Combating Rising Pharmacy Costs

Download PDF Version


OPTIMIZING PHARMACY OPERATIONS

Pharmacists are still hard to come by. Add competitive pressure, margin pressure, continued wage increases, and fewer releases of generic drugs, and the outlook—from a cost-containment standpoint, at least—continues to look dim. Grocery executives face budgeting salary increases that outpace inflation and erode margins.

To cope with rising labor costs, many grocers are turning to innovations in operations, with a focus on improving productivity. These include workflow automation, automated ordering systems and automated dispensing (robotics).

Though designed to increase pharmacist productivity, these efforts often fail to achieve ROI. National studies show that pharmacists continue to spend 30-50% of their time processing and filling prescriptions – a task better moved to more cost-effective means. Breaking all processes down to an effective measure such as cost-per-script can reveal significant opportunities to leverage the careful balance between productivity, safety and rising labor costs. Of course, this does not mean making the pharmacist work harder; it simply means identifying where labor improvement opportunities exists, and how to extract the benefits.

A FOUR-PART STRATEGY

Successful retailers have focused on four opportunity areas:

• Match Customer Demand With Hours of Operation. Balancing pharmacy hours of operation with the hours of increasingly mixed-use stores can carry different expectations from the customer’s viewpoint. Stores with low prescription counts have difficulty supporting extended early morning, late evening or Sunday hours. Using one constant, such as daily traffic patterns, to analyze by day of the week can provide eye opening results – especially on weekends (figure 1). This type of analysis should be conducted 2-3 times per year, especially in stores with cyclical seasonal changes due to weather and resort communities.
   
• Leverage Centralized Fill. Most pharmacies today employ some type of Automated Voice Response (AVR), which allows customers to call in and automate their dispensing refill requests. AVRs are interfaced with the billing and dispensing systems to allow for order processing. These systems can be activated remotely, enabling pharmacists from a centralized location, or lower volume store, to review the request, check for insurance issues, and ‘drop’ a label for printing – in other words, to prepare a prescription to be filled. This can be conducted remotely early in the morning, offsetting the need for pharmacists to start their day before the pharmacy opens – and saving as much as five to seven hours per week.

• Side-By-Side Benchmarking (figure 2). Benchmarking can help to identify over- and underperformers. Calculating a labor cost-per-script for each store can be used to create performance standards falling within the same performance range, and can reveal performance gaps. Using this type of analysis to identify where staffing rules, such as pharmacists-to-technician ratios, should be adjusted can enable those rules to be restructured to match those of the most efficient pharmacies.

• Robotics. A case for installing robotics in higher volume stores can often be made; these technologies can deliver an ROI in as little as 20-36 months. Building the case is not difficult, but achieving the results is often overlooked. While improved speed and resulting customer service is a benefit, identifying the specific pharmacy and/or technician labor hours to remove, or redeploy to other stores, is often overlooked, and can be aided with side-by-side benchmarking.

Cost-per-script can be used to optimize the balance between pharmacy productivity and safety and rising labor costs. Developing a standard set of metrics to benchmark stores against one another, while improving operational performance, can generate substantial results. Even a slight reduction in cost-per-script can be impactful: a regional grocer recently achieved a reduction of just ten cents per script, which produced over $2 million in annualized pharmacy labor savings.