also juggling the business demands of running a pharmacy. Yet, as the sector becomes increasingly competitive, getting your IT right has never been more important. There is no doubt about the business benefits of technology - increasing competitiveness and business efficiencies, and gaining better insight into your business. But there are also risks. Not getting it right can be costly and time-consuming. So how do you plan a viable technology path for your business? In the twenty years since launching Fred, Iâ&#x20AC;&#x2122;ve seen hiccups arise consistently in two areas. The first is in jumping in too soon without properly researching or understanding longer-term technology directions. And the second is in getting caught up in technology for technologyâ&#x20AC;&#x2122;s sake, rather than focusing on how it can help your business and patients. Both of these can be costly errors. So what do you need to look out for? Here are the five biggest IT issues facing pharmacy over the next five years.

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Trend 1: Security The most alarming trend of the last year has been the rise in cybercrime. International hackers have broken into computer records and ransom data back to the business for thousands of dollars. Handfuls of medical centres and pharmacies throughout Australia have been hit, and the Australian Federal Police are investigating these cases. The issue here is that some medical centres and pharmacies have not had adequate security measures in place to protect their data. Given the catastrophic consequences around patient confidentiality and the potential loss or copying of data, this is the one IT trend that I urge you to look at. Make sure your security is watertight, and look seriously at the worldwide move to managing data offsite rather than on premises. Data security companies will always have better security than you can provide.

Trend 2: IT as services This worldwide IT trend filters across every area of pharmacy and within the next five years will become standard pharmacy IT practice.

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“The most alarming trend of the last year has been the rise in cybercrime.”

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This is also called cloud computing, a concept that we’ve already seen with systems such as PharmX, PBS online and eRx Script Exchange, and in off-site data storage and managed services. The two biggest drivers here are cost and expertise. The cost incentive lies in the fact that, rather than purchasing hardware such as servers and computers as capital expenditure, these become operating costs. The beauty of this is that you can adapt your IT usage as you need to rather than predicting your needs years ahead. It also means that you effectively get to share infrastructure, software and programs that you may not be able to afford on your own.Your IT partner outlays the cost, rather than you. The second driver is common sense. Treating technology as a service keeps your expertise where it needs to be – on the pharmacy business – and lets IT experts focus on your technology.

Number 3: eHealth The big eHealth shifts of the last five years will be consolidated in the next five. This began with eScripts, a mechanism for accurate, secure sharing of patient information between GPs and pharmacists, now able to be read and dispensed in any pharmacy, regardless of system type. The PCEHR saw the practical benefits of eHealth accelerate, as patients began choosing to have their treatment information shared among health professionals, making up-to-date information available to the entire care team. Schemes such as ePIP incentive payments for GPs have contributed to the exponential

we will be on the path to paperless scripts and records, including the legislative changes that this entails.

Trend 4: Mobile applications Mobile applications will make their mark in pharmacy over the next five years with the flood of tablets and other wireless devices entering the workplace. This will mean that pharmacists can have patient data and tools at their fingertips wherever they are in the store, radically changing customer service opportunities. Rather than talking across the counter, pharmacists can speak to patients in a quiet space and still run all of the medicine checks and compliance checks they need, including POS, dispense, PCEHR and NPDR data. Pharmacists in hospital and aged care settings will be able to do their rounds whilst also recording and viewing “live” electronic records, rather than keeping paper records and entering them at the desktop. Hospital pharmacists in emergency departments will be able to quickly look up medication information rather than ringing the patient’s local pharmacist, as is the case now. For patients, applications might include medication reminders, repeat reminders, and drug interactions. In-store, you can expect digital locations where people can seek product advice and program information on topics such as weight management, diabetes, cholesterol, and heart medications. As well as reading other people’s reviews, this might include the sharing of their experiences on Facebook and other social media.

“Pharmacists can have patient data and tools at their fingertips wherever they are in the store.” growth of the electronic patient data pool. The next five years will see core infrastructure and systems continue to be bedded down and the secure collection and sharing of health information become the status quo. Greater accuracy and efficiency of dispensing is already at your fingertips. My advice is to get involved sooner rather than later. Beyond five years, I predict that

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Trend 5: Retail The internet has given customers the flexibility to choose how they shop and this is the start of major changes in how pharmacy services its retail clients. Within five years pharmacy will increasingly cater to these different shopping preferences, with multiple retail channels that let people choose whether they buy online and pick up in store or simply shop instore.

