As a new financial year dawns, Real World Analytics chief operating officer Adele Curran tells P3pharmacy why contractors need to look closely at their business data to protect much-needed margin

What is your advice to contractors struggling to keep up with their bills in the current climate?

Looking at the data within the pharmacy gives the big answers a lot of the time. Cutting your costs by £100 a month here and there isn’t really going to do much for the bottom line. Dispensing data can highlight lots of different areas where you can save money and stop margin leaking out of the business.

We see a lot of issues with pharmacies where, for example, a prescription is written generically and you’ve got dispensers labelling a brand, which means the brand gets ordered and then lo and behold, you only get half the reimbursement for it because it wasn’t written as a brand.

Having real visibility of what’s being ordered when a prescription is written generically is very important; there’s a huge amount of margin being lost there.

 You also need to make sure your ordering system is being managed well and you aren’t ordering medicines you don’t need, or overstocking.

A huge amount of prescriptions are not being claimed because of owings, where you’ve got an owing on one prescription and you’ve dispensed the rest of it; you haven’t processed the claim and it just sits there… the prescription isn’t even on the shelf to remind you it’s going, so again you’re losing margin.

And in terms of increasing margin, there are a lot of what I would term ‘pull services’ that aren’t being taken advantage of. Things like hypertension, contraception, appliance use reviews and even the New Medicine Service – the industry is at maybe 30-35 per cent of target in terms of the NHS. That is not where you want to be when the money is right there.

People often feel they don’t have enough suitable patients, but if you run a report to look at how many patients on a given day might have been suitable, quite often that’s not true. In fairness to pharmacy teams, they are so busy and have so much to do, but they also can’t afford to be doing it for nothing.

With the arrival of Pharmacy First and all the training being put out there to deliver these services, it’s the ideal time for pharmacies to up their game. And the fees for Appliance Use Reviews (AURs) are £28 for a pharmacy consultation and £54 if you go to the patient’s home. For a 10,000 items pharmacy, perhaps 800 patients may be suitable for an AUR, so it can all add up.

And remember, they are talking about introducing caps for the hypertension service but at the moment the sky’s the limit in terms of the number of consultations. There is ample opportunity for pharmacies to make more money out of services and be more service-driven.

The devil is in the detail. For pharmacies to be getting the most out of their businesses, they have to be using the data. I hear people talking about cutting back on things like paper use to reduce their costs, but you’re better off looking at what’s being dispensed and what’s being labelled. It’s the difference between saving thousands per month as opposed to £50 or £100 here and there.

What ordering mistakes do people make?

Most ordering systems automatically generate an order for a medicine as you label it. If you’ve already got four or five of the product on the shelf, you need to make sure you take it off the order. Pharmacists and owners are very busy people. I would say as many as four or five in every 10 aren’t scrutinising the order before it gets placed in the evening.

You also need to think about where you or your team are placing the orders because that affects the margin you get. Some people say ‘I always want to take this medicine from AAH because they’re my primary supplier’, so you might ring it in because you need it urgently, which costs more because it’s not going through the ordering system – but also it’s probably not going to be taken off the ordering system either, so now it’s being ordered twice.

We can see that our system has added about £40 million to the bottom line of our customers in the last six years. Pharmacies need to be making money – the margin has dropped probably at least two percentage points in good operators in the last 12-18 months, and for bad operators, it’s more like five per cent.

How would you describe your customer base?

Our customers range from three-branch businesses to ones with around 300. The general trends are more or less similar for the different sized businesses; I think the smaller ones just don’t know what they need to be looking for, while the bigger ones have so many branches they don’t have the capability to look at them altogether and see what’s actually going on.

When we first started, the Electronic Prescription Service hadn’t been around very long. The amount of loss from prescriptions expiring was absolutely huge. A 40-branch group could have been losing up to £15,000 a month in prescriptions, and back then it wasn’t as tight in terms of margin as it is now.

Currently, you see a lot of prescriptions being returned to the spine because the pharmacy hasn’t got the stock and the team feels they don’t have the time to find it – but when you send the patient somewhere else, they stay somewhere else and you’ve lost the nomination.

Does it still pay off to shop around the wholesalers for the best price?

I would never not shop around. If you’ve got multiple pharmacies, you really do need a cascade, and most of our customers would have a minimum of around eight suppliers within that – maybe five mainline wholesalers and two for short line or specials.

Wholesalers sometimes create a visual that makes it look like they’ve got the cheapest prices to incentivise pharmacies to choose them as a mainline wholesaler, but often you still have to go to a secondary wholesaler anyway because they haven’t got the stock.

I work in retail and automotive as well, and pharmacy is the most un-transparent business I have ever had the pleasure of working with. There are so many contingencies in the system, you almost need a degree in data science to figure out what you’re going to be paid at the end of the month. The Drug Tariff doesn’t help because you think you’re getting a 20-30 per cent margin on a medicine, but by the time they take the discount off, you actually haven’t made any margin at all.

They’ve just announced changes to Category A, which I don’t think are going to have any effect at all. And they’re going to repay some concession prices going back two quarters, which sounds all well and good – but it’s still all coming out of the same pot of money. So, if they’re paying back these concessions within this month for six months ago, the amount of margin you’re allowed to have within that month remains the same.

That will affect people in different ways and it will come down to how many concessions a pharmacy did in any given month. But overall, I don’t think it’s going to make a difference.

Despite how hard things are, there are a lot of areas where pharmacies can see an improvement in their finances if they use the data.

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