Studied by 21 people
Big “L” leaders
the people who have a title and are in formal positions of authority
Little “l” leaders
person who leads regardless of their job title or position (ex: pharmacist)
Evolution of community pharmacy practice
1920-1949: Soda Fountain Era
1950-1979: “Lick, stick, pour, and more” Era
1980-2009: Pharmaceutical Care Era - MTM
2010-present: Post Pharmaceutical Care Era - CMR
Financial Statement
-“A window into the health of a company”
-How well the company is doing financially
-Always prepared on an annual basis; but may also be prepared on a quarterly and monthly basis
Income Statement
-Tells the financial story of a business over a specified period of time --most valuable for business planning
-Provides information about income (revenue), expenses, profit (net income) --computes income and expenses--
-May be referred to as the Profit and Loss Statement (P&Ls) or the “revenue and expense report”)
What does an Income Statement tell us?
-Where is the income coming from?
-How well is the organization doing, financially?
-Is it profitable?
-How much does it cost to run the operation?
-When are the costs highest? lowest? (monthly, quarterly, income statements)
-How much can we invest in the business?
Balance Sheet
-Tells you how much the company is worth (lists assets, liabilities, and owner’s equity)
-Done on a quarterly and monthly basis, in addition to annually
☆ Summary of the business at a given point in time (as of one specific date)
Used by potential owners, business owners, employees
Assets
What an organization owns (cash, investments, inventory, etc.)
Liabilities
What an organization owes (debt, accounts payable, etc.)
Owner’s Equity
-Net worth of a company that is left over if all assets are sold and liabilities paid (Assets – Liabilities = Owner’s Equity)
-Amount invested by shareholders
Balance sheet classic financial equation
assets = liabilities + owner’s equity
Internal review
is the business succeeding or failing?
External review
what resources are available in the business and how were they financed
Income Statement vs Balance Sheet
-Income Statement: covers an entire period --usually a year
-Balance Sheet: gives you a summary at a given point in time --typically the end of the financial year
The Statement of Cash Flows
-Detailed accounting of what happened to a business’s cash during a specified duration of time -- how much cash is flowing into an organization and how much cash is flowing out
-Gives you information about an organization’s ability to operate in the short and long term, based on how much cash is flowing into and out of it
cash flow from operating activities
revenue and expenses once business delivers its regular good and services
cash flow from investing activities
from purchasing and selling assets using free cash
cash flow from financing activity
cash flow from debt and equity financing
cash flow
cash flowing in and out of a business
profit
what remains in a business after all expenses have been deducted from revenues
4 financial ratios
working capital ratio
quick ratio
debt-equity ratio
return on equity
working capital ratio
☆ working capital ratio = current assets/current liabilities
-represents a company’s ability to pay current liabilities with its current assets
-measures if a company can pay off its debt in one year
-a ratio better than 1:1, such as 2:1 is optimal
quick ratio
☆ quick ratio = current assets - inventories/ current liabilities
-aka the acid test
-more informative
-companies should have at least a 1:1 quick ratio
-a quick ratio of less than 1:1, such as 0.9:1 is okay if the company is turning over inventory quickly
debt-equity ratio
☆ debt-equity ratio = long and short term (current) liabilities/ shareholder’s equity
-a check on if a firm is borrowing too much
-this ratio should be less than 0.23:1
return on equity
☆ return on equity = net earnings (after axes) - preferred dividends/ common equity
-determines how profitable an investment is in a firm
-the higher the return on equity the better
pharmacy performance metrics
-measure how well a pharmacy is performing and how productive employees are
-the metrics include payroll ratio, net dollars per prescription, number of rxs/employee hours, return to stock %, gross margin per prescription
payroll ratio
☆ payroll ratio = total payroll expenses/ total revenues
-an efficiency measurement
-goal is to be less than 14%
number Rx/employee hours
☆ number Rx/employee hours = total number of prescriptions / total pharmacy employee hours
-track it over a month at the minimum
return to stock %
☆ return to stock % = % of prescriptions filled that were returned to stock (RTS)
-extremely wasteful
gross margin/prescription
☆ gross margin/prescription = revenue from all prescriptions - cost of prescriptions/ revenue from all prescriptions
-has direct impact of your ability to pay your expenses