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Keeping ahead of IT

Behind the scenes, this will require more sophisticated merchandising systems and e-commerce engines capable of tracking different transaction methods and providing live updates about stocks and orders. As a result, systems such as inventory management, merchandising, warehouse management and store back office will become highly integrated. •R esearch, research, research – IT blogs, pharmacy discussion groups, health IT Trust will also be an issue. For pharmacy, the chalpublications and the Guild’s eHealth department can all help. lenge will be in how to nurture its reputation as one •D on’t try to become your own IT expert – invest the time to find an IT partner of the most trusted health professionals in Australia you can trust. in an online environment with less face-to-face • Look for a strategic view of your business and published service level standards contact. At the same time, analytical tools will be •E volution not revolution is key – introduce change as a gradual process in your used for gaining insight into what your customers business. are doing, and providing more tailored programs and • Focus on what your business and patients need, not on the IT. promotions on-line and in-store based on previous •D on’t reinvent the wheel. You can often save time and money by adapting an shopping behaviour. u existing product or service rather than developing a new, fully customised Pharmacist and pharmacy owner Paul Naismith is ‘bells and whistles’ version. also the CEO of the Fred IT Group, launched twenty • Look to the cloud for further cost efficiency and data confidence. A D _ P N P R O MA R _ 1 3 . p d f Pa ge 1 2 1 / 0 2 / 1 3 , 3 :years 5 1 ago : 5 to2 develop P M dispensing A E D T software.

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UNDERSTANDING DATA

Facts & figures: Data will help keep your pressure down The rapidly changing dynamics of pharmacy economics mean it is vital to have current data on what is happening in your store, and how this compares to other pharmacies. Data expert Jon Marshall explains how data can illuminate the situation in one key pharmacy category.

ith recent regulatory changes around pharmaceuticals and the resultant impact on pharmacy, it is more important than ever that pharmacy maximises every opportunity for substitution in clinically relevant situations. This article gives you a data-based snapshot of the lipid lowering market, focussing on a couple of the more high profile molecules that have either recently come off patent or will be in the near future. If your pharmacy substitution rate is not keeping pace with this general trend then it gives you an opportunity to ask why, and what could be done in your pharmacy to ensure all available opportunities for substitution are considered. Globally, the prevalence of high total cholesterol is on the increase. Australia hasn’t been immune from this rise, in no small part due to diet, increasing levels of obesity and other lifestyle factors. The more important measures of high LDL and low HDL cholesterol are strong predictors of CVD. With the prevalence of dyslipidaemia at over 50 per cent of the population (though peaking at different times based on age and gender), we can understand why this has been such a big market for pharmaceutical companies with a product in this space, and the interest of generic companies post patent expiration.

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“This article gives you a databased snapshot of the lipid lowering market.”

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UNDERSTAND DATA

THE GRANDFATHER It’s arguable that the grandfather of the lipid lowering products is Zocor (Simvastatin), long since off patent though still holding quite a strong brand position in the market, which is notable given the period of time generic competitors have been able to compete. Looking at the graph at right that effectively compares the brand versus the generic, one can see that the brand still holds very strongly even after being off patent and therefore largely not promoted for a number of years. Based on this the pharmacy has a lot of work to do to further grow this generic base.

GENERIC IMPACTS The 2012 launch of generic molecules to compete against the originator, Lipitor, version of Atorvastatin came with a great deal of activity and publicity. It’s clear to see from the graph at right that the generic activity has had some impact against the originator product. This is probably a function of the greater generic competition and market acceptance of generics that has occurred since Zocor came of patent years ago. It also shows the significant opportunity there is over the period ahead for pharmacists to educate appropriate patients about the benefit of a generic.

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At the right is a graph that shows the advertising spend that was put into Lipitor in the period that it was to go off patent. In the time leading up to the launch of generic competition promotional expenditure seems to have all but ceased, as it probably was considered not worthwhile spending money on the promotion of the product. At the time that generic competition would have started, a massive activity is seen and only occurs at that time point. Below this graph we decided to incorporate the prescribing behaviour of GPs at this time, which you can see remains relatively unchanged, meaning the brand was already strong and one would expect that to continue for a period of time. It does demonstrate there is a big opportunity for the substitution of Lipitor when appropriate with generic equivalent products.

