Supplementing the bottom line to build patient loyalty
If you ask pharmacy operators what keeps them up at night, their profit margin might be at the top of the list, particularly as reimbursements for pharmaceuticals decrease and front-end sales grow in importance. This is as true for chains — 35% to 40% of their sales come from the front end of the store — as it is for independents that garner roughly 6% of their sales from the front end.
“As drug reimbursements continue to decline — on average 9% a year since 2010 — pharmacy operators are really looking for solutions, whether it be ancillary products or front of store offerings, and they’re looking for drug distribution suppliers to help them with that,” said Chris Savage, vice president of McKesson’s consumer products group.
One of the ways major retailers have sought to pad their margins is through private-label brands, something McKesson takes seriously. It offers its Health Mart own brand OTC products to its independent customers who operate under the Health Mart banner, as well as SunMark OTC products to its chain and government customers. The company augments this with its Front Edge category management strategy, which focuses on price, promotions, placement in store, and having a competitive portfolio.
“We offer solutions and service to help the pharmacies really build their brand — in particular for independents with Health Mart — to let them stand out among the competition,” Savage said. “We’re giving them a value proposition that represents a symbol of quality with those Health Mart private-label products.”
Part of building out the portfolio — with margins that can be as high as 60% — is consumer insights, which include identifying customer needs and segmenting customers based on demographics or geography to help pharmacies differentiate themselves to their customers. In listening to consumer feedback, the company found desire for a more robust vitamin portfolio, and has recently introduced roughly 100 new items in the vitamin category, supplementing the launch with promotional giveaways of free children’s vitamins. Savage said that such efforts help build patient loyalty.
Alongside the vitamin portfolio rollout, McKesson is building out other Health Mart ancillary programs, which also offer touchpoints for pharmacists to identify potential patients’ opportunities.
“It helps the pharmacy boost its revenue,” Savage said. “Vitamins are just one of those key categories that help out with lower margins. Also, ancillary programs increase loyalty, which builds repeat sales from those patients.”
No comments found