If you ask a room full of independent pharmacy owners if they would prefer to increase the volume of $10 prescriptions or the dollar value of existing scripts, chances are they’d all choose the latter. However, many believe it’s easier to find more customers; and focus on tactics to attract new business instead of optimizing current prescription profit margins.
Yes, increasing the number of patients walking into your pharmacy can make your business, well, busier. Take a moment to ask yourself if you are looking to be busier or more profitable? One of the easiest ways to improve your bottom line is to focus on increasing the profit margins per prescription with your existing patients.
Increase Profit Margins by Investing 1 Hour a Day
PDS Members are spending at least one hour per day analyzing their dispensing and utilizing the PDS Profit Chart to identify new opportunities to grow their profit margins. For example, a doctor-approved switch from one low-profit drug to another in the same drug class, but with a higher margin, can increase your profits every month that patient is on the prescription. A $10 prescription can quickly generate a $100 profit (when filled monthly) almost instantaneously.
For example, Mike, owner of a Utah-based pharmacy and a PDS Member since 2013, credits the Profit Chart as key to having the best few months in the history of his business. Mike and his team tripled their profit margin per prescription in his most recent month of reporting. The difference amounts to a $40,000 boost to his bottom line!
Dispensing Data Analysis & The PDS Profit Chart
One of the most effective ways to increase $10 scripts to $100 profits is by utilizing the Profit Chart to identify key switch opportunities, implement successfully, and then replicating that success across as many prescriptions as possible. To do that, pharmacy business owners should leverage their dispensing data.
What Pharmacy Data Should Owners Review?
- Patient Prescriptions
- High Margin Prescriptions
- Lowest Margin Prescriptions
- High Reimbursement Insurance Plans
- Low Reimbursement Insurance Plans
Once you identify an excellent opportunity, begin looking for other candidates that have been prescribed the first medication to see if they would benefit from suggesting the switch as well.
PDS Member Vic, owner of North Carolina-based pharmacy, did just that by implementing the Pain Protocol. After seeing how well the pain medication switch for several patients fared, $90,000 in one month to be exact, Vic realized that he could increase profit margins and improve the comfort for a huge percentage of his pain patients. Running a profitable independent pharmacy and providing world-class healthcare outcomes are not mutually exclusive.
The Profit Chart Paradigm Shift: Pharmacy Businesses Are Allowed to Make Money!
The “profit-driven” mindset and practice of utilizing data to grow your business can be a bit of a paradigm shift for many independent pharmacy owners.
PDS Members John and Sue, owners of a Kansas-based pharmacy, recall that at first, they felt like they were “gaming the system.” They shared that it felt wrong to be seeking the greatest profit from their patients when they had chosen the pharmacy industry with patient-care and not profits in mind.
Amy, an Oklahoma-based PDS Member, felt very similar but shared that ultimately the PDS Founder, Dan Benamoz, put it best when he explained that leveraging RxAnalytics is one of the best ways to move the needle and keep her in business.
These are stores where communities and patients have built heartfelt relationships. Utilizing the Profit Chart and data analysis doesn’t hurt the patient. In fact, in many cases, the switch either doesn’t impact the patient or improves their standard of care through a higher-quality drug.
Turning Ideas into Action!
If you’re ready to stop focusing on things out of your control – like low-paying insurance providers – download our newest eBook – The Pharmacy Business Blueprint for Massive ROI – now! Or, to see how PDS can help you turn $10 prescriptions into a $100 profit, chat with one of our Account Executives; let us know how we can help you.
Here at PDS, we take pride in highlighting some of our incredible solutions partners. We know these companies have the potential to revolutionize pharmacies just like yours through their products and services. We’re excited to introduce Ideal Protein; read on for their sponsored blog post about an exciting new revenue stream that is focused on wellness & better patient outcomes.
Are you ignoring a high-value, high-impact opportunity for your pharmacy? It may seem overwhelming to consider adding a new service to your existing business when reviewing your current day-to-day operations. But, have you really thought about the sustainability of your current business model? As drug reimbursements decline and become harder to realize through cost-containment techniques of PBMs, highly trained pharmacists and their teams should be focusing on the most cost-effective and impactful services for their business.
Pharmacies are often the most accessible health care hub for patients in their communities; not seen only as a medication center, but an advice center. Oftentimes, patients with chronic conditions rely on their pharmacist for advice on how to manage their ailments.
