July 7, 2020
Independent pharmacy owners have always had to strike a balance between taking care of patients and running a complex business. And as their business expands to three, five, or twenty pharmacy locations, so do operational responsibilities. Multiple locations mean more patients, more employees, and more challenges. Success reaps bigger rewards, but mistakes mean bigger consequences. To help tackle the unique challenges of operating multiple pharmacies, we spoke with leaders from three independent pharmacy businesses on the biggest issues they face juggling multiple locations and the solutions they use to rise to the challenge.
The challenge looming largest in the minds of owners of multiple pharmacies is the financial hit they are taking from PBMs. Increased DIR fees and low reimbursements are making it difficult to make ends meet.
Jennifer Clayton, CEO of Clayton Drug, which has three locations in Iowa, said, “When you’re small, it’s a lot harder to weather the reimbursement changes as well as the drug price fluctuations, and that’s something we have very little control over.” Instead, the pharmacy focuses on what it can control: its inventory turnover. “It’s an art of making sure you have enough stock to serve your clients but also have enough cash flow to maintain your operations.” One inventory management mistake—like overstocking on biologics—can cause the pharmacy to have a price swing of $50,000 in a matter of two weeks.
To keep a handle on turnover, Clayton uses Computer-Rx software to monitor fluctuations, assess order points, and review reports. She keeps a constant eye on expensive medications, making sure to immediately return any if a patient discontinues them. She also educates her staff on why inventory management is so important, even if it’s not the most glamorous part of the job. “If we can look at these reports and make that one of our primary management skills, then we’ll have more money to create an extra MTM day or more time for clinical services,” she said.
David Hendler, who served as COO of Ritzman Pharmacies from 2015 to 2019, watched profit margins fall over the years from the high 20s to under 10 percent due to the increasing influence of PBMs. Because pharmacies can’t control reimbursements, Ritzman also chose to focus on what they could control. “Where community pharmacists can make the most cost-saving impact is through cost of goods and through expense control,” he said. “Those are the only two areas that are left.”
Like Clayton, Ritzman Pharmacies turned to their pharmacy management system, PioneerRx, to help. “Your tools are only good tools if you use them. Pharmacy systems today have got a lot of information built into them that can help you save cash,” Hendler said. “The problem is, a lot of folks don’t use them.” Getting to know their pharmacy management system and taking advantage of all the information it provided was crucial in helping Ritzman stay profitable.
For a better cost of goods, Ritzman used ProfitGuard, a unique group purchasing service that compares bids across multiple wholesalers and guarantees improved contract terms and pricing for its members. It also provided Ritzman with a proprietary, automated purchasing tool that maximizes wholesaler rebates and savings on every item of inventory. Hendler estimates ProfitGuard saved Ritzman $200,000 a month on its cost of goods, or about $10,000 per store per month for the 20-store chain. And the automated tool reduced ordering time for the Ritzman staff by two hours per day in each store, giving that time back to the pharmacies to work with patients.
Bretton and Stacey Walberg own and operate 11 retail pharmacies and one long-term care location, in Pennsylvania and Ohio. They focus their efforts on synchronization, which reduces expenses and saves the pharmacy substantial time. “It makes our pharmacies as efficient as possible so we can use our staff appropriately,” Bretton explained. A large part of their med sync process is creating adherence packaging for more than 2,000 patients per month, which makes life easier for the patient, physician, and pharmacy. Much of the adherence packaging occurs through their closed-door LTC pharmacy, which receives higher reimbursements and lower DIR fees. “That’s been the niche that’s been really helping us in the past couple of years,” Bretton said.
Technology has also been instrumental to Walberg’s profitability. “We really try to be proactive with technology so that we are as efficient, effective, and accurate as possible,” Stacey said. They use Parata systems at each retail pharmacy, which helps with volume and efficiency, and they make frequent use of PioneerRx, which touches nearly every part of their operations, including their purchasing.
