Please don’t insult our intelligence

Recently the Alberta College of Pharmacists (ACP) amended the Code of Ethics and Standards and banned inducements in pharmacies.  As a result pharmacists (and pharmacies) will no longer be able to offer or provide inducements of any kind (including loyalty points) to patients in return for receiving prescriptions or pharmacy clinical services.

Remember that provincial regulatory bodies, like colleges of pharmacy, are obligated by law to always act in the interest of the public; hence the following rationale was provided behind the decision of the ACP:

“Banning inducements helps ensure that pharmacists and technicians can objectively make critical decisions without any real or perceived impediment”

In response Sobeys Inc says it plans to file a legal challenge against the ACP on behalf of Sobeys and Safeway, another chain Sobeys recently acquired.  Sobeys now owns or franchises 1500 pharmacies across Canada.

A senior Sobeys executive recently provided this rationale for Sobeys’ action:

“We must make sure pharmacists and pharmacy technicians can work in an environment where the critical decisions they must make can be made objectively.”

Huh? How can two entities sit on opposite sides of an issue and then rationalize their opposite positions on the same basis of reason?

Both the ACP and Sobeys claim their position is in the interest of the public/patients.  Clearly one must be right and one must be wrong.  Surely the two positions must be mutually exclusive.

Here comes the part that not only stretches the imagination, it insults the average person’s intelligence.

Sandra Aylward, vice president of Sobeys, claims millions of Albertans (according to a survey which Sobeys conducted) would consider such a ban unfair.  She goes on to state that:

“Studies show that loyalty programs build stronger bonds between patients and their pharmacies and encourage better patient adherence to prescription medication”

What studies?  Who commissioned these studies?   Who paid for the studies?  Was a study done on a blind control group?  Where can someone get a copy of the studies?  Where were the studies published?  Which scientific journals?

Notice Ms Aylward states that loyalty points build stronger bonds between patients and PHARMACIES (not pharmacists)…in other words those pharmacies that offer loyalty points, being exclusively chains like Sobeys, or Shoppers Drug Mart itself having recently been taken over by Loblaw.

My issue with this whole thing is not loyalty points and whether they should be allowed or not.  There are so many other inducements already rampant in the retail pharmacy jungle like Senior Days, preferred provider networks,  professional fees discounting,  etc that I am not sure one more nail will make much difference, though I do remain against the notion of inducements.

M y issue is that someone would stretch the edges of credulity and offer an argument in defense of their position that insults my intelligence.

Are we really to believe that Sobeys wants to issue loyalty points for prescriptions to increase medication adherence?

So this has nothing to do with marketing?  Nothing to do with trying to increase store traffic and build bigger baskets of goods sold?  Nothing to do with competing with Shoppers Drug Mart Optima Loyalty Points Program?

So one is to believe this is all in the interest of greater patient care?

Please let me know the name of the person who believes this claim by Sobeys; I have some land in Florida I would like to sell him/her.

 

PHARMACY ECONOMICS 101

I feel very gratified when I write a blog and I get responses which support my perspectives, but equally I appreciate it when some reactions are opposed.  I am sometimes accused of being biased. True, I am biased and I freely confess it.  I have some strong biases and I call them ‘as I sees them’.  Sometimes I am accused of being incorrect; if this happens, it is not intentional and I appreciate being corrected.  “Correct” of course is often a matter of opinion…which is OK too.

My piece today is likely to invite reactions both opposed and in agreement; it’s my take on how the pharmacy economic model works today, especially pertaining to big corporate pharmacy chain operations.

The general opinion out there is that the old dispensing model, i.e. churning out as many prescriptions as possible in the shortest period of time, is no longer economically viable.  Factory production, assembly line and robotic are some of the descriptions used.  In addition, the point is made that the considerable skill set and knowledge of pharmacists is wasted under these conditions.

Pharmacy payers, both government and 3rd party, are likely to continue to put downward pressure on the price of pharmaceuticals.  Elimination of generic rebates, PPNs (preferred provider networks), formularies…the tools are endless and new ones will likely be created.