As a healthcare provider, you know that excess weight is a contributing factor towards many chronic conditions.
Are you providing your patients with the solutions and tools they need to heal and prevent these ailments?
Diet plays a critical role in many diseases, and in a marketplace saturated with “fads” and “quick fixes,” who does a patient turn to for advice? In order to achieve patient wellness, the first step for a healthcare provider is to advise their patient towards weight loss and good eating habits as key in easing chronic conditions. The second and vital step is to offer that patient a structured solution, overseen by a healthcare professional, that provides effective results and focuses on long-term sustainable weight management. Over 3,800 clinics have done just this with Ideal Protein.
What is Ideal Protein and How Can it Help Pharmacy Growth & Patient Wellness?
Ideal Protein aids in significant and sustainable weight loss, resulting in improvements toward patient outcomes who are using the system. We have provided healthcare professionals a complete turnkey suite of assets to offer to their patients. As value-based reimbursements become the standard, pharmacies are stepping up to provide effective solutions that improve the health of their patients and result in greater store profitability with a low operational footprint. It is about becoming the retail healthcare hub in their community.
With a unique business model, pharmacies who implement Ideal Protein can expect to:
- Deploy existing staff to deliver a unique, sustainable weight loss and weight management service that improves patient outcomes.
- Drive weekly in-store customer foot traffic and new customer acquisition.
- Benefit from a new high-margin, cash-based revenue stream.
- Develop long-lasting customer retention and trust.
All of the education, training, and weekly visit materials are provided to the staff to ensure that each patient receives consistent one-on-one support. As patients lose weight, they often need medication re-modulization for which pharmacists are available to make their recommendations to the physician.
Because the system is effective, patient referrals are one of the leading sources of new customer acquisition. In addition, patients receive daily support through the IdealSmartTM mobile app, continually focusing on long-term behavior change. As an Ideal Protein authorized clinic, we provide your pharmacy access to all of the material needed to implement and grow your business.
With Game of Thrones season in full swing, we noticed some key strategic lessons in the series that apply to life and business. Indulge us for a moment as we bring you through some hard lessons in business, life, and pharmacy from our favorite Game of Thrones characters. This is relevant, we promise!
Lesson 1: Never Underestimate the Importance of Perseverance.
Sure, no one likes Cersei Lannister, but look at the lesson she imparts to us; unbridled determination and perseverance is a cornerstone of success.Those who don’t believe it should look at how independent pharmacies are still thriving despite PBMs, DIR fees, and mega chains. With the right knowledge, unwavering determination, and confidence in your convictions, a thriving, successful business is within your reach.
As a pharmacy owner, you can find out how to get that knowledge and develop the confidence in your decisions here.
Lesson 2: Don’t Let the Past Determine Your Future
Throughout his life, Jon Snow believed what people told him; there were limits in his life, and the faster he accepted it, the better. Well, look who’s King of the North now! Okay, okay, but our point is that in business (pharmacy or the business of ruling) you have to know when to disregard limitations, self-imposed or otherwise.
Driven by a clear vision, Snow is focused on getting the right tools, in this case, Dragon Glass to accomplish his mission. Others in his company lack perspective, leaving him to take the first steps into the unknown. An inspired vision for your pharmacy business isn’t enough; you need the right tools and team. Improvement and growth require thoughtful execution, so seek out the best in your industry and take a calculated risk; the benefits are worth it.
Lesson 3: An Educated Mind is Sharper than a Sword
Tyrion Lannister was not born equipped for success in the traditional Westerosi way, but he has ascended the figurative ladder considerably through on-going education. Continuously sharpening your mind, expanding your skills, and adding to your area of expertise ensures that you and your team never become obsolete.
Tyrion teaches us a powerful lesson about upward mobility through on-going development both personal and professional. Education doesn’t only apply to the leader. Training your team is key to achieving an efficient, results-driven culture. How do you know when to educate your team? These are the questions you should ask yourself as a leader who has a team in need of training.
Lesson 4: There is No Template for Success
Daenerys Targaryen started out as a character on the fringes, beholden to no one. At best, success was unlikely. At worst, if she failed, she’d be a footnote. Independent pharmacy owners, like Danaerys, have been pushed to the edges and all but forgotten in light of challenges such as chain stores and problematic PBMs.