“It does demonstrate there is a big opportunity for the substitution of Lipitor when appropriate with generic equivalent products.” LEGAL EFFECT We thought given the patent litigation going on with Crestor through 2012, it would be just a point of interest to show the current promotional spend in journals, and the GP prescribing behaviour of that product, which are compared in the graphs to the right. ◆ Any pharmacists interested in accessing the AsteRx data reports are advised to visit www.asterx.com, call 02 9968 4156 or email: support@asterx.com

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IMH_1241_270x206.pdf

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Goal setting

Measurement is the key to management If you can’t measure it, you can’t manage it, so set measurable short-term goals to achieve long-term targets, says Sue Hirst, director of CAD partners.

tarting the new year with an optimistic outlook is one thing. To remain confident throughout the rest of the year requires setting a series of short-term measurable goals that you celebrate as each is achieved. Our partners at CFO On-Call are often asked by business owners like yourself to help them set goals, both short and long term. The question usually stems from the business owners not being 100 per cent sure of what to measure and how to set a realistic target for the future. We’ve all seen the acronym SMART for goal setting: • Specific • Measurable • Attainable • Realistic • Time-bound If you use this SMART methodology, you’ll be well on your way, but still the question remains – what should you measure?

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Why not sales? You’ll end up in hot water if you focus only on sales targets For most people, the first instinct is to set a goal for revenue and work hard all year focused on growing just their sales. If you’ve ever heard the term ‘growing broke’, then you’ll know that this singular focus on revenue is a ticking time bomb waiting to explode. What happens when you land a once-in-a-lifetime contract and have neither the working capital or enough goodwill with your suppliers to fulfil the order? Or you just get a little lax with your debt collection and don’t have enough in the bank to pay your suppliers in time. They might drop your classification to a B or C class customer.

Specific and measurable What should you measure to achieve sustainable growth? All five areas of your business need to be firing well to achieve sustainable growth. Product and service

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Goal setting

development, sales and marketing, operations and finance, customer service and human resources. It’s important to set goals in all areas and choose the one or two items from the key drivers of profit and cash flow that you can use to measure your success. These are the Key Performance Indicators (KPIs) of your business. A few financial KPIs are: • Gross profit percentage – a KPI of sales and direct costs management. • Net profit – a KPI of overheads and overall business operations management. • Accounts receivable days – a KPI of customer payment and possibly customer satisfaction, for example dissatisfied customers may be slow to pay. • Accounts payable days – a KPI of supplier payment. If it is too low this could affect cash flow and if too high could affect service from suppliers. • Inventory days – a KPI of stock management. If it is too high this could affect cash flow and if too low could affect customer satisfaction, if goods aren’t available to sell. • Work in progress days – a KPI of job/service management. If it is too high this could affect cash flow as jobs aren’t being finished and able to be invoiced.

Attainable and realistic Compare your business to similar types of business. Once you’ve agreed on your KPIs you’ll need to set a benchmark and then decide what is a realistic target for this KPI over a set period of time. There may be many factors that make your business unique and seemingly incomparable to others, but at the heart of things most businesses will have a fundamental framework that makes them comparable to others of a similar size within their industry. The best place to start is to look at the already established benchmarks for your industry. Most good accounting professionals will have access to these reports, and should be able to give you the information you need to compare your business against the benchmarks.

Time bound How can you manage your goals over time? Once you’ve looked at your industry’s benchmarks and decided on some realistic improvements for your

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business, the next step is to choose a time frame for achieving your targets. To ensure your goals are attainable, it’s best to set small increments for improvement - weekly, monthly and quarterly goals are much easier to monitor and manage than one great big annual target. If you’ve missed a weekly target, it’s much easier to make that up than a monthly or quarterly target. The other upside of small increments is that if you reach the small goals along the way, the big future goal is attained by default. As Henry Ford said “There are no big problems, there are just a lot of little problems” and that needs to be your approach to managing the Key Performance Indicators in your business. Break down your annual goals for improvement into weekly, monthly and quarterly targets and deal with the little slips off target as they arise. Keep everyone in the loop of how the business is progressing towards the goals with regular weekly, monthly or quarterly updates to keep momentum going.

