Chain pharmacies have a significant footprint in the market, even after consolidation in recent years. Whether these are national, regional, or multiple-location independent groups, they are working their hardest to reach new service levels and roll out offerings that will have a positive impact on patient care and increase revenue.

This market segment certainly played a strong role in the COVID-19 response as well. Here we take our annual look at the top technology, patient care, and operational challenges and priorities for chains, diving into the details with several to find out what they are doing not just to stay afloat, but to thrive.

Med Sync: Standard of Practice

Med sync has been a major component of pharmacy practice for some years now, and it’s truly become the standard of practice in the chain market. All the chains we spoke to have med sync as part of their patient care strategies, with one chain reporting using med sync for up to 70% of prescriptions and offering an example of the success that is possible. This strong program enrollment makes a significant contribution to the chain staff’s ability to manage high prescription volumes. However, not every chain has ramped the program up fully. One chain reported that between 25% and 30% of prescriptions are in the sync program, and that it is actively working to improve this number by increasing outreach to patients, incentivizing staff to enroll patients, and streamlining med sync workflows.

Other benefits of an efficient med sync program, as outlined by a third chain, include time savings and better inventory management, for example making it so that the chain is ordering high-dollar items for just-in-time delivery based on sync calendars, rather than having that inventory sitting on the shelves.

Need for More Built-in Features

In a competitive market such as pharmacy, you don’t want to get caught flat-footed. This certainly applies to the demands that chains place on their pharmacy management systems. While this software has been evolving rapidly to incorporate new features, chains continue to find areas for improvement.

Documentation of clinical encounters is one such area, according to one chain. Here there’s a need for an ability to use the pharmacy management system to simplify and standardize the questions in a clinical encounter, and provide an in-workflow, structured way to document the responses. This might be accomplished using drop-down menus. This chain offered its med sync workflow as an example of an area that would benefit from better-structured documentation. In this case, the pharmacy makes a regularly scheduled call to the patient, and staff are supposed to ask the same set of questions each time, such as: Have any of your medications changed? Have you visited your doctor recently? Have you been hospitalized? Right now there’s no prompt for these questions within the pharmacy software, and the answers are recorded in a text field. The lack of structure here increases the burden for the staff, and in this chain’s view reduces staff acceptance of the sync program, leading to lower enrollments.

Another good example of the significance of structured clinical documentation within the workflow opportunity are various programs that pharmacies can participate in with Medicare MCOs (managed care organizations) to manage patients with, for example, COPD (chronic obstructive pulmonary disease). In this case, there’s a standard questionnaire, the COPD assessment test (CAT), that pharmacy staff need to complete. A pharmacy would benefit from being able to build out a structured version of the CAT within the pharmacy system.

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This chain notes that it would also be helpful to ensure that patients are easily flagged within the system when they need a clinical interaction such as a CAT. This would go a long way to ensuring that pharmacy staff don’t miss an opportunity to perform this task and that the chain can generate revenue from the interaction.

Another chain sees point of sale (POS) as an area that needs improvement. In this case, the chain is looking for its pharmacy system vendor to provide a robust, tablet-based mobile POS that will allow the staff to ring people up without being tied to a workstation. While these systems are out there, for example from vendors that specialize in POS, they aren’t necessarily part of the offering from pharmacy management system vendors that also offer POS systems.

Another area of need mentioned when it comes to POS is an enhanced loyalty point system, so that a chain can provide incentives for customers that are competitive with other retailers.

Chains are seeing a growing need for Medicare Part B billing capabilities as well, and again this functionality would be best if built right into the pharmacy management system rather than being a bolt-on service. The need for this has become more acute as chains have responded to the COVID-19 pandemic by administering high volumes of tests and vaccines, both of which are billed to the medical benefit. And as we see a little later on, chains have plans to build out the work they’ve done with COVID-19 testing and vaccination programs to ramp up other vaccine and point-of-care testing programs. So the demand will remain for strong medical billing tools that are built right into the pharmacy system workflows.