Far from being marginalized, exceptional pharmacy owners, much like Daenerys have managed to maintain an unbreakable edge after enduring waves of inequity by finding strength in numbers. The most progressive pharmacy owners have started to discover their tribe and demonstrate the power to impact a brighter future.
Just like Khaleesi herself, independents across the nation have discovered a new way of thinking. Join the top 20% of them in February at the 2018 PDS Super-Conference. Grab your dragons and join your tribe in Orlando! Okay maybe leave your dragons at home (fire hazards and all). Find more info here.
Lesson 5: Start Where You are and Use What You GoT (we couldn’t help it).
As a lesser known, but pivotal, character, Lord Varys signifies the power of resilience and resourcefulness. He uses his little birds to make informed decisions on data points to advance in the game. It seems Varys has a thousand hands and ears, all able to measure, track and assess the current pulse of the environment and act accordingly.
Just like Lord Varys, PDS members use a vast and comprehensive system that analyzes existing data to discover a way to dramatically increase their profit per prescription. The PDS member exclusive system is called RxAnalytics. Curious? Find out more here.
Lesson 6: Watch, Observe, Act
In a time where most people shoot first and aim later, Littlefinger understands that there is power in patience. There are three elements to his formula for success; observe, assess, and then make an informed decision. Sustainability is built on timely and informed decisions. We can all take a cue from Littlefinger on playing the long game. His patience and leveraging of the right relationships keep him moving forward. Applying these characteristics to your business will do the same.
PDS has more than 1,000 member pharmacies, and many of them make up the top 20% in the industry. Coincidence? Not at all. These owners know that patience, key resources, and the right relationships will drive your success. Join the most successful pharmacy owners in the nation, ready to welcome you to the team. The PDS Super-Conference is where they’ll be. Will you join?
Lesson 7: You Can Be aVictim, or You Can Win
It’s fitting that we end with a character who has been beaten and down-trodden, which perfectly analogizes independent pharmacies against the unfair pharmacy environment.
Arya Stark chose to rise above the treatment she has endured to become the deadliest wolf in sheep’s clothing. Her lesson is simple and one we reiterate to our members: You have the choice on how you react to your circumstances. You can be part of the owners that succumb to the inequities in our industry or you can gain new skills and choose to be a fighter and triumph over your adversities.
You can be a victim, or you can be a victor. Which will you choose?
Join us to see what we’re all about at the 2018 PDS Super-Conference in Orlando Florida on February 22-24, 2018 at the Orlando Convention Center. If you are a pharmacy owner, manager, key employee or anyone in the industry concerned with the state of pharmacy, you must join us to discover the solution that the top 20% of the industry have already discovered. Own your future and don’t let the game beat you down. Click here or below to find out more.
With our SyncRx+ Intensive training course coming up, we’ve had requests for the Facebook Live video we posted below. In it, our very own Dr. Lisa Faast discusses the benefits of synchronization in your pharmacy and answered questions from pharmacy owners about our SyncRx+ program.
Watch the short video below and you will discover:
- Benefits of a medication synchronization program
- Managing the growth of a synchronization program
- Mitigating inventory and staffing challenges
- Identifying ideal patients for your program
- Setting goals for your synchronization program
- Managing compliance with patients
Still have more questions? Watch a free on-demand webinar, Sync or Sink: An Insider’s Guide to Successful Synchronization, hosted by the developer of the program, Jason Turner. He answers more in-depth questions about the program and exactly what to expect from the training plus the incredible results you’ll see. Watch it now here.
SyncRx + Intensive incorporates the traditional synchronization adherence model and adds an MTM component. The program will help improve your pharmacy’s performance through data mining, improved quality measures, workflow efficiency.
Here at PDS, we take pride in highlighting some of our incredible solutions partners. We know these companies have the potential to revolutionize pharmacies just like yours through their products and services. We’re excited to introduce GRX Marketing; read on for their sponsored blog post about leveraging public relations to market your independent pharmacy.
One of the most common questions we get asked by our clients is, “How can I market my pharmacy without spending a lot of money?” There are multiple ways to get started, but one easy and effective method is through Public Relations (PR). A strong PR strategy consists of tactics designed to build good relations with your pharmacy’s various audiences.
