Integrated solutions essential in a complex health care marketplace

Drug Store News, July 19, 2004

Roiled by pricing pressures, therapeutic breakthroughs and increasing demands from an aging population, the health care system is in a state of dramatic flux. And for the retail pharmacist, this changing landscape spells both peril and promise.

"On one hand, we feel extremely bullish about the retail marketplace," said Stefan Linn, McKesson's senior vice president of pharmaceutical marketing. "There are a lot of factors driving growth."

Linn ticked off several elements, including the aging of the American population, which drives up drug use, and "strengthening pipelines," as pharmaceutical manufacturers ramp up R&D efforts to bring new and more effective medicines to the market.

"At the largest level, the forces driving the Rx industry certainly include the continued propagation of new drugs, many of which weren't even available four or five years ago," agreed McKesson chairman and chief executive officer John Hammergren in an interview with Drug Store News. "You have new indications and new compounds that are driving and propelling our industry.

"Second, you have increasing utilization, which is both demographically and educationally driven," Hammergren continued. "More and more people are utilizing these new drugs at a higher level and staying more compliant to them. So, as we're getting older and sicker, we're also smarter about the fact that pharmaceuticals are probably our first and best alternative."

Also fueling the pharmacy marketplace, Linn added, is an "increasing recognition that drugs are really the first choice of therapy and can prevent a lot of other health problems," as well as a growing need for pharmacy services and patient management as drug regimens grow increasingly complex and difficult.

"All of those are positive drivers," Linn noted. "But at the same time, when we look at the retail marketplace, we see tremendous issues."

Those issues pose serious challenges to retail pharmacy. Among them are heightened competition from mail order pharmacy, continuing third party reimbursement pressures, cost-cutting pressures from both public and private health care sponsors, and rising operating costs.

"Public policy is the biggest issue facing the industry," said Paul Julian, executive vice president and group president of pharmaceutical operations.

What's more, community pharmacy operators face growing competition from one-stop shopping destinations and mail-order pharmacies that "cater to the convenience priority very, very well," Linn added. "And they're gaining share."

Linn said pharmacy retailers must deliver on two fronts in order to thrive in such an arena. "One, they have to be cost-competitive with mail order pharmacy--not necessarily the same price, but at least approaching that level. So fundamentally, they have to get a lot more cost efficient."

Second, according to Linn, pharmacy retailers have to raise their clinical relevance again.

"If your pharmacy is all about just pushing out scripts quickly, that may not be good enough. You can't compete on a convenience basis alone," he said.

Advances in patient safety

Both the ability to operate with cost efficiencies and to deliver a higher level of clinical care at the pharmacy are "critical factors that will drive who will be successful in the retail environment," Linn asserted. "And we have positioned ourselves to support our customers on that quest--on being the most efficient."

McKesson also has positioned itself as a solutions provider in an era when quality of care has taken center stage in the minds of patients, providers and federal regulators. The focus on higher-quality health care and preventing mistakes has intensified as the costs of drug misadventures and noncompliance--both in human terms and in billions of dollars lost--gain increasing scrutiny from the public and from lawmakers.

"Three years ago, the Institute of Medicine estimated that up to 100,000 Americans die each year from preventable medical errors," a 2003 McKesson report stated. "Many of these deaths come as a result of the patient receiving the wrong medication or the wrong dose."

The implementation of bar coding to reduce medication errors was given a significant boost earlier this year, with the announcement by Health and Human Services Secretary Tommy Thompson that the Food and Drug Administra-tion will require bar-coding on all hospital medications and also will enhance reporting requirements for medicine-related safety problems. McKesson pioneered the use of robotic dispensing and bedside scanning of bar-coded medications in hospitals in the mid-1990s, and it remains "the only company that provides a comprehensive system of robotics, scanning, dispensing and software ... to reduce medication errors in the hospital," according to a company report.

That technology, branded by McKesson as Closed Loop Patient Safety, helps ensure that the right patient is receiving the right drug in the right dose at the right time, the company explained. And it is in line with calls by former FDA Commissioner Mark McClellan, now administrator of the Centers for Medicare and Medicaid Services, for a "comprehensive strategy to build a medical patient protection system for the 21st century."