Volume 7, Issue 22, November 10, 2020
As we approach the end of year, it's a good time to look back and identify some of the more significant pharmaceutical developments from 2020 that are playing a role in influencing or reshaping the industry. Here are eight noteworthy trends that emerged or gained steam this year that are likely to follow us into 2021 and beyond.
For several years running, pharmacists have ranked among the highest professions for honesty and ethics according to Gallup. In its most recent annual poll, the results for which were released in January, pharmacists placed only behind nurses, engineers, and medical doctors, trailing the latter by a single percentage point. That's one of the many reasons why it's not surprising to see more consumers relying upon their pharmacists as a go-to source of medical information, and now often in place of primary care physicians.
Pharmacy companies are looking to build and capitalize on this trust. A FierceHealthcare reporton the J.D. Power 2020 U.S. Pharmacy study revealed that the expansion of pharmacy companies into primary care has been largely welcomed by consumers. James Beem, managing director of healthcare intelligence at J.D. Power, is quoted as stating, "… it's clear that pharmacy operators are positioning themselves to become hubs of consumer healthcare, edging into the space once reserved for primary care physicians' offices. … What has not been clear until now is exactly how consumers would react to the shift. Simply put, they're embracing it, and it's driving higher overall satisfaction and increased spending as they use more health and wellness-oriented services."
Expect some of the other trends discussed below to further contribute to the momentum moving consumers toward pharmacists.
Going into 2020, the retail pharmacy industry was undergoing a significant transformation due to developments such as the rise of e-commerce and rapidly evolving consumer shopping expectations. Generating foot traffic was proving difficult enough, and then came COVID-19. Pharmacies, considered "essential businesses" that were permitted to remain open when states issued business closure and stay-at-home orders, did considerable retail business in the early weeks of the pandemic as consumers scrambled to purchase a wide range of supplies, including disinfecting and antibacterial sprays/wipes, hand sanitizer, toilet paper, medications, latex gloves, face masks, and hydrogen peroxide. Eventually, this period of frantic buying quieted down.
While pharmacies may get a sales boost from another round of consumers stocking up on items in response to rising cases and the arrival of flu season and winter, retail sales are likely to take a long-term hit going forward because of a new dynamic brought on by the pandemic: consumer fear. As long as the health crisis continues and consumers remain concerned about their safety, many will continue to try to keep their in-person shopping to a minimum to reduce the potential for exposure to the novel coronavirus. This trend contributes to other emerging trends discussed below.
While mail-order drug delivery is not a new concept, it received what can be described as a "COVID-19 bump." Data from SunTrust Robinson Humphrey revealed that during the final week of March 2020, mail-order prescriptions rose 21% from the previous year. Consumers had been increasingly embracing mail-order delivery of prescriptions prior to the pandemic. Faced with stay-at-home orders, a desire to maintain social distancing, and the aforementioned concern about potential exposure to the coronavirus from in-person shopping, that embrace grew. This was fueled by consumers of all ages seeking delivery of essential items, including medications, and aggressive pushes by pharmacy chains to convince consumers to take advantage of mail-order prescriptions, such as by waiving delivery charges.
A report by Chain Store Age on the recent announcement that Sam's Club and DoorDash had partnered to provide home delivery of eligible prescription medications highlighted just some of the home delivery options available to consumers — and it doesn't even mention the likes of PillPack by Amazon Pharmacy or DivvyDose, which was recently acquired by UnitedHealth Group.
Postal service delays may sour some consumers on the idea of mail-order delivery, but there's every reason to believe that prescription delivery will only become more commonplace.
While not getting the same attention as mail-order drug delivery, 90-day prescription refills got a boost of its own when more consumers gained access to this option thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act. An American Enterprise Institute (AEI) report notes that, as part of the CARES Act, "… the federal government has required Medicare Part D plans to provide 90-day refills to people who request them. While most Part D plans allowed 90-day refills for generic drugs prior to the pandemic — and half did for branded drugs — the vast majority of Part D enrollees were in plans where they could not get a three-month supply for a specialty drug."
Drug Channels reported that prior to the pandemic, the share of 90-day prescriptions dispensed by a community retail pharmacy had been increasing, from less than 7% of retail prescriptions in 2010 to almost 20% in 2019. The prevalence of 90-day prescriptions accelerated in 2020, hitting 23.9% in the first week of June before dropping to 22.9% by early August.
The AEI report highlights the many benefits — and some limitations — associated with 90-day refills, but concludes that, "Changes to the healthcare system that limit the need for repeated visits to a pharmacy or physician office without a significant improvement in care should be retained. Requiring longer prescription fills where clinically appropriate should be retained."
Don't be surprised if we see an expansion of the availability of 90-day refills.
While telehealth was expected to eventually take on a significant role in our healthcare system, COVID-19 advanced the adoption and embracing of virtual care by many years in just a matter of months. Fair Health's monthly telehealth tracker shows that telehealth claim lines increased by more than — and this is not a misprint — 3,550% from August 2019 to August 2020, growing from about 0.2% of all medical claim lines to more than 6%.
Which brings us to telepharmacy. While telepharmacy is far from a new concept — the first telepharmacy services date back to the early 2000s — it has remained largely unfamiliar. The pandemic is helping change that, and fast (albeit not as fast as other telehealth disciplines and applications). The Centers for Disease Control and Prevention, in guidance it provided for pharmacists and pharmacy technicians in community pharmacies concerning their COVID-19 response, stated: "Pharmacists who are providing patients with chronic disease management services, medication management services, and other services that do not require face-to-face encounters should make every effort to use telephone, telehealth, or telepharmacy strategies." Meanwhile, numerous states loosened their rules concerning the delivery of telehealth services, including those that can be provided by pharmacists.