- Prospective customers
- Community leaders, etc.
This medium can be used to promote products, services, staff, ideas, events and more. It does not necessarily have to be new to your pharmacy, you can promote something anytime if the general public is not aware of it, even if you added a new service six months ago, for example. PR can have a strong impact on public awareness at a much lower cost than advertising. When using Public Relations tactics, the pharmacy owner does not pay for the space or time in the media, so it is often considered more credible to the public. It’s important to note that since you are not paying for it, the media staff does have discretion on what they publish.
Writing Your Press Release
Use these tips to craft an effective and engaging piece.
- Get a strong headline. If it doesn’t catch the reporter’s eye it won’t get published. Try to keep it at 15-20 words.
- Avoid using “selling or fluff” words. Copy should be objective and informational, not promotional.
- Be concise by keeping the entire piece around 300 – 500 words.
- Include as many facts as possible and remember to keep it newsworthy.
- Using real quotes will add insight and personality to your piece.
The goal of Public Relations is to educate your audience. While you do not want to inundate the media with Press Releases, there is no harm in sending one quarterly. A good rule of thumb is to have a staff or family member read it beforehand, did they find it interesting? If they answered, “YES,” it’s a good story to send.
Power of the Internet
In the “old days,” a business owner would have to fax a Press Release to the media, hoping it would get picked up. Today, the internet has become a vital channel. Your story may not get picked up for print, but if posted to the web, it can be shared through social media (Facebook, Twitter, LinkedIn, etc.), thus reaching and engaging an even larger audience. Anytime you send a Press Release, remember to alert your staff in case they are asked about the story. Additionally, you can increase your audience again by asking your team to share the story on their social media channels.
Establish Your Pharmacy as a Thought Leader
Another benefit of using public relations to market your pharmacy is that it helps build positive relationships with the local media and can help to establish your pharmacy as a health-care thought leader. A reporter may reach out to you first if a pharmacy or health-related story comes up, further increasing your exposure and positioning yourself as anexpert in the community. Any articles you are a part of can also be posted on your website and/or placed in your pharmacy for customers to read.
Be proud of your pharmacy and what you have to offer! Share it with your community, by incorporating public relations into your 2017 marketing plan.
When it comes to offering your patients the latest options in their health, wellness, and medical care, size matters. Chain pharmacies are logical places patients expect to be introduced to the latest in their personal health options because they are equipped with their expanded footprints, buying power, and national brand recognition. Though, much like mighty ships require expansive space to maneuver, so do national chain pharmacies.
Independent pharmacy owners are at a unique advantage in their ability to adapt and maneuver when they need according to where the market leads. These owners who recognize their opportunity to create for niche offerings and leverage them, elevate their pharmacies above national recognized brands.
Not sure which niches first deserve your attention? We’ve pulled together five of the juiciest underserved niches in pharmacy today, now it’s your turn to learn about and pick that low-hanging fruit.
- NICHE: Pharmacy Genomics
Pharmacogenomics, also known aspersonalized medicine, is exploding within the pharmacy industry. The ability to tailor drug therapies to a patient’s specific metabolic and DNA blue print is a hot-button innovation. Pharmacy owners are staying ahead of the curve by investing in both themselves and their staff through current research and training. Be the first pharmacy in your community to offer personalized medicine.
- NICHE: Travel Vaccines
Between packing, securing their passports, making arrangements at work, hiring pet sitters, and financial planning, most travelers put getting up-to-date on their travel vaccines on the very end of their to-do lists — if they remember them at all. This is your opportunity to promote pharmacy services that provide the most common (and even uncommon) vaccines travelers need before their big cruise, backpacking trip through Europe, or visit to their family. You’ll not only earn their business by offering them this service, but make their lives easier. They’ll appreciate not having to make an appointment with their general physician.
- NICHE: Fertility
More and more women are taking charge and control of their fertility, more specifically those who have recently been diagnosed with infertility. As these women face the emotional, physical, and mental struggle of receiving, facing, accepting, and treating their diagnosis, create a safe place in your pharmacy they can utilize as a resource. Providing the medications, supplies, and support they need as they navigate their fertility journey will make your pharmacy more than just a convenient stop on their way home – you’ll create a relationship that will last through their journey and into their pregnancies.
