Leveraging global strategy to help independents navigate macro trends in health care, business
Health care is local. But the back-end service that enables the delivery of that localized healthcare experience has become increasingly global both in size and scope.
“We believe that health care is extremely local, but from a McKesson perspective, it is becoming more global. Regarding the overall healthcare ecosystem, for us to be a healthy company in the future, we have got to explore the global opportunities,” Chris Dimos, McKesson SVP corporate strategy and business development, told Drug Store News in an exclusive interview hours before taking the stage Monday afternoon for the McKesson ideaShare 2016 Opening General Session.
“Some of the moves we’re making as a company are to position ourselves to win in that global economy,” he added. “When you think about how we are reacting to the impact of generic scale, it’s around our global relationships with manufacturers and being able to demonstrate that. When you think about innovation and changing the front-end, then it’s about the learnings we can bring from across the globe through our interactions with community pharmacies in Europe and in Canada to deliver the best of all community pharmacy.”
To describe how McKesson’s global strategy is helping to drive success for the independent pharmacy operator, Dimos outlined four macro trends that are impacting the delivery of health care at every level today:
Generic scale: “Purchasing consolidation is happening everywhere,” Dimos noted. “When there were 10 to 12 buyers acquiring pharmaceuticals, and the wave of branded patent expiries spawned a plethora of new generic introductions, that fueled a lot of growth for pharmacy,” Dimos said. “As the number of new small molecule drug introductions fell off and the generic business became more commoditized, a number of entities — beginning with Walgreens Boots Alliance — began to form generic purchasing partnerships with major wholesalers to gain greater purchasing scale. “Where we’re at today, there are a handful of companies controlling some very large market shares,” Dimos said. “We believe it’s extremely important for us to have ‘stable’ scale … where the manufacturers can count on that long-term relationship with us so we can think and plan more strategically than just year-to-year, product-to-product.”
Consolidation and integration: “Traditionally, industry consolidation has followed the old pharmacy law, ‘like dissolves like.’ Retailers bought retailers, PBMs bought PBMs, manufacturers bought manufacturers,” Dimos explained. “Now, we’re starting to see more vertical integrations — probably the best known is CVS and Caremark.”
“With accountable care, as quality of care becomes much more of an important component, we believe we are going to see entities come together, either through organic growth or by acquiring the assets they need to be successful in the future of a value-based model as opposed to a volume-based model,” he said.
Product mix shift: “Generic profitability is starting to wane as payers become more transparent … less new innovation in small molecules, the traditional tablets and capsules dispensed in the retail environment,” Dimos said. “You’re seeing the emergence of specialty drugs — large molecule drugs that are really aimed at much smaller, targeted populations at much higher cost. By 2020, it’s expected that specialty drugs may represent half of total pharmacy revenues, but total transactions will still be in the single digits,” he said.
Reimbursement, performance and access: “Cost will always be important, but value is where we are going to be differentiated and measured,” Dimos said. “We’re seeing different levers used to differentiate healthcare offerings, such as narrow networks or performance-based networks where you have to earn your right to participate,” he said. “Access is being influenced on a product level in terms of limited distribution for some of the larger molecules, and that access is really influencing how providers are being differentiated inside of the overall healthcare ecosystem.”
To help community pharmacy navigate these macro forces and meet the myriad challenges imposed by each, Dimos pointed to four integral strategies independent operators should employ to drive profitability and retain access to patient lives:
Bolster core business: “This is about managing your expenses,” Dimos said, noting that labor and inventory are two of the easiest costs to manage. “It’s about becoming extremely efficient, managing and balancing not only the clinical care, but also the economic health of your business,” he said. “We’re providing, through Health Mart and the assets that we have, ways to educate and help operators become extremely efficient in running their businesses.”
Pharmacist-delivered services: “The pharmacist has to practice at the top of his license,” Dimos said. Pharmacists need to be prepared for the day that provider status is enacted for the profession. “Having that status, it’s not the end of the game, it’s just the beginning,” he said. “Pharmacists need to educate themselves about the new services they will be able to deliver as providers before someone pays us for it. It’s about moving from product provision to knowledge provision, and then being able to monetize that.”
Partnering within the greater healthcare ecosystem: “Healthcare is local, especially for our independent community business,” Dimos explained. “The partnerships they form with the local healthcare providers to provide services, whether it’s in transition of care or helping to prevent readmissions, those types of collaborations are partnerships they can form based on locality and the relationships they have in the local healthcare ecosystem.” But pharmacy operators need to take a proactive role in driving these relationships. “They won’t come to you; you’re going to have to seek them out.” This is another area where McKesson is helping to provide turnkey solutions for its customers. The company rolled out the Collaborative Practice Agreement (CPA) program in a few states last fall. The program has since been expanded to 37 states, covering nearly every state that requires a CPA to prescribe and administer eligible immunizations to patients in their community.
Identify new revenue streams: “You have to diversify away from dispensing revenue and earnings only,” Dimos said. “Health Mart can help identify those opportunities and provide turnkey solutions to assist in getting those programs off the ground, such as immunizations or medication synchronization,” Dimos noted.
But it’s more than that. “Are you innovating? Are you innovating on the front-end? Are you thinking about new ways to capture and engage your patients?” he asked. “We see a growing interest around healthy food or beauty in the marketplace,” he said. Whether it’s disease-state specific like diabetes, or general like nutrition, pharmacists need to make sure they are diversifying their revenue streams, he said.