-affected by the type of prescriptions dispensed, prescribers. insurance plans
Key Constituents (Managed Care Pharmacy)
Patients: receive benefits but they pay for them in most cases
Payers: pay bottom line for the claims; ex: government (medicare, medicaid), insurance plans, pharmacy benefit managers, employers
Employers: pay claims directly or pay premiums to insurer
Major goals of payers
-Provide a meaningful benefit package
-Moderate the amount of an individual’s out-of-pocket costs (how much their clients have to pay)
-Moderate the cost impact of the benefits on the bottom line (how much they themselves have to pay)
-It is a balancing act, can’t charge clients too much because they will leave but also can’t cover too much because then no profit will be made
Drug Utilization Review
-Comprehensive review of a patient’s prescription and medical history with the goal of ensuring patient safety and identify cost-saving opportunities
-Prospective DUR
-Concurrent DUR
-Retrospective DUR
Prospective DUR
-Preformed prior to medication dispensed; find problems before drug is dispensed
-Typically performed on a new medication
-Looks for drug-drug and drug-disease interactions, dosing appropriateness, medication allergies, clarity and completeness of directions
Concurrent DUR
-Patient’s drug regimen is evaluated during treatment (therapy can be altered)
-Looks for over and underutilization of medication, excessive or insufficient dosing, drug-drug interactions
Retrospective DUR
-Review previously administered medications to reveal trends in prescribing, administering, and dispensing of medications (done after claim was dispensed)
-Looks for appropriate use of generics, patterns of inappropriate use of medications, medication use that is inconsistent with evidence-based guidelines
PBM
-Pharmacy Benefit Manager
-The insurance company pays the PBM to manage its drug costs, and get rebates from manufacturers (the PBM often retains a portion of the rebate)
-The PBM negotiates with the pharmacy over reimbursement for drugs and dispensing fees
-The PBM also negotiates prices with the manufacturer, which then pays rebates to the PBM for preferred placement on a plan’s formulary
Tiered cost-sharing networks
3 tiered drug formulary/copay structure → generic drugs, preferred brand name drugs, non-preferred brand name drugs
4 tiers → preferred generics
5 tiers → specialty drugs
(different tiers in a copay will have different values like $10, $20, $40, etc.)
Pros vs cons of tiered cost-sharing networks
Pros
-makes patients think about their pharmacy benefits
-affects utilization
Cons
-confusing to patients
-many patients do not read or understand details
Limits of specialty and biotech drugs
-Less than 2% of prescriptions
-51% of national drug spend
-Limited competition
-Higher inflation rates compared to other branded drugs
-Onset of biosimilars has been slow
-Great financial burden on patients
-Often placed in specialty tier -higher price or co-insurance
Pros vs cons of limits of specialty and biotech drugs
Pros
-Minimizes waste of expensive drugs
-Prior authorizations ensure that the drugs are prescribed for proper indication and administered in proper doses.
-Partial fill programs – 30 days supply-ensure adherence and monitor tolerance
Cons
-Delayed therapy
-Anxiety on part of patients
-Higher out-of-pocket costs often triggers non-adherence or noncompliance
-Media stories about restrictions
Step Therapy
-Definition: it requires member to try most cost effective treatment before proceeding to more expensive treatments or treatments that are more difficult to use
-13% for orphan drugs, 33% of non-orphan drugs
-Disease states such as rheumatoid arthritis, MS, cancer, etc. usually have step therapy
-This is the most common restriction to specialty drugs
Pros vs cons for step therapy
Pros
-Explores alternative therapies
-Helps to keep costs down
-Keeps risks to a minimum
Cons
-Patient may have to use unnecessary or inefficient therapies
-Can increase drug costs
-Frustration, non-compliance, self-medication
Mail order service(s)
-over 85% of plans
-estimates of one-third of all chronic medications filled through mail-order pharmacies
-should be noted that now, many drug plans allow patients to obtain a 90 day supply from their community pharmacy
Pros vs cons of mail order service(s)
Pros
-Better adherence (refills)
-Convenience (delivers right to your door)
-Appropriate for subgroups of patients – stable chronic conditions
Cons
-Missing regular contact with a pharmacist (elderly, patients on multiple drugs, multiple comorbidities)
-Could be wasteful
Prior Authorization
-Virtually all drug plans
-Requirements by payers to approve a medical service, treatment plan, medication or a piece of durable medical equipment before it is provided
Pros vs cons of prior authorization
Pros
-Savings of $1.9B for Medicare from 2012-2017.