- NICHE: Hospital Discharges
Whether your patients are leaving the hospital with a brand new member of their family, or going home to recover from major surgery – the last thing on their mind is having to stop at their community pharmacy to pick up their new medications. Establish new relationships with patients, right when they need you the most by offering Bedside Delivery. They won’t soon forget the exceptional service they received and who provided it to them.
- NICHE: Wellness Testing
Health and wellness is no longer a trend, but a lifestyle many people are committing to. With incentives from their insurance, physicians, and even employers, your patients are health conscious and it means that you should be, too. Providing testing gives your patients access to services they could previously only obtain through their physician. Save them the additional cost of a doctor’s office copay and give them the freedom to take charge of their health.
Now you can watch the on-demand webinar 5 Niches Chain Pharmacies are Neglecting, where Dr. Lisa Faast will go deeper in why you need to implement these niches and the benefits they’ll bring to your pharmacy and community. Click below to watch.
Bedside delivery is a profitable service you can implement that will connect your independent pharmacy with new and existing patients in an effort to provide the best care possible.
Are you ready to take your Bedside Delivery program to the next level? Here are the 5 steps for successful Bedside Delivery implementation that will help get you started.
1. Research Your Hospital
Before jumping headlong into a Bedside Delivery project, you have to do your homework! As yourself questions like:
- How many beds are your local hospital?
- What specialties does it service?
- Does it have an outpatient pharmacy or does it already provide any Bedside Delivery (spoiler alert: even if they do, there is still an opportunity for you!)?
- How far away is the hospital from your pharmacy?
- What are current penalties for readmissions and where are they hurting?
2. Request a Discovery Meeting
Once you know more about your hospital and its pain points, you can set up a meeting to present to the administration about the benefits of developing a strategic relationship. They will want to see a detailed plan for your pilot phase, implementation, staff training, clearance, expansion, follow-up, and the entire workflow. You must be confident on what your pharmacy can provide and how you can help the hospital reach its readmission goals.
3. Follow-up and Persistence is Key
If your hospital is anything like the norm, you’ll have to practice your patience, be persistent, and follow-up at regular intervals to push the project forward. Most hospitals have many layers to maneuver before getting the green light, so persistence should be your main skill here. Do not become discouraged! Typical Bedside Delivery initiatives take anywhere between 1 to 2 years to get fully rolling hospital-wide, but when you’re seeing 15-20 new patients a day from an average 300 bed hospital, you’ll be glad you took Step 3 to heart.
4. Sign the Contract, Jump the Hoops
Once you wow the hospital with your presentation and persistence, you can reveal your Bedside Delivery contract. Agree on a contract detailing the services you provide and the support and access the hospital will provide. Then you can finally set your start date! Next, will come the various screenings, clearances, BAA and vendor details, and HR requirements you’ll need to execute before the hospital gives you a badge and lets you step your foot in their door to peek in the charts. Again, be persistent.
5. Begin the Pilot
It’s go time!! You’ve laid your foundation, you’ve trained your team, you’ve met with the nursing staff on the pilot unit, you’re ready! Your persistence is not done yet. Doctors and hospitals will need to be exposed to your services on a daily basis. They will become increasingly more comfortable as they realize you’re doing all the heavy lifting. Patients will appreciate you helping them transition home and your follow-up. Do a great job, and you’ll retain them, their families as well as hospital employees and their families.
Bedside Delivery is an enormous opportunity whether you have a 10 bed, 100 bed, 300 bed, or 1,000+ bed facility. You just have to know how to get started!
PDS has created a Bedside Delivery workshop that will make you the expert and teach every aspect of selling and delivering a Bedside Delivery Service in your local hospital. The next course is May 19-20, 2017, so register today! From researching profitable hospital units, to navigating how to penetrate the hospital administration — this course will ultimately let the attendee become the subject matter expert on transitions of care.
Want more information? Watch this short video from our course facilitator, Dr. Nicolette Mathey on why you shoud consider a Bedside Delivery program.
Watch Dr. Nicolette Mathey Below:
Need even more information? Download our free Bedside Delivery Guide. The next training starts soon! Visit the Bedside Delivery training page to register for the next session today!
