Pharmacists in the Vortex…

Did you know that there are over 314k pharmacists in the United States? Amid all of the bluster around “Medicare For All” and cost of drugs, the front line of healthcare is often manned by the pharmacist standing sentry in over 67k pharmacies and hospitals. Medscape estimated that 5.8 billion prescriptions were filled in 2018 or 17.6 per person, underscoring the pharmacist’s role in potentially bending the cost curve and closing gaps in care.

The pharmacist has taken on a much more expanded set of responsibilities as the complexity of therapeutic options has increased and with the dramatic rise in chronic disease. Pharmacists are increasingly providing important clinical services, advising patients about drug selection, dosage, potential harmful drug interactions and side effects. They have also assumed a much more profound role in public health issues, while deploying strategies to better drive adherence and compliance, reduce medical errors, and therapeutic reconciliations.

First some industry context. There was a doubling of pharmacy schools over the last 30 years; there are now 143 accredited institutions. This naturally led to a concomitant explosion in the number of pharmacists which put pressure on compensation. According to the American Pharmacy Journal of Education, median pharmacist income in 2018 was $126.1k or approximately $60 per hour. The Bureau of Labor Statistics (BLS) estimates that job creation between 2018 – 2028 will essentially be flat, in large measure due to challenges confronting retail pharmacies. BLS estimates that 57% of pharmacists work in retail, 26% in hospitals, and the remaining 17% either in wholesale, online pharmacy or government settings.

Ironically, while the increasing complexity of the role has led to greater demand for quality pharmacists, it is not expected to increase the number of job openings. As more of the industry moves to central-fill shipped to retail distribution models, pharmacists will need to provide more counseling services to augment the drop in dispensing activities. Scanning the nearly 64k-member Reddit Pharmacy community comments reflects much of the workplace pressure on these healthcare professionals.

The turmoil both at retail and with pharmacy benefit managers (PBM) has been widely reported. As products traditionally purchased at traditional retailers (pharmacies and supermarkets) move to online, pharmacies are looking to meaningfully repurpose that real estate, often offering important clinical services. As a source of product differentiation, PBMs are looking to develop clinical services to augment existing drug formulary products. Walgreens and CVS are establishing offerings to treat chronically ill people in-store. Analysts estimate that early attempts to offer clinical services, initially focused on less severe episodic issues, are now evolving to a focus on chronic conditions, promising repeat foot traffic. Two months ago, Walgreens announced closing 160 walk-in clinics, while CVS announced that it would roll-out over 1,000 HealthHUBs, a more evolved model of MinuteClinic.

All of this disruption to the pharma supply chain is not lost on the venture capital community. This past quarter witnessed a marked increase in both the amount of capital invested ($1.0 billion) and number of deals (44). Much of this activity reflects opportunities for improved delivery and access, novel payment models, as well as solutions to enhance compliance and adherence.

Pharma-Supply-Chain-Funding

But there are other industry developments which directly affect the role of the pharmacists. Thomas Menighan, President of the American Pharmacists Association (APhA), in our conversation highlighted a number of issues which his organization is navigating. One involved establishing clarity around “provider status” which would allow pharmacists to bill for discrete services above and beyond the dispensing fees. Additionally, the APhA is very focused on securing relief from “direct and indirect remuneration” (DIR) fees assessed by PBMs to offset member costs, thereby bringing a greater degree of transparency around rebates. The APhA, with 60k members and a $50 million budget, recently secured favorable language in the Prescription Drug Pricing Reduction Act to address DIR.

Menighan stressed the important role of technology as the pharmacist workflow is transformed. For example, the development of digital platforms to more effectively manage the opioid crisis and to improve interventions will be critical. The Pharmacy Quality Alliance is creating quality metrics and surrogate measurable markers to address attribution when determining quality ratings. Menighan is hopeful that with greater analytics, pharmacists will be better equipped to quantify their contributions in collaborative value-based care models, perhaps billing separately, particularly with the increased prevalence of high deductible plans with patients having to take on greater responsibility for drug costs. Provocatively, Menighan predicts that “85% of pharmacist jobs in ten years have not yet been invented.”

David Medvedeff, CEO and founder of Aspen RxHealth, cited medication synchronization (“med synch”) as another profound industry development that requires greater clinical services to be provided by pharmacists (DISCLOSURE: I am on the board of Aspen RxHealth). Patients on multiple medications are harmonized to all be prescribed on the same day, thereby closing gaps in care with greater medication management and oversight. Arguably, this will improve adherence but likely will reduce traffic at retail and possibly the number of opportunities for face-to-face clinical interventions.

Medvedeff cited a handful other industry developments. Retailers are increasingly competing on convenience and same/next day delivery, all of which further reduces access to neighborhood pharmacists. Notably, though, dispensing contracts are tied to clinical performance (closing gaps, etc) which potentially elevate the pharmacist’s role. Insurance plan design is increasingly playing an important role. High deductible plans are causing patients to look for lower cost alternatives such as generics and mail order, further complicating the role of pharmacist at retail. Approximately 90% of all therapeutics prescribed are generics, yet only account for 25% of total U.S. drug spend. While not highly profitable, generics ensure significant repeat foot traffic that is now at risk of moving to online distribution. One other unknown: the role of digital therapeutics (DTx), while very modest in volume today, presents a conundrum for pharmacists. What will their role be with software therapies?

Earlier this month, Centers for Medicare and Medicaid Services (CMS) reported that national healthcare spending in 2018 increased to $3.65 trillion or $11,172 per person (or 17.7% of GDP). Notably, retail prescription drug prices declined by 1% last year which was the first year since 1973 that prices declined, largely attributed to the role of generics, although overall retail prescription spend increased 2.5% to a total of $335 billion. In-patient pharmacies, chemotherapies and infusion increased more dramatically around 4.5% in 2018.

Rx Spend

If past is prologue, pharmacists should be jacked up. According to a report by Georgetown University’s Center on Education and the Workforce which looked at 40 years of longitudinal income data across 4,500 colleges and universities, the Massachusetts College of Pharmacy and Health Sciences (MCPHS) had a greater net economic gain than Harvard University. MCPHS was ranked #3 nationally with $2.4 million of net gain over 40 years versus Harvard at #8 with $2.0 million net gain. It gets better as the top three institutions overall are all pharmacy schools. Presumably, as the role of pharmacists become even more integral to overall patient care, expect these metrics to improve even further.

While none of this improves pharmacist eyesight, perhaps these types of cartoons will be less funny in the future as the pharmacist role becomes more vital…

eye-test-for-pharmacists

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