-AMA, APhA, AHIP – joined forces to improve the system
-Some reduction of unneeded services
Cons
-Have resulted in patients deferring or abandoning treatment
-Bottleneck (constraint) for patients
-“Number-one administrative burden” cited by physicians
-Communication between stakeholders is delayed
-No prior authorization electronic submission standards
Preferred Provider Networks
-very popular amongst plans
-provider accepts predetermined fees for covered drugs
-patients are incentivized to use these providers (smaller deductibles, lower cost-sharing, etc.)
-growing popularity
Pros vs cons of preferred provider networks
Pros
-Resulted in 1% decrease in drug cost for Medicare Part D
-Results in lower drug costs for plans
-Have a significant effect on pharmacy demand
Cons
-Narrow networks will reduce enrollment in plans
-Medicare Part D- members are willing to pay $82 more annually for a comprehensive network
What can you do for patients about all these different strategies?
Educate them (how each strategy or plan works, why it is in place, what they can expect, what they can do if they disagree with strategy or plan)
DIR Fees
-Direct & Indirect Renumeration
-These are fees that are taken away from the pharmacies by the PBMs
-They are generally collected before and after point of sale
-They concern both community and specialty pharmacies
-Increasing over the past 10 years (grown by over 107,400% between 2010 and 2020)
-Have a significant impact on pharmacy profitability
-Can be in the form of 1. manufactures rebate (direct DIR) or 2. concessions paid by pharmacies (indirect DIR)
-They were created with the Medicare Part D legislation -were meant to be incentives for pharmacies
-Originally DIR fees were the reconciliation between the claim price and the negotiated price
-Now they are fees taken from pharmacies after the sale due to performance measures or due to price decreases (can be months after sale)
Why the debate over DIR fees?
-DIR fees create losses in revenue that could surpass the acquisition cost of the drug – “negative reimbursement”
-Pharmacies are losing money
-PBMs argue that pharmacy DIR fees are necessary to bring drug costs down, that they allow for savings, and that they pay for performance
Clawbacks
-Most debated
-PBM charges a DIR fee after the point of sale – can come months after dispensing (this makes them hard to predict and can create tax issues)
-Patients are likely to pay more out of pocket costs – higher copay at point-of-sale
-More frequently with generics
-Varies by pharmacy
2 types of DIR fees
Flat Fee/Flat Dollar
-More common in community pharmacy
-DIR fee can be higher than reimbursed payment – loss for the pharmacy
-Seen more commonly with generic drugs
Percentage
-More common in specialty pharmacy
-Higher price of specialty drugs create a higher DIR fee = thousands of dollars in a single fee
Performance measures
-refill rates
-generic dispensing rates
-preferred product rate
-audit performance/error rates
-”star rating”
Star Rating
-PBMS use Medicare Star Ratings as a basis for quality measures (CMS program to rate insurance plan sponsors, not pharmacies; Insurance companies who get a “5-star” rating get extra incentive payments from CMS)
-Ratings cover six categories: Staying healthy, Screening tests and vaccines, Managing chronic long-term conditions, Member experience with the plan, Changes in the health plan’s performance, Health plan customer service
-PBMs now have their own “star ratings”
CMS (Center for Medicare and Medicaid) Ruling
-This rule eliminates PBMs retroactive application of direct and indirect DIR fees, beginning in 2024 – does not eliminate fees altogether
-DIR fees must be reflected in the negotiated price that patient pays at the pharmacy counter
-Greater transparency for both patients and pharmacies
-CMS also eliminated a provision that would have allowed health plans to decide how much savings can be passed to the patient at point of sale
-Sets a floor for lower possible reimbursement
-Allows for bonus payments for improved performance
-Who benefits from this ruling? → patients (reduced out of pocket fees) and pharmacies (increased predictability, no more retroactive fees)
What does the CMS ruling not do?