“It really has the ability to be a one-place software where we can do data entry once, and it allows us to import or export that to other platforms without any difficulties,” Bretton explained. “The other thing is that it has a robust capability to handle many suppliers in the system. Instead of talking to five different third-party vendors, we import the EDI and allow the computer system to do the ordering for us. It’s something that has been tremendously helpful for us.”
With multiple locations, owners can’t just make an announcement in the store and be sure that all of their employees are in the know. Communicating effectively to all employees means that owners and managers have to be organized and intentional.
To Hendler, good communication bridges the people, process, and execution of the business. “When you’re communicating about a new initiative to gain patients, you have to be very clear about what you want to accomplish. The steps also have to be clear, and then training goes along with that,” he said. “No one thing can happen in a vacuum.”
No matter how a message was communicated—be it by email, phone, or an intranet system—Hendler tried to make “eye contact” to ensure everything was fully understood. Even if multi-unit managers aren’t necessarily looking at staff members face-to-face, they can check in with questions that confirm understanding.
To stay connected with all their stores, the Walbergs have recently adopted the philosophy of an “entrepreneurial operating system.” Once a week, they meet with a team that includes their director of operations, business development manager, controller, marketing manager, and clinical consultant pharmacist, and discuss the issues that are facing the pharmacies. “Everyone takes four problems, and then next week we come back and all those things have been solved. Suddenly, we’ve conquered 28 things,” Bretton said. The system gives them a big picture view of the pharmacy that they wouldn’t have if they were running around putting out fires as they started. ”That has been very powerful,” Bretton said. “It was our new initiative for 2020 and we’ve gained so much traction and foothold. It’s made a huge difference in our organization.”
They also perform in-store surveys for employee satisfaction, to see how well they feel they are being equipped or trained for their job. They use the results from those surveys to stay connected with people on the ground and make changes to strengthen their workforce.
Even though she’s busy juggling the business aspects of the pharmacies, Clayton finds time to work as a staff pharmacist at one of the locations. “I feel like staffing as a pharmacy owner and being down in the trenches with the pharmacy team has been really important,” she said. “Not only am I telling them how to do things, I’m doing it with them.”
She and her store managers email on a daily basis and have conference calls once or twice a week to keep each other clued in on what’s happening at each store. She said, “The benefit of having the three stores is that we can share and learn from each other.”
With locations in several different towns, owners of multiple pharmacies must strike a balance between presenting a unified brand and catering to the needs of individual communities.
“We feel that it’s important to have a consistent image out there, one that really shows who we are as a local, family-run independent business. We’re not a chain or a big corporate company,” said Stacey Walberg.
The Walbergs have found success in communicating on social media with short videos. When it comes to paid marketing efforts, they still run ads in their local papers, but the bulk of their marketing money is spent on supporting little league teams, rotary clubs, schools, and church groups in their community. “If there is a community function asking for local businesses to be there, we’re there,” Stacey said. “We’d do county fairs, especially when we started doing strip packaging, because we found that people really needed to see it and touch it. Print or TV advertising wouldn’t do it justice.”
One of their most successful marketing efforts has been the “Waffle Wednesday” they host at local senior centers. Members of the pharmacy staff cook waffles and provide free breakfast to residents, and the event serves as an opportunity both to get to know the community and let people know about the services they provide.
Personal interactions also lie at the heart of Clayton Drug’s marketing efforts. “Since we’re in smaller communities, each community has its own needs,” Clayton said. “We obviously do Facebook and social media, and we use local newspapers and radio stations. But what I found, and what I’ve always found, is that if you provide a good service, word of mouth in a small community is your best source of marketing.”
Two of Clayton’s pharmacy locations are participants in CPESN’s Flip the Pharmacy initiative, which encourages staff members to provide more education at the pharmacy window. She explained, “Someone might not be sold on something the first time you talk about it, but if you continue to talk to a patient about a service or product you think might benefit them, they come around to it and start asking questions about it.”
