Prior to the pandemic, the retail pharmacy industry was experiencing significant disruption. We were witnessing a steady increase in transactions and consolidation, Amazon's entry into the market, significant changes to strategic alliances between major payers and pharmacy benefit managers (PBMs), and the introduction of a wide array of new technologies, just to name a few noteworthy trends and developments. It's safe to say that COVID-19 not only disrupted some of these disruptors, but it also brought with it new disruptors.
By understanding how the market is changing, retail pharmacies can determine how to best shift gears so they can remain viable and competitive in the coming years. To help you make more sound decisions concerning the future of your pharmacy, below are some thoughts on a wide range of current opportunities and challenges followed by an update on retail pharmacy valuation.
Retail Pharmacy Opportunities
These are some of the tailwinds for the retail industry.
Mobile apps — It's never been easier or cheaper for retail pharmacies to offer and leverage mobile apps. Not only can an app make it easier for customers to refill prescriptions, get refill reminders, and take advantage of discounts, but providing customers with an app can enhance loyalty and improve satisfaction.
Mail order — Prior to the pandemic, mail-order prescriptions were on the decline. COVID-19 reversed this trend. Some consumers who used mail-order delivery for the first time or relied on it during the pandemic will revert to filling their prescriptions in person. However, other consumers who appreciated the convenience and potential perks of mail order will likely make it their default delivery method. Offering mail-order prescriptions can help you attract and retain these consumers and should prove appealing to potential new customers — including the growing number of people working from their homes.
Telehealth/telepharmacy — It's safe to say that telehealth is not only here but it's here to stay. Telehealth claim lines increased more than 2,800% (not a typo) nationally from December 2019 to December 2020, according to FAIR Health's Monthly Telehealth Regional Tracker. Retail pharmacies that effectively leverage telehealth and telepharmacy can give their business a boost. While rules and regulations concerning the delivery of telepharmacy — including coverage — are evolving and vary from state to state, the addition of telepharmacy services can help pharmacies reach new patients and better support existing patients, all while improving patient care.
Digital pharmacy — For retail pharmacies looking to undertake a more dramatic overhaul, going the "digital pharmacy" route is an option. While there's no clear consensus about how to define "digital pharmacy," in this case, we're referring to a pharmacy that significantly embraces digital technologies to deliver pharmacy services, such as mobile apps, telepharmacy, and online ordering.
Testing and vaccines — The pandemic has been a boon for those pharmacies offering COVID-19 testing and vaccines as these services not only generated revenue, but they brought consumers physically into stores. This presents an opportunity for pharmacies to sell products and educate consumers about available services, including the delivery of other screenings, vaccines, and immunizations. The trend also provides a pathway for retail pharmacies to pursue the conversion of retail space into clinics and primary care service locations. The expansion of pharmacy companies into primary care has driven "significant increases in both satisfaction and consumer spending," according to the J.D. Power 2020 U.S. Pharmacy study.
Human experience and loyalty — Pharmacists remain one of the most trusted professions. This helps explain why some pharmacies are leaning much more heavily on their pharmacists. In October, Rite Aid indicated it was revamping the its business strategy and the layout of pharmacies to put pharmacists "front and center." As Jocelyn Konrad, Rite Aid's executive vice president and chief pharmacy officer, told Drug Store News, "We want to ultimately enable our pharmacists to address mind, body, and spirit of each of our customers, so that they don't only get healthy, they get thriving."
Such initiatives that highlight the role and value of pharmacists while emphasizing the critical services they provide can help retail pharmacies remind consumers about the importance of a human experience for health and wellness. This can drive better outcomes and build consumer loyalty to the pharmacist and their pharmacy.
Customer base — While competition for customers is and will remain fierce, the good news for retail pharmacies is that their number of potential customers and the services required by customers is on the rise. This is fueled largely by the prevalence and increase of chronic diseases and an aging population. On a per capita basis, health spending has increased over 31-fold in the last four decades, from $353 per person in 1970 to $11,582 in 2019.
In addition, the pandemic has brought a new patient population into pharmacies: those who postponed receiving care as part of their efforts to reduce the amount of time spent outside of their homes. Subsequently, many of these individuals saw their health worsen. Some have chosen pharmacies as the first place to begin catching up on their neglected care. Pharmacists who effectively support patients as they restart their care journey can earn the loyalty that generates ongoing business...
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This post is related to:
Mergers, Acquisitions, Buying-Selling, Franchising