It's expected that while some of these temporary policy changes and waivers will likely be reversed after the declared public health crisis ends, others may become permanent. And for good reason: With many consumers being introduced to and then benefitting from telehealth during the pandemic, it will be difficult to stop the momentum behind virtual care. That should only help telepharmacy to further emerge as a viable option for the delivery of appropriate pharmacy services.
Administering vaccines has become an effective way for pharmacies to generate much-needed revenue. Vaccines provide the same boost to front-end sales as retail clinics. One frequently cited estimate claims that a 20% vaccination rate can drive an additional 6% in front-end sales.
As the National Community Pharmacists Association reports, a majority of community pharmacies offer immunizations. Pharmacy Times reports that all 50 states permit pharmacists to provide some vaccination services, with laws varying by state because the practice is not federally regulated … except for (hopefully) upcoming COVID-19 vaccines.
In September, the U.S. Department of Health and Human Services (HHS) issued guidance under the Public Readiness and Emergency Preparedness Act to expand access to FDA-authorized or FDA-licensed COVID-19 vaccines when they are made available by authorizing state-licensed pharmacists to order and administer the vaccinations to persons ages 3 or older, subject to certain requirements. Then, in October, HHS issued guidance authorizing qualified pharmacy technicians and state-authorized pharmacy interns to administer COVID-19 vaccines when made available, COVID-19 tests, and childhood vaccines, all subject to requirements.
These developments should help grow pharmacy vaccination and testing services and contribute to growth in front-end sales. Consumers who were already going to their pharmacies to receive vaccines will likely continue to do so and may now take advantage of COVID-19 testing. Effective marketing by pharmacies and growing awareness concerning the availability of these services should help motivate more consumers to go to their local pharmacies for services they may have typically associated with their primary care physician.
Finally, it would not be surprising to see these rules, which further shine a spotlight on the value of pharmacies, pharmacists, and pharmacy technicians, lead to the expansion of the types of vaccines pharmacists and pharmacy technicians can administer.
For years now, running a successful pharmacy, particularly the thousands of independent pharmacies that remain in operation, has proved challenging at best and extremely difficult at worst. Going into 2020, pharmacies were already facing many barriers to success, including tightening reimbursement, audits cutting further into payments, direct and indirect remuneration fees increasing, more cumbersome accreditation requirements, consolidation of chain pharmacies giving the big players an expanded footprint and greater market power, the threat presented by Amazon's expanding pharmacy business, and the steering of large groups of consumers toward specific pharmacies. Pharmacy owners who viewed these challenges as rather daunting — and who could blame them? — began exploring or executed exit strategies, which led to an uptick in consolidation.
It's safe to assume that the pandemic is helping consolidation gain even more momentum. Like other retail businesses, many independent pharmacies have experienced overall decreased foot traffic. Patients are stocking up on 90-day supplies of medications, helping reduce the number of trips they need to make to pharmacies, or choosing not to fill prescriptions. Large pharmacy chains are offering perks, such as free prescription delivery, that are pulling even more consumers their way. In addition, independent pharmacies are largely continuing to struggle to work with pharmacy benefit managers (PBMs), particularly the largest PBMs (e.g., CVS Caremark, Express Scripts).
There are some opportunities for independent pharmacies to strengthen their business, a few of which are highlighted in this piece. However, it's difficult to see how these opportunities, some of which would require pharmacies to greatly redesign their infrastructure, outweigh the abundance of challenges. Expect more owners of independent pharmacies to consider and proceed with selling their businesses while they still have value.
Our final trend concerns the rise in internet-based pharmacies selling medications directly to patients. These are often patients who do not have insurance, do not want to use their insurance, or would rather avoid the retail setting. As with nearly every other industry, the pandemic has pushed consumers to further embrace online shipping and, sure enough, there were pharmacies that welcomed these shoppers with open arms (including plenty of fakes).
One such example is a pharmacy we've already highlighted: PillPack. While the Amazon pharmacy is covered by most insurance plans, it prominently highlights the option for patients to choose "out-of-pocket" as the manner in which to pay for medications. For patients who want to go this route, PillPack plays up the opportunity for discounts, ability to use copay coupons, and choice of payment options: credit card, HSA/FSA card, or bank account.
As the battle against the novel coronavirus continues, expect word about online pharmacies and the perks they offer to continue spreading. This should lead to increases in sales volume. Even when we can finally put the health crisis behind us, at least some of those consumers who were introduced to online pharmacies during the pandemic are likely to continue using the service.
It's fairly certain that we'll look back on 2020 as one of most distinctive years ever, as it combined a pandemic, presidential election, and racial unrest, to name just a few of the most significant issues. For pharmacies, trends and developments from 2020 are transforming the industry. Considering that the aforementioned issues will continue into 2021 and be joined by the likes of a new presidential administration, Supreme Court ruling on the Affordable Care Act, COVID-19 vaccine(s), and either a divided or unified-controlled Congress, it's possible that in a year from now, we'll look back on 2021 and say that it, too, was a year like no other.
During the past decade, Alan has facilitated numerous, diverse M+A transactions in the pharmacy marketplace across the country, as well as providing strategic consultation to national pharmacies and similar organizations. Prior to becoming an M+A advisor, he was a “hands-on” owner and manager in the pharmacy and home infusion healthcare marketplace for over 15 years and successfully sold his pharmacy to a national company after growing and diversifying their income streams in a very competitive market. Alan's specialties in the pharmacy and home infusion marketplace include long term care, retail pharmacy, specialty pharmacy, and home healthcare, and he has attained the URAC Accreditation and Specialty Pharmacy Consultant designations, in addition to other recognitions. His educational background includes a Bachelor of Arts from Rutgers University and a Master of Arts from the John Jay College of Criminal Justice.