Editorial

From the desk of the editor

Welcome to the May 2012 homepage edition of i2P-Information to Pharmacists. Rollo Manning has been having some time out having staples removed from the site of his open heart surgery.He is now at home recuperating in Darwin, having arrived home last Friday, beating a cold and hasty retreat from Canberra.We all wish him a speedy recovery and hopefully, he will be fit enough to contribute by next month.
This month, Pharmedia discusses the toll that is taken when someone complains about you to an authority without good cause. Well, the good news is that you can now take action to protect yourself if such a complaint is made, and that may even include action for defamation. Read about a recent case involving two doctors, with Mark Coleman drawing on personal experience to illustrate.

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Audit Your Future

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Neil Johnston articles by this author...

Neil Johnston is a pharmacist who trained as a management consultant. He was the first consultant to service the pharmacy profession and commenced practice as a full time consultant in 1972, specialising in community pharmacy management, pharmacy systems, preventive medicine and the marketing of professional services. He has owned, or part-owned a total of six pharmacies during his career, and for a decade spent time both as a clinical pharmacist and Chief Pharmacist in the public hospital system. He has been editor of i2P since 2000.

Given the current climate regarding the PBS, now would be an excellent time to audit all your business processes and develop strategies to overcome imbalances that are occurring and will continue to occur for some time.

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Stable prescription/sales ratios lie between 50:50 and 30:70. So much retail market has drifted from pharmacy except for those enterprising pharmacists who have always monitored this ratio.

Smart managers will know that pressure on gross profit $ value is going to steadily increase.

Gross profit percentage rates will be directly proportional to the prescriptions/total sales ratio and more importantly, when preparing an expenses budget make sure each expense is quantified as a percentage of gross profit $ value (not $ value sales). It is so easy to find yourself slipping backwards when expenses are indexed against sales that include a rapidly declining gross profit.

Next on the list is your stock turn ( average cost of sales divided by average stock value).

Be ruthless on the range of products held. Don’t stock slow selling pack sizes and clear out any stock that is not filling part of an organised marketing strategy. Sell this type of stock at half price to create liquidity and then ensure that you have an inventory management system that keeps track of unit sales.

Shelf display stock according to unit sales and delete when unit sales fall below a set volume in a given time.

As stock turns consciously increase, place some of the liquidity generated on the short-term money market. If a tight control is kept on inventory movement you can then experiment with an optimum price point that returns you more in interest received than the loss of gross margin on the product.

This is how the warehouse pharmacies operate, but you need one person taking full responsibility for the management of this process - otherwise it can go off the rails.

Other ways of improving liquidity are to negotiate extended trade terms, negotiate better cost prices from different suppliers and ruthlessly sell down stock in your inventory that has insufficient stock turn.

As we move further down the list we come to Information Technology.

What electronic systems do you have in place and are there others that can be proven to drive down expenses. Do you have electronic systems for stock ordering, accountancy records, sales analysis and shelf planning? In fact any procedural process that could be better managed through IT, including the electronic storage of records.

Following hard on the heels of IT is automation - machines that can dispense original packs or fill dose administration aids. Have you planned financially to be able to incorporate these machines in your pharmacy?

Plan these purchases because they are large in $ value and not all machines have been created as equals.

Apart from savings on labour, automated equipment is supposed to release valuable pharmacist time.

Have you plans to put this time to good use?

Have you prepared a business case for a range of professional services?

Don’t wait for the PGA to do the work for you - develop your own plan and get into the market place as quickly as possible.

Professional services equate to services with a high gross profit component. It may also mean that pharmacists can directly generate sufficient income to cover their own cost enabling more pharmacists to be employed under the one roof.

It is quite obvious that existing activities can be modified to kick this process off e.g. Schedule Three preparations, and more so now that pain management products containing codeine will be restricted from May 1. This will involve a major change in work flows and represents an opportunity to review this entire area - how will you manage your own?

Why not have a pharmacist located away from the dispensary (in a counselling room?) able to generate S3 prescriptions and maintain patient compliance profiles? A link to the dispensary will see the S3 products dispensed correctly, plus any other recommendations, while the counselling pharmacist delivers the face to face information.

This could be built into a system of treating minor ailments and may serve as a model for contracting with clinical pharmacists at arms-length, so that they can offer general prescribing services without a conflict of interest and maybe this type of activity could attract government funding to help bridge the gap in GP services.

So now we have arrived at our market audit to see what goods and services are appropriate for the existing business model and what changes may have to be made to accommodate them.

If you were not aware, when you start to incorporate robotic equipment, you will immediately need to enlarge the dispensary and plan work flows to accommodate the new systems.

If you begin to offer professional services you will need discrete and private areas for counseling.

So given that we are going to eventually face a major upheaval in shop fittings, should not this be done in the context of a full redesign of the pharmacy, but contracting out modular bits according to a plan?

This auditing and planning inside a business structure is ongoing and never-ending.

Done properly, you will always have the funds to expand and there will be no nasty surprises.

The above list is only the tip of the iceberg. Make your own audit list so that the health of your business can be checked methodically and regularly.

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