Finance

Resources managed by pharmacy manager

Money, People, Time, Material resources, Information

Self-management level

Most frequently occurring level of management; involved in practically every decision we make

Interpersonal management level

Occurs between the manager and one other person

Organizational management level

Least frequent occurring level of management; involves actions that affect groups of people

Planning activity cycle

Predetermining a course of action based upon an organization's goals and objectives

Organizing activity cycle

Arranging activities and resources necessary for the effective accomplishment of goals and/or objectives

Leading activity cycle

Bringing about purposeful action by others to achieve the desired goals/objectives or outcomes

Controlling activity cycle

Reviewing the progress that has been made toward the objectives that were set out in the plan, then making appropriate changes or effectively seeking remedy

Income statement

Profit and loss statement or Statement of operation

Income statement definition

records revenues and expenses for a specific period and is dated for the period ended of a specific date

Net income formula

Net income = Revenues – Expenses

Net income definition

Amount earned after recording all expenses necessary to generate the sales recorded

Revenues definition

The inflows of assets from selling goods and providing services to customers

Expenses definition

The outflow of assets incurred in generating revenues

Balance sheet definition

lists total assets and total liabilities and portrays company's net worth at any moment in time

Balance sheet components

1. Assest

2. Liabilities

3. Equity

Assets

cash, inventory, accounts receivable

Liabilities

accounts payable, expenses

Equity

stocks, retained earnings

Statement of owner's equity definition

Retained earnings; displays components of the shareholders equity

Statement of owner's equity components

Common shares, retained earnings, and changes in these components

Statement of cash flow definition

Reports information about cash receipts (inflows) and cash payments (outflows) during a period

Statement of cash flow purpose

Highlights the ability to raise cash when needed

Operating activities

Transactions and events that determine net income, revenue, and associated expenses (cash received and disbursed for product sales, royalties, commissions, fines, lawsuits, supplier and lender invoices, and payroll)

Investing activities

Transactions and events that affect long-term assets, most notably the purchase of long-term assets (purchase of fixed assets and the purchase or sale of securities issued by other entities)

Financing activities

Transactions and events that influence long-term liabilities and owner's equity; transactions that involve the company's owners and creditors (sale of company shares, repurchase of shares, and dividend payments)

Ratio analysis definition

Expresses the relationship among selected items of financial statement data; the process of analyzing information in a financial report as it relates to another piece of information in the same report

Profitability ratios

Measure the ability of a pharmacy organization to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders' equity during a specific period of time

Liquidity ratios

Measure the short-term ability of a pharmacy organization to meet its financial obligations, which is significantly affected by the timing of various inflows and outflows of cash

Solvency ratios

Measure the long-term ability of a pharmacy organization to meet its financial obligations

Activity or efficiency ratios

Measure the efficiency of a company in using and managing its resources to generate maximum possible revenue

Location analysis demographics

Population size, age distribution, income, education, insurance coverage, and health needs of the area

Location analysis market demand

Prescription volume potential, disease prevalence, and demand for pharmacy and clinical services

Location analysis competition

Number, type, and strengths of nearby pharmacies and healthcare providers

Location analysis accessibility

Traffic patterns, parking, public transportation, ease of entry, and storefront visibility

Location analysis healthcare environment

Proximity to hospitals, clinics, physician offices, nursing homes, and other referral sources

Location analysis economic factors

Rent or property costs, operating expenses, projected revenue, and profitability

Location analysis regulatory factors

Zoning laws, licensing requirements, and state and local pharmacy regulations

Location analysis community characteristics

Local culture, language needs, socioeconomic status, and opportunities for specialized pharmacy services

Mass market definition

Large, broad group with shared needs

Market niche definition

A narrower segment needing specialized goods/services; must be sufficient size, growth potential, no competitors

4 P’s of Marketing

1. product

2. price

3. place

4. promotion

Product

The good or service (e.g., tablet color, service quality)

Price

The charge, including objective (actual) and perceived price, plus non-monetary costs (time, effort)

Place

Creating utility by having the product available (location, displays, home delivery, private counseling area)

Promotion

Strategies to make customers aware (advertising, personal selling, public relations)

Branding definition

A promotional technique to instill a distinct image; risk of rebranding is losing customers who think you went out of business

Integrated Marketing Communications

Ensuring consistency in name, colors, fonts, and voice across all marketing elements

Advertising definition

Long-term, one-way communication in paid media

Promotion definition

Short-term incentives (coupons, free products) to drive immediate sales

CUA (Cost-Utility Analysis)

compares costs and outcomes measured in utilities (e.g., QALYs)

CUA primary outcome

Cost per QALY gained

Methods for estimating utility

1. Rating scale

2. standard gamble

3. time trade off

Rating Scale utility

Simplest; rate health state on a scale (e.g., 0-10)

Standard Gamble utility

Gold standard; asks respondent to choose between a certain health state or a gamble (perfect health vs. immediate death)

Time Trade-Off utility

Alters the duration of time in a health state until indifference; utility = t/x

CUA calculation

CUAR = Δ Costs / Δ QALYs (Often used interchangeably with ICER)

CEA (Cost-Effectiveness Analysis)

compares costs (in dollars) to a single, specific, natural-unit outcome (e.g., cases cured, mmHg BP reduction, lives saved)

CEA final outcomes

Mortality

CEA intermediate outcomes

LDL levels - used when final is hard to measure

CEA calculations

1. ACER

2. ICER

ACER calculation

Total Cost / Total Effect

ICER calculation

(Cost1 - Cost0 / (Effect1 - Effect0); represents the additional cost for one additional unit of outcome

CE plane dominant

Quadrant II (More effective, Lower cost) =

CE plane dominated

Quadrant IV (Less effective, Higher cost) =

CMA (Cost-Minimization Analysis)

compares costs only when outcomes are proven to be identical or equivalent

CMA key assumption

Therapeutic equivalence (e.g., generic vs. brand, same clinical effect)

CMA limitation

Cannot be used if outcomes differ in any way

CBA (Cost-Benefit Analysis)

compares costs and benefits, with both measured in monetary units (dollars)

CBA Intangible Benefits

1. HC

2. WTP

Human Capital approach

Values life based on productive contribution to society (income and productivity); ignores QoL, pain, suffering

Willingness-to-Pay approach

Asks how much people are willing to pay for a benefit or to avoid an adverse event; incorporates patient preferences and intangible aspects

Net benefit formula

Total Benefits – Total Costs; decision rule: Accept if > 0

Benefit-to-Cost Ratio

Total Benefits / Total Costs; decision rule: Accept if > 1.0

Internal Rate of Return

The rate of return that makes benefits equal costs; accept if IRR > Hurdle Rate

Business plan step one

Define the business/program

Business plan step two

Conduct market analysis

Business plan step three

Assess clinical and quality requirements

Business plan step four

Define processes and operations

Business plan step five

Develop a marketing strategy

Business plan step six

Develop financial projections

Business plan step seven

Identify an action plan

Business plan step eight

Assess critical risks and opportunities

Business plan step nine

Establish an Exit Plan

Market analysis definition

Provides insights into potential customers and your competition; market refers to the customers of the program; market is described geographically and demographically

SWOT definition

Strategic planning framework used to evaluate strengths, weaknesses, opportunities, and threats

SWOT positive attributes

Strengths and opportunities

SWOT negative attributes

Weaknesses and threats

SWOT internal characteristics

Strengths and weaknesses

SWOT external characteristics

Opportunities and threats