supermarket pharmacy special report
Supermarket pharmacies are building bridges to managed health care providers.
Leading grocery chains are re-engineering their strategies in order to adapt to a fundamentally
changing health care marketplace.
Declining margins, price competition from mass retailers, discriminatory pricing of pharmaceuticals and limited access to managed care pharmacy networks are just a few of the obstacles threatening the viability of supermarket pharmacies today.
The good news is that supermarkets are filling more prescriptions, and the industry segment grew in 1995 in number of outlets.
Supermarkets dispensed 227.7 million prescriptions in 1995, a 9.9% share of the total market, and 10% better than in 1994, as the total market grew 6%, according to IMS America, the Plymouth Meeting, Pa.-based script tracking service.
The number of supermarket pharmacies reached 6,613 in 1995, a 5.4% increase from 1994, according to an SN survey.
Still, pharmacists fear this trend won't last because of the increasing pressure from managed care organizations, which service large populations and are under pressure to reduce health care costs.
Of immediate concern for supermarkets is how to continue building prescription traffic, pharmacy directors said.
"Our first challenge is building market share in prescriptions. The tough thing is gaining entry into these managed care programs, which often represent large populations of covered lives," said Barrett Moravec, director of pharmacy at Abco Foods, Phoenix.
Pharmacy directors said some food chains have been shut out of provider networks, losing out typically to drug store chains that have more outlets in a particular market.
For example, Albertson's, Boise, Idaho, closed 17 pharmacies in northern California last year, deciding it lacked enough outlets to compete for third-party contracts. "We felt we could get a better return on assets [in another business]," said Mike Read, a company spokesman, adding that the 477-store chain remains committed to the business in areas outside northern California, and will put pharmacies in stores where appropriate.
Leading food chains such as Dominick's Finer Foods, Wegmans Food Markets, H.E. Butt Grocery Co. and Fred Meyer Inc., all of which are pursuing disease-state management programs, are looking to patient care as a way to access large provider networks.
Such initiatives have both short- and long-term implications for pharmacies.
Enhanced pharmacy services give food store pharmacies an edge for getting into managed care programs, which one recent study predicts will cover up to 90% of the insured population within 10 years.
A grocery chain with a pharmacy program that addresses the high-costs associated with patient nonadherence, for example, or offers case management by pharmacists for a particular expensive disease state, can differentiate itself from competition on more than prescription pricing. It also can gain access to large populations enrolled in health maintenance organizations, preferred provider organizations and other managed care programs.
As a long-term goal, pharmacy directors said, patient care services are helping form the foundation for providing full-blown pharmaceutical care. Here the traditional dispensing role is handled mostly by certified technicians and computers, and pharmacists are left to assume the role of case managers or primary care providers in selected disease states. Increasingly, the pharmacist's role will be to document patient outcomes, and receive payment for results.
Grocery management tends to support these trials, seeing them as consistent with providing a full-service concept for customers, pharmacy directors said.
"Management sees pharmacy as a vital component of the total business," said John Beckner, director of pharmacy at Ukrop's Super Markets, Richmond, Va., which is building its ninth pharmacy. And "they are progressive and forward-thinking enough to want to [move into patient care] programs."
Ukrop's has remodeled some pharmacies with layout changes and counseling rooms. Chain pharmacists, assisted by Ukrop's nutritionists, are leading seminars for diabetes patients of a local HMO in "a first step" toward relationship-building with the third parties, Beckner said.
Store tours and shopping guides for patients with diabetes and hypertension, another disease in which proper nutrition plays a key role, are coming on line, he added.
The patient care concept is consistent with management's service philosophy at Dillon Stores, Hutchinson, Kan., said Jane Siebert, director of pharmacy.
Pharmaceutical care is becoming a reality," Seibert said, adding: "I see it as securing our future. Ideally, we get to the point where payment for these services becomes a significant revenue stream."
Redesign of pharmacy to put the pharmacist at the front to interact with patients and help technicians take on "nonjudgmental" functions, including counting and filling, refill authorization, and computer input, is under way at Dillon. Pharmacists are being trained at local universities in the basics of pharmaceutical care. Dillon Stores will likely avail itself of a Kansas University certification program in asthma treatment, Siebert said.
Pharmacists' care doesn't need to be offered to everyone, Siebert added. Dillon pharmacists are asked to identify one patient per month requiring care. Patients identified by pharmacists, insurers or pharmacy benefit management companies as needing special care will be referred to "centers of excellence" -- stores with pharmacists certified in specific disease states.
Seeking to improve service and control costs, the state Medicaid program has asked a committee of pharmacists to develop a program defining additional levels of care. Identifying a problem, the pharmacist would electronically send a recommendation for resolution to the state agency and receive payment in return.
Another key challenge for food chains is involving the pharmacists in the process, directors said. "The first barrier is, by far, pharmacists' attitude and desire to provide the care services," said Mike Roberts, director of pharmacy at Buttrey Food & Drug Co., Great Falls, Mont.
The first stage in what will be a progression toward more involved services at Buttrey is the recent launch of a medication compliance program using a computer-based refill reminder system developed by Elensys, Woburn, Mass., that is being offered by Schein Pharmaceuticals, Florham Park, N.J. The program includes documentation of results of the intervention.
Though there are challenges to accessing the managed care business, supermarket pharmacy is clearly on a growth track.
At Haggen Inc., Bellingham, Wash., prescription unit volume is 50% above what it was five years ago," said Pharmacy Director Cleve Schwenke.
Pharmacy directors acknowledge, however, that margins on rising prescription sales continue to decline with the growth of third-party business.
Chains are limiting losses by rejecting unprofitable plans such as when Giant Food joined Rite Aid, CVS and 60% of the pharmacies in Maryland in refusing to participate in a Medco/Paid Prescriptions-managed plan for Maryland state employees, which dropped reimbursement to average wholesale price minus 15% plus $2 ($2.50 for generics). Maryland canceled the contract, which was to be rebid in March.