Can Pharmacies Save Healthcare?

Dialysis, aisle four. This reality may not be as far-fetched as it sounds.

The delivery of healthcare must change if payers are to cope with rising costs and patients are to access quality services in an easy and timely fashion.  One way to achieve this is to allow Pharmacies to offer more healthcare services.  According to Booz & Co., a consultancy, Drugstores are well positioned to play a critical role in efficiently providing basic healthcare services to a wide number of people.

The macro trends are positive. Patients are demanding greater choice, more information and increased access to care. Large retailers like Walmart, CVS and Walgreens are already tweaking their retail models beyond just offering aggressive dispensing discounts.   Finally, Canadian and U.S. governments are targeting innovations  like electronic medical records and new service models to deliver meaningful cost reduction and improvements in patient care. 

The Drugstore channel has innate advantages relative to traditional healthcare suppliers like physicians, clinics and hospitals. For example, Pharmacies are ubiquitous (each US citizen lives within 2.36 miles of a drug store); Pharmacists are highly trusted (they are among the most trusted healthcare providers); Drugstores are very convenient (most are in plazas/malls with lots of free parking) and; most major drugstore retailers enjoy a lower cost footprint (e.g., minimal fixed costs, low union penetration) than other providers like hospitals.   Most recently, Pharmacies have played an important role in providing cost-effective immunizations, whereas 85 percent of physicians found immunization reimbursements inadequate.

Most importantly, the Pharmacy channel can improve patient care for millions of people.  Pharmacists can leverage strong customer relationships to improve treatment compliance and counselling. Moreover, drugstores can serve as a single source for many healthcare needs, minimizing the time lag between diagnosis and treatment. 

Delivering new healthcare services represents a game-changing opportunity for smart, agile Pharmacies to increase customer share of wallet, build brand equity & loyalty and improve operating efficiencies.  Can they do it?

Important challenges stand in the way of implementation and profits.  For example, there are: regulatory impediments (limiting the types of services pharmacies can provide); incompatible IT systems that prevents integration; old store formats that complicate implementation and; cultural/staff issues that hinder change and prevent stakeholder collaboration.  As an example, pharmacists may be reluctant to alienate prescribing physicians who may view drugstores as new competition.  All of these issues will have to be addressed before pharmacies can enter the business.

What could a new retail model look like?  It all depends on what patient/consumer segments are targeted.  For example, retailers can focus on delivering critical services to the chronically ill (e.g., diabetes management) or they concentrate on maintenance programs for healthy or at-risk customers (e.g., wellness programs).  Drugstores are already experimenting with in-store clinics, wellness programs, health screenings, and disease management services.  In one notable program, the city of Asheville, N.C., has been using local pharmacists to provide free counseling to diabetes patients, generating substantial savings and health improvement.  Additional pilot programs will be needed to identify the high potential/low risk service offerings.  As well, Pharmacies can leverage useful learnings from other retailers (e.g., Apple, Loblaw) on how to combine disparate service offerings under one roof.

Given compelling advantages, it is likely that Pharmacies will play a significant role in future healthcare delivery.  The big question is: what will the business model look like and how will it ultimately benefit patients and payers.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.


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