Next on the list of needs is a way to manage inventory chain-wide that’s built right into the pharmacy software. For example, one chain mentioned that the staff should be able to review 20 NDCs every day for the amount on hand and dispensing history. If they find slow movers, then they should be presented with the option to return the stock or to transfer it to another location where the medications are in demand. As this chain notes, there are add-on services out there that do this, but the data itself is right there in the pharmacy system, and all that’s lacking is an inventory management feature within the pharmacy software itself.

Finally, there’s another idea that came up, which would address the high cost of processing credit-card transactions. Businesses pay more than 3% of revenue when customers choose the convenience of using a credit card, which many pharmacies may simply accept as the cost of doing business. But as one chain notes, payment processors do offer solutions that allow for a so-called cash discount program. This means that transactions paid by credit card are grossed up to reflect the fee, effectively passing the cost on to the customer. But there’s work that has to be done by a pharmacy system vendor to implement this for a chain. In at least one case, the chain we spoke with is still waiting for this to happen, and paying the cost with every transaction.

Digging into Data

One area that is paying big dividends for chains is data mining. One chain, for example, reported that it has made successful efforts through data mining to eliminate low-margin diabetic testing supplies. This pharmacy has used the tools within its pharmacy software to identify the products that generate strong margins, and has been able to use this data to drive a shift to dispensing 90% private-label products. This has led to generating an extra $30 or $40 each time it dispenses these supplies.

Another chain has created a process in which a remote worker mines dispensing data accessible within the pharmacy system to show the most-profitable products based on BIN and PCN. Again, the idea here is to identify where the margin dollars are and ensure that the chain understands the dynamics driving these prescriptions and makes the data available to all locations within a chain.

Being able to mine data from within the pharmacy system also impacts clinical programs, since it allows chains to take a list of patients from a payer or provider group and easily pull reporting on their medication histories, disease states, and clinical interactions with them. This data can create a list of action items for each patient and qualify the pharmacy for a clinical services bonus payment, according to one chain.

What you want, this chain reports, is a ready way to apply categories to your data, and then sort by these categories. So you may want to group patients or prescribers by category, or even inventory. Then you can set parameters for reporting, ideally automatically by time and date or other triggers. Notably this last detail, automating report generation, isn’t always a feature in existing pharmacy systems. There remains a need for pharmacy staff to initiate the reporting event.

DIR Fees: A Losing Battle?

Given the significant burden that direct and indirect remuneration (DIR) fees have placed on pharmacies in recent years, it’s unfortunate to hear from the chains we surveyed that they are only getting worse. Several of the chains we spoke to reported paying on average $1.50 or more in DIR fees on every prescription dispensed, with clawbacks amounting to around 8% of the ingredient cost.

Chains are taking actions to mitigate the risk of these fees by putting efforts into meeting or exceeding the thresholds on the metrics that can trigger them, for example measures of adherence or generic dispensing rates. And they are having some success. We’ll get into the technology and tools that can help create this success a little later, but first it’s important to outline just how strong of a headwind DIR fees are creating for pharmacies.

This is because payers have been ratcheting up the requirements, creating ever-higher thresholds for escaping the fees, and are now setting metrics at levels that may well be unachievable, according to one chain. For example, even just three years ago a payer required a 90% medication possession ratio for diabetes and cholesterol. But for the coming year that ratio has been raised to between 91% and 93.5% in order for the pharmacy to avoid a clawback.

The generic dispense rates required are also creeping up. For example, one plan is requiring a 95% or greater generic dispense rate for a pharmacy to be in tier one. One chain said very plainly that this is a rate a pharmacy is never going to achieve. And here’s why: Consider a chain’s patient population of insulin-dependent diabetics. There are a lot of branded insulin products out there, with heavy advertising behind many that causes prescribing for them to explode. This creates a situation in which a chain is never going to reach the 95% generic dispense rate for this class of products, and the DIR fee rules don’t reflect the reality of the market.