If all of these external forces were not enough, pharmacy retailers self inflict further injury to themselves through discounting of professional fees.

All of these factors together represent money out of the pharmacy economic equation.

Countering all of these factors are the new paid clinical/professional services which are now funded by governments to varying degrees province by province:  Medchecks, flu shots, pharmacy opinions, all of which represent money in…but not nearly enough to balance against the money out.   Futile attempts to rebalance the equation results in tactics like quotas on professional services and performance metrics, which are universally abhorred by pharmacists and provide poor value to government payers.

So if all of this so far is to any degree correct, why would any rational business want to go into the business of retail pharmacy?  How do these big chains, after making huge capital investments, make any money?  Why would a successful grocery operation like Loblaw spend billions to buy Shoppers Drug Mart if the pharmacy business produces such low return on investment?

I suggest that the answer is that although the actual dispensing of ethical pharmaceuticals may have become less and less profitable, the business of retail pharmacy or food drug combos is indeed quite profitable.

It is well documented that when a pharmacy department is introduced into a grocery store environment, the sale of grocery items (not counting any pharmacy related SKUs {stock keeping units}) goes up by an average of as much as $100,000 per week.  This is as a result of the increased traffic produced by the attraction and presence of the pharmacy department.   Some large merchandisers, Target being a good example, consider the pharmacy department a critical component of their ‘guest experience’.  I have seen some billboards proclaiming “Target…a pharmacy with a department store attached”.

Within days of the official Loblaw takeover of SDM, Shoppers stores were drop shipped President’s Choice Decadent Chocolate Cookies; a signal to the SDM customer to anticipate a full complement of these popular PC products in the near future.  One could argue the rationale of promoting the consumption of high sugar/fat products in an environment whose function is to counter the two biggest health problems we are experiencing today: diabetes & obesity…but leave this aside for now.

The presence of a pharmacy department in any retail environment means the sale of a whole bunch of stuff which is not prescriptions per se.  OTCs are the biggest example, some of which like cough syrups have nothing to do with health.  Then there is ColdFX, copper bracelets, fat flushes, homeopathic products, NHPs, flu shot enhancers,  many vitamins, energy supplements, meal replacements etc which also provide little or no benefit, but which are heavily advertised and promoted on TV and elsewhere.  Whether these and the many other products like them have any efficacy or not is not the point.

The point is that the consumer/customer associates these products within a pharmacy environment and he/she goes to the drug store to purchase them.  In fact, a pharmacy is chosen by the producers and retailers of these products in order to provide a level of perceived efficacy to what more knowledgeable consumers know is junk.  These products are known to have very high margins…50% or more. The pharmacy/pharmacist are used as leverage to sell the products.

Back to the economics.  Let’s take an extreme example to illustrate the point.  One pharmacist working 12 hours at $50/hr (a little high I know) = $600 plus all other allocated costs, say another $900 = $1,500 total.  In this extreme example, say not a single Rx is filled in the 12 hour period so sunk costs are the total of $1,500.

To reach a breakeven point, a mere $4,500 of DSTM (drug store type merchandise) at a margin of 33% has to be achieved.  Of course reality suggests that some number of prescriptions would be filled in the 12 hour period and that actual sales of DSTM would be far higher than $4,500, but the example illustrates the point that it does not take much in the way of DSTM sales to offset the costs of the actual pharmacy itself, pharmacists included.

 

 

 

 

This is why PPNs (preferred provider networks), and flu shots  by way of example, are so valuable to Big Retail Pharmacy, not for added Rx volume, but for the extra traffic dragged through the store enhancing the opportunity to sell more DSTM, as well as regular grocery/deli/prepared foods etc.

The pharmacy and the pharmacists are essentially a loss leader in many cases, hence my confessed bias against this type of environment for professional pharmacists to have to practice in.

Challenge me if you wish, but I don’t believe any person with a degree as difficult to achieve as pharmacy (soon to be a PharmD) should be used as a loss leader.

I welcome both your bricks and roses.