Reward your team Your team will be a key component of the success of your goal setting and achievement. Involve them in the process. Consult with them firstly to decide what the KPIs should be for their area of responsibility, and how the targets can be achieved. Finally, as I said at the start, don’t forget to celebrate each target you reach along the way. It doesn’t have to be extravagant – a round of cappuccinos for the accounts department when accounts receivable days keep their downward trend for another week, or a BBQ lunch for the warehouse staff when there’s a decrease in percentage of damaged stock returned for the month. Paying attention to the smaller measurable parts of your business means things like profit and cash flow are taken care of too. u CFO On-Call is a team of financial and business advisors, who work with open-minded people committed to growth and success. We regularly run webinars on business financial management. To register please visit http://www.cfooncall.com.au/events/ webinars.html. For help call us on 1300 36 24 36 – NZ 0800 180 400 or visit our website www.CFOonCall.com.au/ www.cfooncall.co.nz.

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PHARMACY VALUATION

ADDING

VALUE to Your

Business Build value systematically, well before you decide to sell your business, says Frank Sirianni from Medici Capital.

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PHARMACY VALUATION

harmacy ownership, like other types of investment, provides two forms of return: net income which you earn while you own the business, and capital growth or gains. As pharmacy valuers, a question that we receive from many pharmacy owners relates to capital growth – “how do we, as pharmacy owners, create long-term value and wealth?” In this article, we focus on building value and creating wealth in your pharmacy. While many small businesses and professional practices may be profitable, they may not necessarily be valuable. Pharmacies, in most cases are profitable, but we estimate that almost 20 per cent do not earn the owner a salary for hours worked. Almost all pharmacies have some value - so what is your pharmacy worth? Value, and value creation, is ultimately the bigger ger prize for most business owners. It can also be the greater wealth creator for most business owners.

WHAT DRIVES VALUE? So the question remains, what drives value in yourr pharmacy? The answer to this question lies in creating a pharmacy which is attractive to buyers.Valuation requires a logical review of all aspects of the business. ess. In all instances, the final market value is contingent nt on the willingness of the vendor and the eagerness off the buyer to transact. What makes your pharmacy attractive active to buyers? All pharmacy owners should consider these questions, regardless of what stage of their professional ional career they are at. If you start focussing on these questions now, rather than waiting until you need to sell or retire, you will reap the rewards later on! Regardless of whether you’re planning to sell now or later, start determining and working to improvee on the factors that make your business valuable. Look ook at your business from a buyer’s perspective and start rt building value today!

BUILDING VALUE Building value requires time, focus, and careful planning. Indeed, it requires you to always ask the question “will this make the business more or less valuable?” Here are five steps which can be used to o create and build your pharmacy’s value. 1. Get Organised, document and provide evidencee to support value.

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“Valuation requires a logical review of all aspects of the business.

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PHARMACY VALUATION

Ultimately, value arises from the tangible and intangible assets created by a business. While intangible assets are often difficult to document, the tangible assets should be readily available for assessment. Asset registers, contracts (including customer contracts), supplier arrangements, stock takes (don’t just estimate) and all tangible assets should be documented. For the intangible assets, the key driver of value is the net income stream of the pharmacy. Financial records and statements should document the income streams of the pharmacy. While accounting reports form one component of the supporting evidence in a business sale, the other components can include: bus • Prescription summaries, reports and point-ofsale reports • Business plans • Procedures and operational policies • Technology and systems • Staff training manuals and records 2. Build Bu your customer base and your relationships with customers. Value is a function of the certainty and/or Va transferability of income. This is derived from your transf relationship with customers and the goodwill relatio customers have towards the business. custo One of the most effective ways to increase the O value of your business is to build or broaden your customer base and deepen your relationship with custo existing existi customers. This may involve approaching a wider Th market, mark including an on-line component, adding complementary products or services, or simply comp marketing. In regard to existing customers, you may mark need to better understand their needs and wants. Ultimately a business buyer is looking to buy U businesses with a solid and reliable customer base. busin 3. Build Bu your market offer – brand or value proposition. propo For some pharmacies, the brand is what creates Fo value. value For others, it is the value proposition it offers its customers. cu What is your offer to the market? What makes it W valued value by the market?