The Combo Shop Advantage

That’s a tough situation for pharmacies, but there are areas in which chains report being able to take action to ameliorate some of the damage DIR fees cause. One chain noted that it is in the process of establishing all its locations as retail/long-term care (LTC) combo shops, which will mean being able to submit claims to Medicare Part D plans at preferential rates while also purchasing inventory at lower cost and with extended payment dating. All of this has a positive impact on cash flow.

This process requires applying for a separate NPI (national provider identifier) number for the LTC side of the business, as well as being able to show that you offer services such as home delivery, med sync, and adherence packaging. In the case of this chain, it also means partnering with an LTC-focused pharmacy purchasing group, which offers a range of services to support combo shops.

Achieving combo shop status can also make your pharmacy more competitive by allowing you to dispense tier-one generics at a $0 copay. One chain notes that it lost a number of patients to competitors, including to a local health system, because it still had to take copays, which could amount to close to $1,000 for a typical household over 12 months. Moving to combo shop status with the opportunity for $0 copays will level the playing field and allow the chain to try to win patients back.

Finding New Revenue Opportunities

Chains also report looking for revenue opportunities that aren’t subject to DIR fees. The pharmacy response to the COVID-19 pandemic has proven just how valuable it is to have pharmacies providing clinical services, and it’s also improved pharmacy finances. One chain is eager to find further opportunities to demonstrate value to payers. This means, for example, taking what they’ve learned from COVID-19 testing and vaccination programs and the workflows built up to run these, and applying this to flu, strep, and other programs. Another chain reported that, in addition to ramping up point-of-care testing and vaccination programs, it’s also looking to generate revenue not directly tied to PBMs (pharmacy benefit managers) through increased cash prescriptions, such as through compounding. A third noted that there’s an opportunity to regain margin lost to DIR fees by using order optimization that ensures compliance with the primary wholesaler contracts while also maximizing savings on cost of goods.

One chain made an interesting comment about the need to incentivize the staff when rolling out new services. This chain noted that it’s not always easy to get the staff to make the effort to engage with a new revenue opportunity or communicate a new service to patients. One solution is to offer bonuses for reaching important milestones, for example enrolling a certain number of patients in med sync or performing and documenting a certain number of clinical interactions. These bonuses don’t have to be large to be useful.

Efficiency Through Remote Work and Automation

Finally, another response to ongoing pressures on margins is to look for gains in efficiency. As one chain noted, it’s all about trying to get the cost of dispensing down into the single digits as quickly as possible. This chain has had success in this area by installing a server that’s dedicated to allowing remote workers to connect to and use the pharmacy system via a VPN (virtual private network) at the same speeds possible on-site at the chain’s locations.

This allows off-site staff to manage remotely the prescriptions processing for 80% of the chain’s volume, including the queues for phoned-in prescriptions, e-prescribing, faxes, and refills. A staff member generates regular reporting on dispensing and operations off-site as well. And all phones are answered off-site. That allows on-site pharmacy staff to focus on a sharply defined set of tasks. The return on investment on setting up such a robust remote work platform is very strong, according to this chain.

Dispensing automation is also driving efficiency, with the focus strongly on adherence packaging among the chains we spoke with. This connects to the importance of improving metrics such as medication possession ratios and offering the services required to achieve combo shop status, mentioned earlier. Adherence packaging can also serve to boost med sync programs, as noted by one chain.

One trend to watch for appears to be establishing a centralized adherence packaging location serving several chain locations, when possible. This strategy was mentioned by two chains as either deployed or in the planning stage.

Swimming, Not Sinking

Chain pharmacy has plenty on its plate right now. As we’ve seen, many are looking to build on the value pharmacy has demonstrated through a successful pandemic response. They are also making key decisions impacting operating efficiency. There’s also a need to focus on rolling out and gaining staff buy-in for programs that win and retain patients and establish service levels that can yield improved reimbursements, such as med sync and adherence packaging. And as always, they will be looking to stay out ahead in the face of aggressive tactics from payers and stiff competition from within the pharmacy market. CT