☆ Does not eliminate PBMs use of DIR fees
-CMS acknowledges but does not address impact on pharmacy cash flow
-Does not close other loopholes – such as negative reimbursement and patient steering to PBM-affiliated pharmacies
Medicaid
-Principal source of long-term care coverage
-Finances 1/5 of all personal health care spending in the U.S.
-Significant source of financing (revenue) for: hospitals, community health centers, Physicians, Nursing homes, Pharmacies,Jobs in the health care sector
-Based on income levels, set by federal government and state
Two guarantees of the Medicaid program
All Americans who meet the eligibility requirements are guaranteed coverage
States are guaranteed federal matching dollars without a cap for qualified services; match rate is at least 50% and match can be as high as 75% for poorer states
(Also every state medicaid program covers prescription drugs; though this wasn’t always the case)
Who medicaid covers
low income families
individuals with disabilities
elderly individuals
Medicaid Managed Care
-Traditional Medicaid got too expensive so they started to enroll people into managed care plans
-Over 2/3 of all medicaid enrollees are in a Medicaid managed care plan now
-Private managed care plans have contract(s) with states to provide comprehensive services for their enrollees
-Managed care plans ensure access to service and are at financial risk for the costs of care
-Children and families, as well as individual with special needs, may be enrolled in a Medicaid managed care plan
Difference between traditional Medicaid and Medicaid Managed Care
Traditional Medicaid:
-States oversee enrollment
-State pays all of the claims submitted by providers
-State at risk for all health expenditures
Medicaid Managed Care:
-Managed Care plans enroll with state oversight (the state just makes sure whoever enrolls is eligible)
-Plans pay the claims; state only pays enrollee premium for coverage
-State only at risk for payment of premiums (state only pays premium fee every month and nothing more than that)
Benefits of Medicaid
-Contributed to decline in infant and child mortality
-Improved long-run educational attainment
-Reduced child disability
-Lower rates of hospitalization and ER visits later in life
Medicare
-It is a federal insurance program for people ages 65 and over, regardless of income, medical history, health status, and those under 65 with a long-term disability (i.e. ESRD)
-Covers: Hospitalizations, Physician visits, Prescription drugs, Preventative services, Skilled nursing and home health care, Hospice care, Radiology, laboratory, physical therapy
-20% of total national spending
Part A
(Traditional Medicare)
-Came 1st
-Funded, paid and run for by federal government
-Covers inpatient hospital stays, SNF, some home health visits, hospice care
-Benefits subject to a deductible - $ 1,600 in 2023 (have to pay $1600 first, out of your own pocket, before gov. will start paying)
-In order to get Part A for free you have to work for 40 quarters (10 years); otherwise $499/mo. premium
Part B
(Traditional Medicare)
-Came 2nd
-Funded, paid and run for by federal government
-Covers physician visits, outpatient services, preventative services, some home health visits
-Benefits subject to a deductible ($226 in 2023), monthly premium of $164.90 in 2023 and 20% co-insurance (does not matter how many months or years you worked you still have to pay the 164.90 every month and also 20% of the bill [if you get a bill])
-Covers drugs that are usually not self-administered (if a drug is self-administered or not part of a doctor’s service, Part B generally will not cover it)
Part C
(Medicare Advantage)
-Came 3rd
-Covers Part A and Part B benefits, and possibly Part D.
-Funded and run through a private insurance company (run by health plans, all private, no government).
-Cost sharing (deductible, copays) varies by plan. In 2018, 34% of all Medicare beneficiaries were enrolled in Part C plans.
-Typically includes prescription drug coverage which eliminates the needs to purchase Part D insurance.