The Annual Wellness Visit (AWV) is a trending pharmacy business tactic, with more and more owners adding the service to their repertoire. It’s an annual check up intended to update and review patient history, assess a patient’s vitals, screen them for risks and establish a list of their health care providers and medicines.
The AWV can be provided by any healthcare professional, including pharmacists, with physician approval, and is covered by Medicare B – which is great news for patients! Additionally, it is the perfect opportunity for independent pharmacies to offer value-added, relationship-building services to doctors.
According to a study conducted by the University of North Carolina Eshelman School of Pharmacy, in about 40% of a pharmacist’s available working time, AWV could cover $120,000 of their annual salary, making it a particularly lucrative endeavor for increasing profitability. However, surprisingly, only 11% of patients are taking advantage of the opportunity for an AWV – mostly because they haven’t been asked – making this a hugely untapped market for pharmacy businesses.
Pharmacists who invest the time and resources in setting up the clinic in a doctor’s office and proactively reaching out to existing and new patients to get them scheduled for an AWV have huge potential for increased earnings.
The numerous advantages of AWV include…
- A better understanding of patient needs
- An opportunity to update files
- Increased profits by offering ancillary services, such as diabetic shoes and pharmacogenomic testing
- And, an important check-in with your patient, guaranteed to happen at least once a year!
It’s clear Annual Wellness Visits are a pharmacy business’s secret weapon!
5 Reasons Why Annual Wellness Visits Are Pharmacy Business’ Secret Weapon
1) Gain greater involvement in patient care
An Annual Wellness Visit is an opportunity to check in with your patients. It’s a great way to keep your patient files streamlined and up-to-date, which makes offering the best standard of care to your patients that much easier.
Having this guaranteed face-time with your patients also allows your team to share new programs and opportunities with your patients efficiently, as well as ensure your patients are following proper protocol when it comes to their medications.
2) Sync your patients
AWVs are also a fantastic time to focus on getting patients who haven’t taken advantage of medication synchronization. Your team can easily make the sync set up part of the visit and even look at offering applicable patients adherence services if that’s something your pharmacy offers.
3) Implement profit chart recommendations
During the AWV, you and your patient will both be focused on the conversation about their health care needs. This is an ideal time to implement strategic switches that your team may have identified through data mining and regular use of the PDS Profit Chart.
In some cases, you may be able to recommend a switch, such as a pain cream that yields superior results for your patient’s care and is also incredibility profitable to your business.
4) Complimentary products and add-ons
Due to the general nature of the Annual Wellness Visit, you’ll receive a comprehensive picture of your patient’s up-to-date health care needs, and your patient will likely be more receptive to a conversation about supplementary products.
With this style of visit, most patients are not in a rush and will be open to talking further about their needs and potentially beneficial products from their trusted healthcare provider.For example, the AWV is a great time to speak to diabetic care patients about diabetic strips and pain creams.
5) Nurture relationships with physician partners (and grow your client base)!
Working with a local physician to offer AWV in partnership is a great way to develop and build strong doctor-pharmacist relationships.
This can be extremely valuable when it comes to requesting medication switches with physicians, as well as a valuable way to grow your business through new patient opportunities.
Additionally, working in partnership with a physician (or a few physicians for AWV services) is a good gateway into developing other mutually beneficial clinics in partnership. For example, rolling out pain clinics, diabetic clinics and flu clinics with physician partners is a great way to nurture your business and optimize your opportunities for growth.
Launching Your Annual Wellness Program
If you’re ready to offer Annual Wellness Visits in your community, chat with one of our Business Growth Advisors. They can discuss how PDS Members fast-track their success with our Clinical Services Profit Ignitor workshops and a team of Business Coaches and Performance Specialists. For more money-making and patient-focused strategies, download our eBook – The Pharmacy Business Blueprint for Massive ROI – now!
Here at PDS, we have many incredible solutions partners that have the ability to revolutionize pharmacies through their products and services. We’re so excited to share with you one of them — iMedicare. They would like to share with you the blog they wrote below about how you can join the revolution to reshape Medicare Part D. Read on!
Like PDS, iMedicare shares the same dedication and passion to helping community pharmacies win. Recently, we conducted a survey that polled 5,000+ of our pharmacy customers and discovered that many want to see real change in the industry. A change that serves the independent community, while being patient-focused. So we decided to investigate how pharmacies like you could create a profitable Medicare Part D plan.
