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18 March 2016
Impending regulation changes and increased competition mean pharmacies need a radical shift in business strategy to remain profitable and relevant. Kim Brotherson, Managing Director of Pharmacy 777 and Bruce Annabel, Pharmacy Business Consultant and Adjunct Professor of Pharmacy Management at QUT, share their top 5 tips for creating a thriving community pharmacy.
Community pharmacies have traditionally relied on dispensary revenue and cost trimming to maintain their profitability. However, the impending regulation changes and increased competition mean a radical shift in business strategy is called for.
Kim Brotherson, Managing Director of Pharmacy 777 and Bruce Annabel, Pharmacy Business Consultant and Adjunct Professor of Pharmacy Management, QUT discuss some key areas to address.
1. The consumer is now the centre of your business model
“Understanding all the reforms coming in is key to formulating a business strategy that will allow your pharmacy to succeed,” explains Annabel. “In general, they put the consumer front and centre, and that means you must too.”
Multi-awarded Pharmacy 777 chose a deceptively simple starting point for their highly successful strategy. “When you leave the doctor’s surgery with a script, you’re a patient. You should still be a patient when you walk into our pharmacies. Our job is to dispense knowledge, services and products that improve your health,” explains Brotherson.
2. Upgrade your staffing model
For Brotherson, focusing everything on the patient required a significant cultural change. “The pharmacists have to lead from the front of house, not the dispensary. That includes handing out all prescriptions and interacting with patients. We also ensure technicians and assistants are trained to support the pharmacist in delivering services to their community.”
Annabel says the Pharmacy 777 model isn’t just for groups. He cites a small (90m2) independent pharmacy that opens seven days a week. “It has four full-time pharmacists, four dispensary technicians and no assistants. And they are booming!” he says. “They don’t discount or do catalogues. It’s all about expert advice and service.”
3. Package your Primary Care Services
Medication management, cardiovascular management, wound care, bone density testing, DNA testing, baby care, allergies and diabetes are all areas where pharmacists can improve patient health outcomes and create long-term patient loyalty.
Where possible, Annabel encourages offering these services in management packs to improve profitability. “You can recommend a medication management pack, for example. The pharmacist helps the patient through the script, with SMS/email reminders, compounding for convenience and doing a meds check. Make sure you’ve got a semi-private desk location to do your checks in”.
4. Forget fighting a price war you can’t win
Annabel is adamant that cutting overheads does not work long-term. “The wholesalers and generic companies are reversing or ruling out further price reductions. Add to that the reduced dispensary income and increased competition, and it’s obvious you have to exploit a different niche.”
Brotherson points out that while others have cut wages to improve their bottom line, Pharmacy 777 has been spending more on them. “More pharmacists interacting with patients is key to building script and patient numbers and getting bigger spend per customer. The key is to look at your wages-to-gross profit as opposed to wages-to-sales profit.”
5. Review your premises, merchandise and operational tasks
Both Annabel and Brotherson suggest that once your culture is on track, premises, stock and business practices should be overhauled next. “Ask yourself if you have the best environment for your patients,” advises Annabel. ”Do your premises resemble a healthcare destination or a $2 shop?”
Annabel points out there are usually six or seven departments where pharmacies make a profit outside dispensing, and they are all health related. “Pharmacists do very well in Schedule 2 and 3 medicines,” he says. “But they tend to have too little product that’s poorly presented”. He adds vitamins, wound care, first aid, eye, ear and lens care, therapeutic skin and hair care, digestion, quit smoking and weight loss products to the profit generating list. “My analysis of high-performance health solution pharmacies shows the average retail sale per customer is $12. Pharmacies practicing the primary healthcare model average $17. So range up on specialist product and increase its space allocation.”
Brotherson acknowledges that pharmacists are not natural retailers. That’s why the Pharmacy 777 model ensures business tasks are kept as simple as possible. “Everything is about supporting the pharmacists to spend more time with patients,” says Brotherson. “Training technicians for tasks such as inventory control is crucial in this”.
In conclusion, both Brotherson and Annabel insist the future of community pharmacies is promising – with one caveat. You have to be open to change. The key is making yourself relevant to your local community by continually asking what you can do to improve your patients’ health. The consensus seems to be that if you stand for something, patients in your community will respond to that and remain loyal.