-But networks do not include all providers (so with A, B, D you can go anywhere -any hospital, clinic, country, etc. and they will still pay at least a little bit; but with Part C, if the hospital, clinic, country you go to is not on their list, they won’t pay anything at all)
Part D
(Traditional Medicare - Stand alone plans)
-Came 4th
-Funded, paid and run for by federal government
-What is it? → outpatient drug coverage
-Outpatient prescription drugs through private plans which contract with Medicare
-Cost sharing varies by plan
Part B covered drugs
-Flu shots – one flu shot per flu season
-Pneumococcal immunization – also covers second shot one year later
-Hepatitis B – series of three injections for those at high risk
-Other vaccines – tetanus
-Blood clotting factors
-Immunosuppressive drugs
-Oral cancer drugs – if same drug is available through injection or is a prodrug of the injectable drug
-Oral anti-nausea drugs – must be administered within 48 hours of chemo
-Durable Medical Equipment (DME) drugs – drugs infused through an item of DME such as infusion pump or nebulizer
-Injectable and infused drugs – necessary, reasonable and not self-administered
-Some antigens
-Erythropoiesis stimulating agents – ESRD-related anemia
-Parenteral and enteral nutrition
-Intravenous Immune Globulin provided in the home
Part D covered drugs
Drugs:
-Available only with a prescription
-Approved by the FDA
-Used and sold in the US
-Used for a medically accepted indication (Social Security Act)
-Not covered by Part A
-Not covered by Part B
-Included on the plan’s Part D drug formulary
-Non-formulary drug covered through exceptions or appeals
-All commercially available vaccines (Shingles) except for immunizations covered by Part B
Drugs not covered by Part D
-Drugs for weight loss or gain
-Drugs used in the treatment of erectile dysfunction
-Drugs used for symptomatic relief of colds and cough
-Non-prescription drugs
-Drugs for cosmetic purposes or hair growth
-Drugs used to promote fertility
-Prescription vitamins and minerals
Medicare supplement- Medigap
-Your doctor provides medical service and bills Medicare
-Medicare pays the approved portion of the bill and sends the excess amount to Medigap
-Your Medigap Plan pays the excess amount left over, according to the plan’s terms
Inflation Reduction Act of 2022
-Effective 8/16/2022
-Significant impact on Medicare Part D
-Changes to Medicare Part D will have an impact on patients, pharmacies, drug plans and manufacturers
-For the first time, requires the federal government to negotiate prices for some top-selling drugs covered under Medicare
-Requires drug companies to pay rebates if prices rise faster than inflation for drugs used by Medicare beneficiaries
-Eliminates 5% coinsurance for catastrophic coverage in Medicare Part D in 2024, adds a $2,000 cap on Part D out-of-pocket spending in 2025, and limits annual increases in Part D premiums for 2024-2030
-Limits monthly cost sharing for insulin products to $35 for people with Medicare
-Expands eligibility for Medicare Part D Low-Income Subsidy full benefits
-Eliminates cost sharing for adult vaccines covered under Medicare Part D and improves access to adult vaccines under Medicaid and CHIP
-Further delays implementation of the Trump Administration’s drug rebate rule
Why is Marketing Pharmacy Important?
Pharmacy evolution from a product focus to a patient focus
Need to build the supply and demand for new pharmacy services
Marketing, critical to the successful evolution of the profession – advocacy component
Innovative pharmacy services can help optimize patient outcomes
What is Marketing?