Curious? We hoped you’d be! The following will be a thorough step-by-step plan on how to get started building your profitable Medicare Part D plan and help patients along the way:
Step 1: Start an insurance company.
All Medicare plans must have a license from the Department of Insurance (DOI) of the state they want to do business in. Each state has different requirements, the most important one being the capital and surplus requirement.Capital and surplus refers to cash in the bank (assets minus liabilities) and some states require as much as $10 million, as in the case of Iowa.Find each state’s capital requirements from the NAIC (National Association of Insurance Commissioners) here.
So what do you do? You start the new insurance company in North Carolina, which has a $1.1 million capital requirement, then fill out all the forms and get a Certificate of Authority for Insurance. Next, you apply toNAICto get a risk-bearing entity code. Now, you can apply in other states as an out-of-state insurance company to get the Certificate of Authority for each state. Note: you will still need to fulfill the capital requirements for each state. So,you will need around $10 million to ensure all state requirements are satisfied.
Why would you want to apply in every state? Because more states equals more Medicare patients, and more premiums. Having a large number of patients on your plan is key to Medicare plan financials.
But here’s the real reason: Around 400,000 LIS (low income subsidy) patients lose their coverage due to plan and premium changes every year. These low income patients are auto-assigned into one of the LIS-eligible Medicare Part D plans offering a $0 premium for LIS patients. There are 6 LIS-eligible plans in each state, on average. So, if you have a LIS-eligible Part D plan, you will capture 400,000 / 6 = 66,000 new patients in your plans without doing anything – simply due to the way the system works. Let me say this again:
If you have a plan with a premium below the benchmark in all 50 states, you will automatically get 66,000 Medicare patients on your plan each year.
But before you get too excited, you must start a Part D plan and go through the Center of Medicare and Medicaid (CMS) application process. There’s an important CMS rule to be aware of: In the2014 Final CMS Rule, CMS introduced the requirement thatall new Medicare plans must have 2 years of experience in health insurance OR 5 years of experience as a PBM for health insurance.
This CMS rule makes it much harder for new plans to enter the market. You have 2 choices:
- Run your new health insurance company for 2 years before applying to CMS.
(i.e., offer Medicare Supplement plans)
- Buy a failing insurance company with 2 years of experience.
Based on our research, the buying route seems to be the preferred method for many companies.
- Ascension Health (a hospital system) bought a small Health Insurer in February of 2015 for $50 million.Click here for press release.
- Symphonix, now a national Medicare Part D plan, acquired Vista Health for around the same amount.Click here for details of the deal.
The most cost-effective option is to buy aninsurance shell company. These companies go for about $80,000 per state license (that’s about $4 million for 50 states). This does not include the capital and surplus, soyou are looking at a minimum investment of $14 million. The risk with these transactions is the unknown liabilities they bring from previous insurance policies they may have used in the past. While there are some preventive measures to minimize this, trust is a big factor in these transactions.
Step 2: Hire a Pharmacy Benefit Manager (PBM)
While the health insurance company has the licenses, the name, marketing, and contract with CMS, the day-to-day operations of a Part D plan are done by a pharmacy benefit manager.
PBMs do the work behind the scenes. PBMs create and administer the plan formularies, pharmacy networks, rebates, reimbursements, enrollments, phone calls, prescription claims processing, reporting to CMS, and compliance.
You may be tempted to start your own PBM, but it is unlikely that you can comply with all the CMS requirements your first few years.Others have tried, and failed:
By freezing all new enrollments, CMS can put any plan out of business with a stroke of a pen.
To hire a large PBM for all the functions above, you will likely have to pay a signup credit of a few hundred thousand, and then $10-$15 per member per month (PMPM). Or you can get a smaller PBM for $4-$5 PMPM.
Besides the PBM cost, you will need to spend an additional $550k per year: Actuary ($100k), a lawyer ($100k), CMS consultants ($100k), and a Statuary Accountant required on staff full-time ($250k)
Step 3: Create a business plan for your Part D plan
Every year, Medicare plans place a bid on the premium for their plan. For 2017, the average premium was $35.63/month.Click here for the CMS announcement.
