Inside This Issue - Opinion
Rx operators adjust to changing paradigm
August 16th, 2010
The Obama administration has begun the slow, laborious process of implementing the Affordable Care Act, legislation that will bring momentous changes to the nation’s health care system by the time its major provisions take effect in 2014.
Decisions made at the White House, the Department of Health and Human Services and other federal agencies will alter the way care is delivered and paid for and, in the process, transform the playing field for health care providers.
To cite one early instance, the administration last month issued regulations requiring insurers to provide screenings and preventive services at no cost to consumers. Immunizations, blood pressure testing and tobacco cessation services are among those covered, a development that should be welcome news for community pharmacies, particularly those that house an in-store clinic.
Ted Vaughan, a partner in consulting firm BDO’s retail and consumer products practice, is tracking the benefits and burdens that the Affordable Care Act is creating for retail pharmacy operators. He thinks the legislation will provide impetus for store growth.
“We expect a 10% jump in the number of pharmacies in the next one to two years, which is a change from what we’ve seen recently,” he says. “As we get closer to 2014, then we’re looking at anywhere from 20% to 30% annual growth.”
Several factors will coalesce to increase demand for community pharmacy services.
“The doughnut hole in Medicare coverage will gradually be filled in, and that will drive higher prescription usage among seniors,” notes Vaughan. “More important are the 30 million-plus people who will have access to health insurance by 2014 that are now uninsured.”
In addition to attracting more patients, retail pharmacies are likely to extend their reach in terms of what they provide to consumers.
“The opportunity is primarily about serving more people, but part of that comes through new services,” Vaughan says. “The provisions are still rather vague, but pharmacists are supposed to have a greater role in treating patients through MTM [medication therapy management], which is basically designed to get people to take their medication as directed.
“The whole theory behind the expected growth is getting more pharmacy customers in the door and motivating them to buy other products as well.”
In-store clinics are another area that should be helped by the legislation.
“The medical industry is going to change, and this could be one of the areas where we see it,” he comments. “Clinics have less overhead than it costs to run a regular medical practice, so the number of patients they need to see over the course of a day is lower. With the additional patient volume and the emphasis on the pharmacy as a point of care, the clinics should be able to expand the scope of services they offer and build their practice. Clinics and pharmacies will work together and benefit from the synergies.”
The Affordable Care Act isn’t all good news for pharmacy operators. It will have a significant impact on the expense side of the ledger.
“A lot of the extra cost for providing health coverage to the uninsured is going to be borne by larger employers,” Vaughan explains. “That greatly affects retailers because of the number of employees they have. Retailers work hard to protect their margins. Faced with this situation, they’ll have to decide whether to reduce payrolls in order to manage overall expenditures, pass the costs along to customers by raising prices or offset them through higher volume.
“The interplay for companies whose stores include a prescription counter is the additional cost on the one side versus additional revenue on the other.”
Most community pharmacy operators recognize the importance of staying on top of the evolving paradigm, according to Vaughan, and the leaders in the field — CVS Caremark, Walgreens and Walmart — are actively engaged in trying to turn it to their advantage. Those companies and many of their rivals recognize, as Shakespeare said in a very different context, that “the readiness is all.”