Develop a strategy which builds this value in the longer term and, more importantly, makes it sustainable. 4. Develop your team. Transferability of the pharmacy to a new owner is often a function of your staff and management. The better skilled your team is, the more valuable the pharmacy will be. Conversely, the less reliant the pharmacy performance is on you as the owner, or perhaps a single key staff member, the greater the value of the business. At one end of the spectrum, a pharmacy with no staff and just the owner or owners dispensing, will have limited or no value. These pharmacies are simply the personal goodwill or equity of the owner(s), and more difficult to transfer to a new owner or business buyer. Conversely, a pharmacy with a well skilled and broad workforce, will be highly valued and transferable to a new owner. 5. Develop, maintain and improve your physical assets. All buyers will inspect the pharmacy. The better maintained and the better the quality of the physical assets of the pharmacy, the more attractive the pharmacy will be to buyers. Buyers will look for assets that are in good order, ready for use and relevant to the income generation of the pharmacy. Ultimately, if a buyer needs to upgrade the assets or complete a refit, this is added to the effective cost of buying the business. On the other hand, if the assets and fitout are in good or excellent condition, this adds value to your pharmacy. Start building your pharmacy value now. Conduct a business review to assess what drives your pharmacy value and how to improve it. ◆ Consider completing an on-line, indicative pharmacy valuation at http://express.medici.com.au/landing/ indicative-valuation.php Medici Capital completes pharmacy valuations for banks and pharmacists throughout Australia. The valuations can be prepared for lending purposes as well as partnership, legal, or general management purposes.

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Australia’s most experienced pharmacy valuer

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Refresh your eyes

Understanding categories: Some big health categories are creeping into grocery and discounter space.

For more information, talk to your HealthOne Representative or phone 1800 252 224 Always read the label and recommend only as directed. If symptoms persist, advise patients to consult their healthcare professional. REFRESH PLUS®,REFRESH TEARS PLUS®, and REFRESH CONTACTS® contain carmellose sodium 5mg/ mL. REFRESH LIQUIGEL® contains carmellose sodium 10mg/mL. Allergan Australia Pty Ltd. 810 Paciﬁc Highway Gordon NSW 2072. ABN 85 000 612 831. REFRESH PLUS®, REFRESH LIQUIGEL®, REFRESH CONTACTS®, and REFRESH TEARS PLUS® are registered trademarks of Allergan Inc.

6 | IT’S YOUR BUSINESS | MARCH 2013

each there may well be dozens of separate ‘missions’. In health, let’s call these ‘conditions’. Can and should you concentrate on all of them? No! It’s impossible, impractical and may well stand for nothing.

what to ‘stand for’? Pharmacies can no longer stand for, and haven’t been able to for at least two decades, the wide array of convenience, and now grocery products – for lots of simple reasons. They do it better in every dimension – more space, more range, better prices and most of all, the spot where customers now expect to buy – in short, grocers, supermarketers, better discount pharmacies (with lots of space and already destinations for their customers), have all achieved a ‘first choice’ position in the customers mind. The bottom line for these categories is two words: ‘lose them’! Some find the wrench of losing these slow-selling, unsaleable products almost too much to bear: ‘Surely we must have some, just in case the customer wants them’. The contaminating effect of playing in the

grocery space could potentially destroy your real mission areas. Unfortunately, some really big health categories are creeping into grocery and discounter space – like vitamins and supplements, especially when one looks at relative turnover. So, limiting the focus to health, how do you find the right missions or even conditions? Ask all these questions: 1. Which are my highest volume script conditions and customers? 2. Which are the biggest health issues, for example obesity? 3. If we were to deliver all that these customers expect, want and need in products and services, would they be commercial? 4. Are there separate commercial opportunities to support and expand services from experts in particular categories? Eye care, sleep apnoea, troubled skin, weight, veternary, digestive or intolerance areas come to mind. The experts could be dermatologists, sleep specialists, vets, gastro-enterologists, gynaecology and obstetrics, IVF. Often, what seems like a good category idea may turn out poorly if the total mission