MARCH 2021 - Financial experts and a panel of pharmacy owners discussed the past and future impact of COVID-19 on the business of independent pharmacy during CFP's Pharmacy Forum in February.
A fiscal view
From a sheer numbers perspective, gross profit dollars for the prescription side of the retail pharmacy business were up 4% in 2020 compared to 2019, said Max Beairsto, Business Valuation Analyst at EVCOR, during the
“However, the costs were great. In the end, most of the gains were negated by additional costs, both fiscal and emotional,” said Beairsto.
Leading up to the pandemic, gross margin and profitability in the pharmacy were on the decline. That tide turned during the pandemic in 2020: average gross profit dollars increased by 4% and prescription volume was up by 8%. However, wages increased by 6%, delivery costs jumped by 23% and personal protective equipment and other public health measures brought new costs to the table. These numbers also do not take the front store into account. In urban areas especially, “in many cases the front store was significantly impacted,” said Beairsto.
As well, the emotional toll cannot be overstated. From the “nightmare” of limited days-supply policies to the ongoing extra demands placed on pharmacy as an essential service provider—uniquely able to fill healthcare gaps, unlike other essential providers—and a growing need to support the mental health of staff, pharmacy owners have been tested like never before.
“You have been forced to become better operators, and it hasn't been easy because you're having a lot of these changes forced on you during a very difficult time emotionally,” said Mike Jaczko, Portfolio Manager and Partner, KJ Harrison, who co-presented with Beairsto.
Stepping back, a silver lining has been the likelihood that key external stakeholders have come to see community pharmacy in a new, positive light. “What's transpired here has played a part in putting community pharmacy on the map in society, and in health care in general. Public decision makers and policy makers have had a bit of an ‘aha’ moment,” observed Jaczko.
The growing appreciation for pharmacy’s role in health care may drive future profitability; however, “operators need to continue to factor in the new costs going forward, [including] structural costs,” he said. Increased personal taxes (including possible increases to the HST or GST), increased business taxes and even greater pressures for cost containment in health care could create a “trifecta” impact on pharmacy profitability.
“As it relates to healthcare spending, pharmacists are going to have to get their elbows out. We're all going to be sitting at the stakeholder table…and I suspect there will be a fight [for healthcare dollars] so pharmacy needs to be ready,” said Jaczko.
At the business level, Jaczko recommended that pharmacy owners implement a mitigation strategy that involves tax planning, optimizing operational efficiencies (e.g., through workflow and use of technology) and a closer look at the front store. In rural or bedroom communities especially, where consumer awareness to support local businesses has grown, “there are tremendous opportunities to develop and evolve your front store. You can compete,” said Jaczko.
Pharmacy owners weigh in
During the panel discussion, pharmacy owners emphasized the emotional toll over all other impacts. “What cannot be exaggerated is what a hard time this has been for staff,” said Bruce Winston, president of Apex Pharmacies, which operates 20 pharmacies in Alberta. “I don't know if we'll ever experience something like this again, that has been such an overwhelming challenge on mental health.”
The added stress comes not just from an increased workload but also the constant, multiple uncertainties, whether around COVID-19 itself or public health measures, added Chris Juozaitis, owner of Howe Sound Pharmacy in Gibsons, BC. “Going forward we have to keep looking at how to keep our staff safe and sane. We are all feeling the burden at this point,” he said.
Cross-training has helped in his pharmacy. “We've been working on it for years but it really came into fruition. If we had two people off we could shift our personnel around the pharmacy and be able to fill those positions that needed filling that day,” he explained. To further increase scheduling flexibility, he is also looking to employ more part-time people in the near future.
Medication synchronization has also proven its worth in terms of efficiency in workflow. “That helped us get through some of the tough parts,” said Juozaitis.
The pandemic was a catalyst for medication synchronization at Ryan Fullerton’s four pharmacies in Ontario, including Brown’s Guardian Pharmacy in Walkerton. “Patients have been really good about getting on a schedule,” said Fullerton. “That’s allowed us to better survive the waves of three-month highs and lows.”
Technology has also been an important tool to support staff resilience. For example, Fullerton implemented an internet-based phone system and cloud faxing to allow staff who do not need to be in the pharmacy to work from home. For those working in the pharmacy, the creation of two separate teams facilitated scheduling, improved communications and helped provide a sense of stability.
For pharmacy owners, communications, planning and adaptability are key, summarized Winston—even more so now that COVID-19 vaccinations are on the doorstep. “Pharmacy is going to embrace this but we have to be very careful about what that means for our staff and the tremendous load that’s going to be on them. My takeaway from the past year is the need to put a lot of planning into these kind of black swan events,” he said.
On a positive note, all three panelists agreed that the public’s perception of pharmacy has improved. When Alberta pharmacies were testing asymptomatic people, “I have never seen the level of positive comments as I did during the testing. They were really seeing pharmacists in a different light. I’m hoping that’s a legacy that we can build,” said Winston.
Juozaitis remarked that his pharmacy received quadruple the number of Christmas cards compared to past years and agreed that the profession needs to build upon the public’s increased appreciation for pharmacists. “We have to make sure that pharmacists are at the table when it comes to better patient care and when it comes to being remunerated. We want to be part of the system, so people don’t fall through the cracks.”