WHAT IS THE FUTURE OF VALUE-BASED CARE?

Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.

X
Blog Post

What is the future of retail pharmacy? Health care leaders predict it's increasingly digital.

By Regina LohrChloe Bakst

July 21, 2022

    Retail pharmacies are struggling. For the past several years, we've seen headlines on pharmacy closures from independent and chain pharmacies alike. Increasing profit erosion, a workforce that's burning out, and emerging digital pharmacies have all increased the strain on retail pharmacies.

    Many pharmacies are responding to these pressures by expanding on-site clinical services through adding co-located primary care clinics, increasing access to billable clinical pharmacy services, or both.

    During our recent Pharmacy Market Trends webinar, we posed two scenarios representing the future of the retail pharmacy industry, outlined below. Audience members—including leaders from health systems, health plans, PBMs, and pharmaceutical companies—were invited to select which they saw as the more likely future of retail pharmacy. Ultimately, respondents believe that we are moving towards a more digital pharmacy landscape.

    Future scenario #1: Brick-and-mortar pharmacies are the front door to care.

    In this scenario, community-based pharmacies successfully reinvent themselves as community wellness centers that offer a diversified portfolio of health care services, such as chronic disease management, test-to-treat, virtual specialty care, and infusions.

    Revenue from their new business model offsets market share lost to digital competitors. Pharmacy staff are energized by new opportunities to provide direct patient care. Community pharmacies prove vital for supporting patient access in under-resourced communities and for supporting value-based care initiatives.

    This scenario is possible if we see consumers embrace co-located primary care in a way that they really didn't for co-located retail clinics. Health plans will also be critical partners here, as their reimbursement for pharmacy services, including value-based contracts, is essential to success, especially for independent pharmacies. This scenario is also likely only feasible if pharmacist scope of practice is codified and expanded across states.

    About 12% (n=12) of respondents selected this scenario as the most likely option for the future of retail pharmacy. Respondents emphasized the importance that pharmacist scope of practice could have for the future of independent pharmacies, allowing them to be nimbler and adapt to provide services beyond dispensing medications.

    Future scenario #2: Digital pharmacy booms.

    In this scenario, digital pharmacies' consumer-oriented focus leads to growing market share for non-specialty medications. This launches a snowball where more innovation drives further growth, such as same-day delivery and drone options.

    Low volume community pharmacies surviving only on retail pharmacy margins continue to exit, creating access challenges for some patients and challenging providers to find new ways to help them access their medications, especially in lower income and rural areas.

    For this scenario to occur, digital pharmacies have to establish a value proposition that attracts consumers, whether it's ease of use or access to lower cost drugs. Digital pharmacies should also be mindful of their potential to negatively impact health equity and develop methods to serve patients in pharmacy deserts.

    Thirty-seven percent (n=37) of audience members selected this scenario, making it the second most popular choice. Respondents emphasized that generational shifts will impact the future of retail pharmacy, with one commenting that the "younger population trusts the electronic process, whereas the older declining population relies on and values brick-and-mortar."

    The winner: A combination of both

    The most popular option, with 47% (n=47) of the audience members' votes, proposed a mixture of both scenarios as the most likely future for retail pharmacy.

    This scenario predicts that all of these trends can coexist to create a retail pharmacy future where diversified offerings keep brick-and-mortar pharmacies open, while digital pharmacy options also open the door to more accessible, affordable care.

    Parting thoughts

    A few respondents (n=3) selected the option, 'I don't think either scenario will happen.' We don't have insight into the future these audience members were envisioning, but they raise an important point. The future of retail pharmacy is still unclear and undecided. Many factors can shape how it will turn out and influence potential winners and losers.

    Ultimately, those who succeed will adapt swiftly and effectively to new market demands and provide differentiated value to the marketplace, whether via diversified service offerings, quality customer service, or competitive pricing.  

    If you have predictions on the future of the retail pharmacy industry, please feel free to reach out to bakstc@advisory.com and share your thoughts.  

    2022 Pharmacy market trends

    image

    We’ve created a ready-to-use slide presentation that equips leaders across the health care industry with strategic insights on major trends impacting the pharmacy market.

    Included are in-depth looks at the strategies pharmacy benefit managers and retail pharmacies are exploring in 2022 and beyond.

    Download now

    Have a Question?

    x

    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.