 

The ‘McDonaldization’ of Pharmacy

About 15 years ago noted author Eric Scholler wrote a terrific bestseller, first serialized for Rolling stone Magazine in 1999, called ‘Fast Food Nation’.   His lecture summary is also available on YouTube and is very powerful to experience.  The comparison between the fast food industry and modern chain pharmacy is remarkable.

The implications for the profession of pharmacy today are very disturbing if present trends are not altered, especially in light of the many recent takeovers by big chain pharmacies.  Market concentration continues to get tighter: Loblaw takes over SDM, Rexall takes over Dell, Sobeys takes over Safeway etc…all of which puts more power into fewer and fewer hands.

Scholler’s thesis investigates the beginnings of the ‘Fast Food Nation’ within the context of post-World War II America; and examines the specific mechanizations of the fast-food industry, including the chemical flavoring of food, the production of cattle and chickens, the working conditions of the beef industry, the dangers of eating processed meat, and the global context of fast food as a North American cultural export.

Scholler refers to McDonalds Restaurants a great deal in his book.  For purposes of this blog, you can replace McDonalds in your mind with your favourite chain drug store operation.

It was really Ray Kroc (circa 1955) who was the architect of McDonalds.  Kroc is legendary, and it was his ‘genius’ that spawned the modern day fast food industry.  Kroc brought systems to the food industry.  The central credo was ‘conformity’ which allows a consumer to purchase the same product anywhere in the world and have exactly the same ‘experience’.

This is a direct quotation from Kroc:

“The organization must not trust the individual.  It is the individual that must trust the organization”.

Any of this making the tiny hairs on the back of your head stand on end yet?

The systems characteristic of the industry are low wages, systems which allow for employees to be quickly replaced if they quit or are fired, central office driven protocols for every single act in the process of product delivery, supply management, & low price points.

The industry does not welcome creativity which it considers dangerous and could erode the brand.  Everything is minutely controlled and enforced to centrally driven protocols and standards.  The continued utilization of robotics and mechanization is critical to reducing the human element as much as possible. Judgment is disdained in favour of systems, policies & procedures, manuals, and algorithms.

Employees are told what to do and what to say at all points of the product delivery chain. Tight control is maintained by rigourous enforcement of all systems by well chosen and singularly focused ‘district managers’ aka the storm troopers/systems enforcers.

The whole objective is to rely heavily on all things non human as much as possible which ensures low compensation costs, consistency of the value proposition and protection of the brand.

Does any of this remind the many practising pharmacists out there of what it is like to work for Super Duper Drugs today?

 

 

 

 

 

How does the profession of pharmacy, which is moving more and more into the realm of professional services and clinical judgment, fit into a matrix of tight control and a protocol driven environment?  Think quotas, performance metrics, labour scheduling tools, reporting structures, uniforms, branding, image, etc.

What Scholler discusses in his thesis is pretty consistent with other products besides fast food, like clothing, haircuts, footwear, furniture etc.

The disturbing reality is that this has happened as well to pharmacy, a profession with a long and proud history, so quickly and all for the sake of commerce and the interests of shareholders, who are neither pharmacists nor their patients.

Pharmacists must take back their profession by every means at their disposal.  Pharmacists must get active politically and insist their associations lead the change and course of events before it is too late; it is already 11 PM.

Pharmacists need to do all this before the profession becomes just another McJob with the status and compensation that goes with it.

If none of this scares pharmacists to initiate the revolution that Ken Burns has recently referred to, nothing will.

 

Loblaw takeover of SDM: what does it mean for the profession of pharmacy?

Begin by answering this question, utilizing the right brain  hemisphere .  How do most pharmacists feel intuitively about this takeover?  I have yet to meet many practising pharmacists who have reacted positively to this development to the pharmacy landscape.

This buyout transaction represents one of the largest of its kind in Canadian business history.  The largest Canadian grocery chain, already with over 600 pharmacies, takes over the largest Canadian pharmacy chain to create a behemoth retailer with 1800 pharmacies in a country of 35 million population.  This represents incredible reach and market dominance.