It is the art and science of choosing target markets and getting, keeping, and growing customers by creating, delivering and communicating superior customer value
Marketing’s Key Priorities
Identify new opportunities
Promote new products/services/programs
Attract customers
Retain customers and build loyalty
Fulfill requests and orders
wants
not required for survival, but a desire for a specific satisfier of a need
needs
basic human requirements for health, safety and well being
demands
a want that is supported by the willingness and ability to pay
Negative Demand for Healthcare
Occurs when the major part of the market dislikes or doesn’t want your products or services
Problem for healthcare providers
People often do not want healthcare related goods or services (Rx medications = negative goods)
Sometimes demand > need - i.e. prescription drug abuse
Sometimes demand < need - i.e. immunization programs (ppl don’t want to get vaxxed)
Kotler’s Five Competing Concepts
PRODUCTION – product readily available at low price (think dollar store)
PRODUCT – quality, performance, innovative (think luxury cars)
SELLING – sales & promotions to coax purchases of things consumers might not normally make – “stack it high and let it fly” (think car & truck commercials)
MARKETING – focus on the needs of the buyer and creating, delivering and communicating customer value (think consumer/patient focus companies)
SOCIETAL MARKETING = focus on preserving or enhancing the consumer’s and also society’s well-being (think solar panels or electric cars)
4 ways to obtain a product or service
Exchange/Barter
Self-production
Coercion/force/theft
Begging/Public Welfare
Define exchange
The process of obtaining a desired product by offering something in return
Define transaction
The trade of values between two or more parties
Kotler’s Four Primary P’s” of Marketing
Product
Price
Place
Promotion
Other P’s to consider:
Positioning
Participation
People
Product
Product = goods, services or ideas offered by an organization to meet the customer or patient’s needs
Any item of value to somebody
Price
Pricing is based on:
-Cost to produce, distribute and sell
-With a reasonable profit for effort and risk
-Equivalence to competitors’ prices
-Demand for the product
-Target markets’ perception of the product benefits
Price = what the consumer has to give up or sacrifice to obtain a product or service
-Includes non-monetary outlays
Loss Leader – product offered at a loss for the purpose of increasing sales in other areas
Pricing Strategies
Cost-plus pricing (generate certain percentage of profit)
Value-based pricing (use patient perception of the quality of service; high quality = increased price)
Competitive pricing (mirror price of competitor)
Closeout pricing (provide steep discounts to minimize loss rather than making a profit; avoids waste)
Discount pricing (% off the usual pricing; coupons)
Membership pricing (decreasing price w/ membership)
Loss-leader pricing (reduce price of selected products to attract consumers to purchase other items to make up for lost revenue)
Psychological pricing (make price more psychologically appealing; i.e. 9.99 instead of 10.00)
Bundling & Quantity discount pricing (reduce price for buying in bulk; i.e. buy one get one 50% off)
Place
Place = distribution of the product or service or how and where these are accessed by the consumer
Includes physical location or virtual location
Enhancing pharmacy patient access:
–Pharmacies in medical office buildings
–24-hour pharmacies
–Drive-thru pharmacy windows
–Medication delivery services
–Drug dispensing machines
Promotion
-Promotion = set of strategies designed to make customers/patients aware of goods and services
-Seek to inform, remind, persuade and induce action
-Four Primary Methods:
Advertising
Publicity
Sales Promotion
Personal Selling
The Additional P’s of Marketing
-POSITIONING = the process used to create an image, logo or brand of your company
-PARTICIPATION = actively engaging with one’s customer base through dialogue
-PEOPLE = the type of people the organization employs and how they perform and behave
Branding
-Brand = "name, term, sign, symbol, slogan or logo design” that identifies and differentiates an organization.
-Objectives of a Good Brand:
-Delivers your message clearly
-Confirms your standing in the marketplace
-Connects your potential customers emotionally
-Motivates the buyer
-Firms up user loyalty and trust
-Connected to your culture
Still More P’s of Marketing
-PROCESS = the method or sequence in which a service is created, produced or delivered.
-PRODUCTIVITY AND QUALITY
–PRODUCTIVITY = efficiency of transforming service inputs into outputs (fast fill)
–QUALITY = degree to which a service meets the needs, wants and expectations of customers (accurate fill)
-PHYSICAL EVIDENCE = appearance of the physical environment where the service is delivered
Other Concepts in Marketing \n Related to Customer Service
-Expectations
-Satisfaction
-Quality
-Value
-Loyalty
-Relationships
Expectations
Expectations = internal standards used by customers when evaluating a product or service
Conceptual model related to expectations:
–Desired service level (hope to receive)
–Adequate service level (minimum accepted)
–Predicted service level (most likely to receive)
–Zone of tolerance (difference between adequate and desired)
Satisfaction
-Satisfaction = “a person’s feeling of pleasure resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations” Kotler and Keller
-Negative disconfirmation: performance is worse than expected
-Confirmation: performance = expectations
-Positive disconfirmation: performance exceeds expectations
Quality
-Quality = superiority or excellence
Objective Quality
measurable and verifiable superiority based upon a predetermined standard (such as timeliness of Rx fill). e*.g Consumer Reports metrics*
Perceived Quality
assessment made by a consumer based upon something more than the product’s attributes such as the entire patient experience. e.g. customers perceptions
Note 
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