Often, Clayton Drug pharmacies will have flyers at their pharmacy counter to educate patients about new products or services, and then patients will hear about them again from the pharmacy technician. Clayton attributes the success of their medication therapy management program to the face-to-face marketing they do with patients who walk into the pharmacy.
When a pharmacy grows to more than a couple locations, owners and operators can no longer be present as a manager 100 percent of the time. Managing managers and creating consistent performance becomes essential. “A big thing from a multi-unit perspective is that you have to rely on others to get stuff done,” Hendler said. At Ritzman, Hendler developed standard operating procedures to ensure managers were on the same page and each pharmacy ran smoothly. “The more things that each store is doing the same way, the better chance you have to achieve high-level execution,” he said. “Creating those processes and documenting them is very important.”
Clayton Drug holds quarterly meetings to discuss policies and procedures for their pharmacies, and Clayton says that participating in Flip the Pharmacy has helped them formalize their meeting and management structure. “We have a Flip the Pharmacy technician lead, and we also have a front-end lead,” she explained. “The pharmacy manager is responsible for meeting with the different leads in the store to talk about expectations and goals. We also have an inventory manager, and we’ll talk about our monthly goals and quarterly goals.”
Most of the upper management employees at the Walbergs’ pharmacies are pharmacists, and they are afforded a certain degree of independence when it comes to the day-to-day operations of their stores. “We do our best not to micromanage our retail locations. Rather, we allow them to operate within a scope of practice,” Bretton said. “We don’t tell them where to put their pens and where to put their scrap paper.”
Despite the independence of the managers, the Walbergs want to ensure patients still have a uniform experience no matter which pharmacy they’re walking into. “We rotate positions throughout our company,” Bretton said. “Everybody knows how to do data entry, everybody can count, everybody can run the cash register.” This way, patients get stellar service at every location—even if the star cashier is out on vacation.
Pharmacists today are pulled in multiple directions while they’re on the job. It’s a stressor that Clayton sees her staff pharmacists dealing with daily. “We’re in this zone right now where we’re transitioning out of the dispensing role and into more of a clinical role, but we’re expected to do both at the same time,” she said. “Trying to find a way to do that within an eight-hour shift is hard, and it’s hard to place that expectation on the pharmacist.”
Many of the clinical services Clayton Drug provides are free to patients, and data is being collected to prove their value to insurance companies. Even though their popularity bodes well for the pharmacy’s future, it can result in team members being pulled in several different directions. “You have someone on the phone, there’s somebody at the window, and there’s someone waiting for a blood pressure test,” Clayton said. “You can only do so much at one time.”
Running with a lean staff means Clayton Drug has to get a little creative to make sure all patients are getting the care they need, whether they come in for dispensing or clinical services. Clayton has found that using technicians at the top of their license has been crucial in helping pharmacists balance their many responsibilities.
Hendler also saw pharmacists being pulled between the pharmacy’s business interests and their patient-facing role while he was at Ritzman. But in this respect, pharmacies with multiple locations have an advantage that single-location stores do not.
“You have a great opportunity to look for things that you can bring upstream and do more efficiently in a central environment. Then, you free up pharmacists to have more time to spend with patients,” he said. Managers of multiple pharmacies should always be looking for things they can pull off their pharmacists’ plates. Ritzman took ordering out of individual stores’ responsibilities by adopting ProfitGuard, which helped the chain centralize its buying.
“The whole concept of centralization, and having a core group that’s managing the business outside of the pharmacies, can make a multi-unit situation really appealing for an operator,” Hendler said. “I can accumulate a bunch of functions done at individual stores and open up the stores’ time for other things while using less overall manpower.” While owners of single stores have to force themselves to designate time to think about strategy and financials among the chaos of everyday pharmacy business, larger operations can designate an employee—or a team of employees—to think about the pharmacy’s business performance as their full-time job.
This article was published in our quarterly print magazine, which covers relevant topics in greater depth featuring leading experts in the industry. Subscribe to receive the quarterly print issue in your mailbox. All registered independent pharmacies in the U.S. are eligible to receive a free subscription.
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