Assertions have already been made by company officials about how SDM will become “a unique and separate operating division of Loblaw”.  It has been described as “a partnership grounded in complementary strengths”.  The word that company officials avoid is ‘takeover’.  ‘Takeover’ has a negative connotation and our left brain hemisphere’s more analytical bent suggests that this is not a good thing too; so ‘takeover’ is avoided.  But a takeover is what it is.  It sure looks and quacks like a duck.

Experience suggests that takeovers (or even softer transactions like mergers) are all about consolidation.  All costs not at store level like district managers, vice presidents, marketing types, information technology, human resources, finance and legal would normally all be up for grabs.  The savings (and the profits) to be derived out of consolidation will run into the 100s of millions.

Suppliers must be quaking in their boots.  Imagine the control over the distribution supply chain this one retail entity will now have…a good guess would be in the neighbourhood of 35 percent of the retail pharmacy marketplace.  This one entity will tell suppliers what the cost of good are.

To extrapolate from these numbers on an order of magnitude basis, it also means that somewhere between 3 and 4 out of every 10 Canadian practising pharmacists will now be employed by this one employer.  Now that’s power!

Kind of sad to think that almost half of all Canadian pharmacy students now in school across Canada will now approach a 50/50 decision upon graduation…’do I spend the rest of my life working for Loblaw/SDM or not?’

When retail driven operating standards like performance metrics, quotas on professional services, forced flu shots become unbearable, where do practising pharmacists turn for alternative employment to make a living as a professional pharmacist?  Answer: not too many places.  The other pieces of ice floating around in this stormy sea have names like Wal-Mart, Rexall, Costco, Sobeys, Metro, Target etc.  These big retail entities are not likely to offer much of a difference in terms of compensation or working conditions.  The singular focus of all of these big retailers is to maximize sales.

These retailers achieve their goal directly or indirectly through the sale of drug store type merchandise (DSTM) associated with a retail pharmacy environment.

This takeover therefore leads practising pharmacists to two separate conclusions: despair and opportunity.

The despair comes from the realization that community pharmacy is becoming even more and more concentrated in the hands of a very few big players: box stores, grocery chains, & big merchandisers.  All are in the business of selling as much stuff as possible. Where does the profession of pharmacy fit in this tight matrix/retail dominance?   How do pharmacists exercise professional judgment in an environment where tight controls, retail systems, quotas, sales targets, cost control, all created and enforced by non pharmacists, prevail?  It does seem to be getting darker out there.

So where is the opportunity?

First, practising pharmacists must remind themselves every single day that this multibillion dollar industry is totally dependent on them showing up every day.  Although pharmacists (like the produce manager or the meat manager or the deli manager) are employees, only pharmacists must be present physically in the premises or the store does not open.    That’s power too; big power…if only it could be marshaled.

Second, (and I remember Ken Burns making this point in an earlier blog entitled “What does it take?”) maybe now when pharmacists are confronted with the bleak reality of how limited their professional employment options are,  will make the decision to strike out and create their own destiny.

More and more pharmacists are walking away from the corporate scene and striking out on their own. I receive dozens of emails from pharmacists who have taken the plunge and feel totally liberated for it.  They may not be building big businesses, but they are certainly doing better compensation wise than working under Big Pharmacy, and their working conditions have changed from night to day.

From Kingston Ontario, to Cranbrook BC, to PEI and all over this country, more pharmacists are deciding to take a chance.  They are determined to practice pharmacy the way they want, not the way determined by retail sales enforcers/non pharmacist owners.

Pharmacists have the power to take their future into their own hands.  They can do this by refusing to do anything their non pharmacist owners dictate to them which they believe is not in their patients’ interests.  Pharmacists are accountable to their patients first, not their employers.  Those who choose to compromise on this daily struggle in a retail environment will eventually pay a price professionally, ethically and morally.

Pharmacists must begin to turn back the clock…’backwards into the future’.  They can open their own practices and begin to provide outstanding patient services every day.  They can provide more high quality billable services and immediately receive payment directly for these vital services.  The investment is modest, the risk is small and the rewards will be overwhelming.

If more pharmacists took their destinies into their own hands Big Pharmacy would not stand a chance.  Pharmacists still own the means of production.