CMS subsidizes the premium with an additional $25.45/month per patient, depending on the health risk score of each patient. Moreover, CMS covers 80% of the costs in the Catastrophic phase through what is called “Federal Reinsurance,” which will be around $70 in 2017, judging from theMillimanandKaiser Family Foundationreports. So, added up,Part D plans will receive over $1,500 per member in 2017.
Then there’s DIR. Direct and Indirect Remuneration (DIR), refers to rebates and fees from manufacturers and pharmacies that the PBM negotiates on the plan’s behalf.From 2012 to 2015, DIR has increased from $10 billion to 23 billionaccording to a recent CMS factsheet.The same study shows that DIRs lower the plan’s liability from $1,077 to $666 per member per year (PMPY).
A Part D Plan’s gross profit is $1,500 – $666 = $834 PMPY. PBMs take at most $180 PMPY. Other G&A expenses such as compliance, IT, rent, employees take another $216 PMPY.So the EBITDA of a Medicare Part D plan comes to around $438 per member per year.
So given the $438 in profit per member per year, what do we need to make this a reality?
- Q: First, how many enrollments do you need to make a Part D plan profitable?
A: Depends on the expenses to win an enrollment. With $0 marketing expenses, 100,000 enrollments would put a plan definitively in the black. By pricing the plan premium below the low income benchmark (as we discussed in the last article), your national Medicare Part D plan will receive ~60,000 enrollments automatically from the low-income patients auto-assigned in a plan each year across all 50 states. However, for a Part D plan to truly win the market, it will need closer to 1 million enrollments.
- Q: How does the competition get enrollments?
A: Some Part D plans price their premium below profitability in order to beat the competition. Other plans use insurance brokers to drive enrollments. The commission for these enrollments are around $28 per patient per year for a Part D plan, and ~$400 for a Medicare Advantage plan.
- Q: How can a start-up plan beat the competition?
A: One of the best ways is by partnering with pharmacies.
A start-up plan can partner with pharmacies in each community to drive down patient costs. By lowering patient costs, the Medicare Plan would surpass any other plan’s profitability, and have a key stakeholder in each community.
- Q: Why would pharmacies partner with a Part D Plan?
A: Because pharmacies would have ownership in the Medicare Plan entity.
Hence, the best way for a new Medicare Plan to succeed is if pharmacies themselves own the majority of the new entity.
To make this collective plan a reality, pledge below.
The moment $50 million in pledges is reached, iMedicare will help with the plan setup, to help make pharmacies a real player in the insurance market.
Let’s take a look at your pharmacy marketing.
Are you implementing the foundations of marketing to drive traffic through your door? If you’re like most independent pharmacy owners, you don’t have a fancy marketing team for implementation. In fact, most pharmacies have limited time, money or resources for marketing. That is where most owners give up and focus solely on clinical solutions (which is a mistake, ask me why here or in the comments below!). But since you’re reading this blog, you’re not like most owners, are you?
The need for a dedicated marketing team is a myth. Sure, it’s nice, but you already have the right people on your team, you just have to put the process in place. Now that you know you have the manpower, how do you get access to the right processes and profit strategies?
PDS members have unique access to our member training courses, one of which is Marketing 360. This is a live class taught by PDS pharmacy marketing and business experts, Dr. Lisa Faast (me) and Lisa Baker. We both have an extensive background in marketing specifically for the independent pharmacy industry.
This course shows indepenedent pharmacies how to:
- Build the right team within your pharmacy
- Create anactionable strategy
- Focus on target audiences
- Leverage marketing tools that will optimize your existing efforts
- Infuse the marketing angle on all the PDS profit strategies
- Eliminate the trail and error of developing a marketing plan for your pharmacy.
PDS members who take this course start driving traffic to their pharmacy — fast.
Not a PDS member? Don’t worry, not everyone can be perfect! But you can chat with us about joining if you want to see the same incredible results in your pharmacy. (Just in case you’re wondering… we’re not making this stuff up.)
Watch the video below as Dr. Lisa Faast, PDS’ resident pharmacy expert and VP of Marketing, shows you how to easily get started on your dream marketing plan.
Now is the time to start establishing the supporting tactics for the 2017 strategies you’re implementing. We know that you have limited time, money or resources for marketing. So use yours more efficiently by becoming laser-focused on your marketing efforts.
The next session of Marketing 360 begins on March 30, 2017 in Ft. Lauderdale, Florida. Here’s how you can attend: