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Professor, Pharmaceutical Policy and Evaluative Sciences, School of Pharmacy, University of North Carolina at Chapel Hill, Chapel Hill, NC
Associate Professor, Pharmaceutical Socio-economics, School of Pharmacy, University of Iowa, Iowa City, IA
Reprints: Dr. Farris, School of Pharmacy, University of Iowa, 115 S. Grand Ave., Iowa City, IA 52242-1112, fax 319/353-5646, karenfarris{at}uiowa.edu
Abstract
OBJECTIVE: To describe the state of community pharmacy, including patient care services, in the US.
FINDINGS: Chain pharmacies, including traditional chains, mass merchandisers, and supermarkets, comprise more than 50% of community pharmacies in the US. Dispensing of drugs remains the primary focus, yet the incidence of patients being counseled on medications appears to be increasing. More than 25% of independent community pharmacy owners report providing some patient clinical care services, such as medication counseling and chronic disease management. Most insurance programs pay pharmacists only for dispensing services, yet there are a growing number of public and private initiatives that reimburse pharmacists for cognitive services. Clinical care opportunities exist in the new Medicare prescription drug benefit plan, as it requires medication therapy management services for specific enrollees.
DISCUSSION: The private market approach to healthcare delivery in the US, including pharmacy services, precludes national and statewide strategies to change the basic business model. To date, most pharmacies remain focused on dispensing prescriptions. With lower dispensing fees and higher operating costs, community pharmacies are focused on increasing productivity and efficiency through technology and technicians. Pharmacists remain challenged to establish the value of their nondispensing-related pharmaceutical care services in the private sector. As the cost of suboptimal drug therapy becomes more evident, medication therapy management may become a required pharmacy benefit in private drug insurance plans. Pharmacy school curricula, as well as national and state pharmacy associations, continually work to train and promote community pharmacists for these roles. Practice research is driven primarily by interested academics and, to a lesser degree, by pharmacy associations.
CONCLUSIONS: Efficient dispensing of prescriptions is the primary focus of community pharmacies in the US. Some well designed practice-based research has been conducted, but there is no national research agenda or infrastructure. Reimbursement for cognitive services remains an infrequent, but growing, activity.
Key Words: community pharmacy services, United States
Published Online, July 25, 2006. www.theannals.com, DOI 10.1345/aph.1G545
There are approximately 55 400 community pharmacies in the US, and anyone can own a pharmacy.1,2 Of these, 34-42%, depending on data sources, are independently owned. The remainder are chain pharmacies including traditional chains, mass merchandisers, and supermarket pharmacies. Retail pharmacy sales were $203.1 billion in 2003, and 3.2 billion prescriptions were dispensed.2 Prescription drugs account for 11% of total US healthcare costs and represent one of the most rapidly increasing cost components.3
State requirements for pharmacist licensure are now standardized and include yearly continuing education requirements. A national pharmacist qualifying examination is now an accepted criterion for licensure in most states.4 Pharmacists must also pass a state law examination. Pharmacy technicians are licensed to dispense prescriptions under a pharmacist's direct supervision in virtually every state. Some states classify pharmacy technicians into 1 of 2 categories: certified technicians who received special training and noncertified technicians. Many states specify a maximum technician-to-pharmacist ratio, with ratios sometimes differing in community versus hospital settings.
In 2000, there were about 196 000 active pharmacists, representing the third largest health professional group in the US.5 Women comprised 46% of practicing pharmacists in 2000, an increase from 13% in 1970. More than 60% of pharmacists are employed in community pharmacies. There continues to be a shortage of pharmacists as the result of an increased number of prescriptions being filled, increased time needed to process them due to problems with insurance coverage, changes in the pharmacist workforce, an increased number of retail pharmacy outlets, and an expansion of pharmacists' roles.6
Typical Community Pharmacy in the US
The average independent community pharmacy is open for business 6 days (56 h) per week.1 The average size of an independent pharmacy is 3239 square feet, about one-third the size of the typical chain pharmacy (9410 sq. ft.). The prescription department averages 807 square feet in independent pharmacies.1,2 The average chain pharmacy employs 27 full-time equivalent (FTE) persons (pharmacists and nonpharmacists), and independents employ 10.6 FTEs on average.1,2 The average independent pharmacy employs 1.1 FTE owner-pharmacists, 1.4 FTE nonowner-pharmacists, 3.5 FTE technicians, and 4.6 FTE other positions.1 Pharmacy employees are typically paid a yearly salary but may be paid on an hourly basis for part-time work. Some pharmacists in managerial positions are compensated via salary. Pharmacy sales focused on medicines represent 95% and 69% of total sales for independent and chain pharmacies, respectively.1,2
Pharmacies generally operate on gross margins of 23-25%.1,2 Net operating income of independent community pharmacies typically ranges from 3.5% (more than $4 million in sales) to 4.3% ($1.5-2.5 million in sales).1 Net operating income for chain pharmacies is less. Of each dollar the average independent pharmacy generates, 76.5% goes to cost of goods sold, 8.7% to payroll, 6.7% to other operating expenses, and the remaining 8.1% to profit for owners (before taxes).1 Over the past 2 decades, the number and market share of independent pharmacies has proportionately declined, as many of the less profitable pharmacies have ceased operations or been purchased by chain pharmacy competitors. Today, surviving independent pharmacies are enjoying a modest rebound, as exhibited by higher gross sales, more prescriptions dispensed, and a modest improvement in net profit percentages.
Context of Healthcare Delivery in the US
US national healthcare expenditures were $1.9 trillion in 2004, representing health expenditures of $6280 per capita and comprising 16% of the gross domestic product (GDP). The US spends a larger share of its GDP on health care than does any other major industrialized country. Healthcare expenditures were distributed as follows: 30.4% to hospital care, 21.3% to physician services, 10.0% to prescription drugs, 6.1% to nursing homes, 2.3% to home health care, 12.9% to other personal health spending (eg, dental, other professional health services, durable medical equipment), and 16% to other health spending (eg, administration, private health insurance, public health activity, research, construction).7
Health insurance is typically provided by employers to working adults and their families; however, private employers are not required to provide health insurance. About 17.8% of Americans do not have any form of health insurance.8 In general, 61% of Americans have employer-provided insurance, 13.4% have state (Medicaid) or federal government-provided insurance (Medicare), and 5.4% purchase their own insurance. Medicaid provides health care for low income individuals, and Medicare provides health care for individuals aged 65 years and older and for younger individuals if they are disabled. Health insurance typically provides access to primary care physicians and specialists and provides coverage for hospitalization and emergency department visits, but not nursing home care. Monthly premiums average $829/month for a family of 4, and deductibles or copayments are often required, ensuring that individuals directly pay for part of their health care.9
In the US, prescription and nonprescription medicines must be approved by the Food and Drug Administration for safety and effectiveness, and drug advertising is regulated by the Federal Trade Commission. Herbal/vitamin preparations have no formal approval process as long as they are safe for use, contain accurate labels as to contents, and make no claims of prevention, mitigation, or cure of a disease.5,10 Insurance for prescription drugs (typically excluding nonprescription products and herbal/vitamin preparations) is more common now than in the past. In 2004, 47.6% of prescription drug expenditures were paid by private health insurance, 24.9% by individuals, and 27.5% by state-funded health insurance.7 A prescription drug benefit for Medicare enrollees was implemented in January 2006 for persons aged 65 years or older. Prescription drug insurance is generally purchased by employers and administered by pharmaceutical benefit managers (PBMs) who manage and coordinate the structure of the benefit and reimbursement to pharmacies. Pharmacy owners are prohibited from negotiating with PBMs in a collective manner.
Health policy in the US is the result of public and private interests. The federal and state governments provide health insurance to low income and older Americans and, therefore, are a significant force in health policy. Private employers purchase health insurance for their employees and they, too, are an important contributor to health policy in the US. Numerous national pharmacy organizations exist and seek to influence health policy. As a nation, there is no consensus that health care is a right afforded to citizens. Competition is the basis for health insurance and healthcare delivery.
Community Pharmacy Services
Dispensing of prescriptions is the primary duty of community pharmacies and remains their core activity. Pharmacists dispense medicines at the order of a prescriber, typically a physician but possibly a physician assistant, nurse practitioner, optometrist, or dentist, as well. While community pharmacies are the main source for filling prescriptions for most patients, other sources include hospitals, health maintenance organizations, community clinics, and Internet mail-order pharmacies. Cost and convenience are 2 important factors in determining where individuals fill their prescriptions.
Pharmacies generate revenue from prescription dispensing based on a markup on drug product plus a small dispensing fee for cash-paying consumers. Insurance plans reimburse pharmacies for the drug product, using an estimated acquisition price approach, which is based on a discount from the average wholesale price (AWP). However, most pharmacies are able to acquire drugs below the AWP, particularly if the drug is available as a generic product (ie, no longer under patent). Pharmacies also receive a small dispensing fee (rarely more than $5 per prescription). Dispensing fees have declined over the past 15 years, primarily due to cost-containment measures implemented by insurers and/or their PBMs in reaction to increasing prescription drug costs.
State requirements and procedures for dispensing drugs do not begin or end with the mechanical aspects of preparing a prescription. Most state regulations require that a patient drug profile be maintained at the pharmacy and retrieved and reviewed prior to dispensing. Procedures include checking for drug-disease, drug-age, and drug-drug conflicts, such as therapeutic duplication and drug-drug interactions. At the time of dispensing, there is a further obligation to provide patients with instructions for use and an offer to counsel those receiving new prescriptions. This offer to counsel has been interpreted in various ways. In some states, face-to-face counseling by pharmacists is required when dispensing a new prescription; in others, a mere verbal or posted written offer to counsel is sufficient. Because these activities are considered part of the dispensing process, they are included as part of the dispensing fee.
Patient Counseling
Two studies suggest that pharmacists are providing more counseling on medications.11,12 The percentage of pharmacies providing counseling for any information was 37% in 1982 and 42% in 1994.12 In an early 2000 study, two-thirds of pharmacies provided counseling or an offer to counsel on a new prescription.11 For written information, the percentage of pharmacies was 25% in 1982, 59% in 1994, and 79% in the early 2000s. A recent study of pharmacy counseling behavior in 8 states reiterated this trend; about 63% of patients were given oral drug information, but counseling varied significantly according to intensity of state regulation, pharmacy "busyness," and age of responsible pharmacist.13
Other studies have affirmed that pharmacists preferentially counsel patients based on perceived need or the nature of the drug dispensed and that the level of counseling varies based on the factors cited above.14,15 Printed leaflets with information about the drug and its use are increasingly being used as a substitute for pharmacist counseling or as a supplemental means of providing information to patients. In one survey, 87% of patients received such information with dispensed prescriptions.16 Despite the good intentions of pharmacists, counseling is usually limited to new prescriptions and focuses on brief messages about how to take the medication, available refills, precautions, and potential adverse effects.
Cognitive Services
Community pharmacists also perform a number of health-related, nondispensing services. A nationwide survey of community pharmacists indicated that they would prefer to spend more time in consultation with patients and prescribers, up from 19% to 34% (Table 1).1,17 In one state, pharmacists reported a trend toward more disease state-focus when counseling patients, often under consent arrangements with prescribers.18
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Many nondispensing services are termed cognitive services, pharmaceutical care services, or medication therapy management services. In a few states, pharmacists have been reimbursed for cognitive activities, such as medication reviews, resolution of drug-related problems, and pharmaceutical case management, but these programs are neither widespread nor standard.19-21 There are no nation-wide data on the prevalence of different types of cognitive services offered by all community pharmacies in the US, but some data are available about independent pharmacists (Table 1). An important development in this area, and one that will increase the ability to track who receives medication-related services, is the addition of Current Procedural Terminology codes for medication therapy management services.22 However, the codes are defined in time intervals rather than specific activities, such as medication review or patient education.
Definitions of cognitive services differ, but all have a common focus on identifying potential or actual drug-related problems in patients. Various classifications of drug-related problems have been developed. In general, most include one or more of the following headings: questionable indication for drug (eg, unnecessary drug, needs additional therapy), drug effectiveness (eg, suboptimal dose or duration), drug safety issues (eg, adverse effect, drug-drug interaction, excess dose or duration), or patient adherence (eg, over- or underuse, poor administration or technique).23
In terms of impact, there is general agreement in the literature that monitoring of drug therapy by community pharmacists can improve clinical outcomes in conditions such as asthma, diabetes, hypertension, and dyslipidemia and can reduce adverse reactions.24,25 Also, community pharmacists' care services may either increase drug costs (eg, when a pharmacist recommends adding a drug for a previously untreated medical condition) or reduce them (eg, by discontinuing a drug no longer needed or switching to a more cost-effective alternative). There are relatively few well controlled, randomized trials demonstrating community pharmacists' contributions to decreases in total healthcare costs, although studies with weaker designs have suggested that such savings exist. One controlled study, the Asheville Project, showed improvements in clinical and humanistic outcomes in patients with diabetes as well as reductions in total healthcare costs for employers, with reductions being sustained for more than 5 years.26 The Asheville project model has been adopted in several states, and first-year results showed similar benefits in terms of economic, humanistic, and clinical outcomes.27
One controlled study that examined the factors that increase the prevalence of patient care services in community pharmacies showed that paying pharmacists increased the detection of drug-related problems.28 Some states have developed programs for their Medicaid populations in which pharmacists provide disease management or pharmaceutical case management, but, to date, no federal government programs pay pharmacists for cognitive services.21 At least one provider of pharmacist care services in the private sector pays pharmacists for cognitive services,20,29 and these programs will increase as some prescription drug plans and Medicare Advantage plans under Medicare Part D will implement medication therapy management programs in 2006 and 2007.
Patient safety is an important focus of health policy, with specific attention being given to identifying dispensing errors in institutions.30 Pharmacies and pharmacists are responsible for the safe distribution of medicines, and some programs have been created to improve the safe dispensing of medicines in the community setting.31,32 Some states now require community pharmacies to have an active quality assurance program to ensure continued licensure. The Institute for Safe Medical Practice offers community pharmacies a voluntary quality assurance self-assessment program that has been endorsed and cosponsored by some major professional pharmacy organizations.32
Community Pharmacy Research
A small but growing body of research is focused on community pharmacy services or practices, as evidenced by the work cited in this article and recent reviews of research in community pharmacy.24,25,33 A much richer body of literature about research concerning pharmacists' practices has emerged from hospitals, academically affiliated clinics, and managed care settings. Research on community pharmacies in recent years has been of 2 types: descriptive (eg, characterizing the scope of practice or featuring a unique service offered by an individual pharmacy) and evaluative (eg, focusing on services provided and outcomes on a prescription, drug problem, or patient-specific level). In the US, we have neither focused research efforts on a systematic diffusion of cognitive services to community pharmacies nor have we developed community pharmacy research networks to facilitate our work.
In 2004, there were 89 colleges and schools of pharmacy in the US, with approximately 29 220 students enrolled in PharmD degree programs.34 Universities with research interests in community pharmacy and some professional organizations, such as the American Pharmacists Association (APhA) and the National Community Pharmacy Association, are the primary drivers of community pharmacy research. As one example, the Community Pharmacy Foundation has provided grants to some pharmacies and universities to develop and evaluate new patient care services. Only a few investigators have obtained federal grants to examine the impact of community pharmacists' services. Limited research funds are available from private foundations and pharmaceutical companies. There is no cohesive, publicly supported, national research agenda for community pharmacy-based pharmaceutical care services.
Outlook for Community Pharmacy
The future of community pharmacy in the US is uncertain, unpredictable, and likely to be buffeted by several external forces and marketplace factors.
Trends
Forces that are having an impact on community pharmacy practice include the following:
Despite a growing number of outlets, the average prescription volume at community pharmacies is increasing. The combination of more prescriptions being covered by third parties and consolidation within the health insurance and PBM industry has resulted in an oligopoly, wherein community pharmacies have little or no control or bargaining power with respect to dispensing fees or other drug benefit provisions. Legislation to enable increased bargaining power among community pharmacists was proposed and supported by at least one pharmacy organization in 2005, but it was not successful.35
Most insurers have implemented mail-order services as an option within their prescription drug benefit package. Enrollees are provided financial incentives (typically reduced copayments) for using mail-order pharmacies. Community pharmacies have been faced with the dual challenges of rising labor costs and decreasing compensation for dispensing services. They have responded by increasing prescription productivity, using technicians more often in the dispensing process (to the extent allowed by state pharmacy laws), and expanding their use of technology. Automated dispensing machines are routinely used in hospital and mail-order pharmacies and are now common in larger-volume community pharmacies.
Perhaps the most significant external force potentially affecting community pharmacies is the passage of the Medicare Modernization Act of 2003, which went into effect fully in 2006. It offers prescription drug insurance, under the Social Security Act, to individuals aged 65 years or older on a voluntary, subscription fee basis. Its immediate impact is likely to be seen in increasing coverage and use of prescription drugs, particularly for elderly citizens with limited financial resources. Prescription drug coverage is not generous for many older adults, and the program is administered in the private sector by PBMs, with little federal oversight. Under this Act, prescription services must be available through community pharmacies, but may also be available through mail-order services. One component of the Medicare Modernization Act calls for medication therapy management services to be provided to Medicare enrollees whose drug costs exceed specific limits or who have one of several identified chronic diseases. This requirement means that more pharmacists will become involved in direct patient medication therapy management services. The full impact of this service requirement on the operations of the typical community pharmacy is unknown but expected to be modest.
A parallel effort by pharmacy professional organizations is to gain recognition of pharmacists as authorized providers of professional services under public sector programs. Until now, pharmacies (but not pharmacists) were licensed as providers of prescriptions and durable medical equipment under federal programs. Such recognition would allow pharmacists to bill for clinical pharmacy services under Medicare Part B, which governs outpatient medical services by health professionals.36,37 The Pharmacist Provider Coalition, comprised of the Academy of Managed Care Pharmacy, American Association of Colleges of Pharmacy, American College of Clinical Pharmacy, APhA, American Society of Consultant Pharmacists, American Society of Health-System Pharmacists, and College of Psychiatric and Neurologic Pharmacists, is working to enact such legislation.38
Other alliances also help raise community pharmacists' profiles with state legislators.39 The Alliance for Pharmaceutical Care (comprised of 10 national pharmacy organizations, including many of those named above in addition to the National Association of Chain Drug Stores, National Community Pharmacists Association, and National Council of State Pharmacy Association Executives) represents a united effort of pharmacy organizations to impact the legislative process by exhibiting at the National Conference of State Legislatures. At this conference, pharmacists offer a variety of screening and monitoring services to showcase pharmacists' clinical abilities.
A new initiative is the Pharmacy Quality Alliance, comprised of health insurers, government research organizations, and pharmacy organizations. Its focus is to develop performance measures and then assess performance at the pharmacy and pharmacist levels to "help make informed choices, improve outcomes and stimulate the development of new payment models."40
Summary
The private market approach to community pharmacy in the US inevitably precludes national and even statewide strategies to change the basic business model of community pharmacies at this time. However, major federal policy decisions, such as requiring the provision of medication therapy management services, may have a ripple effect on the private sector marketplace. Third-party payers are slowly but increasingly recognizing the medication misuse problem and the potential value that pharmacists offer in providing care-based services. To date, most pharmacies remain focused on dispensing prescriptions as a key source of revenue. Actions of insurers and PBMs to lower costs of drugs dispensed and dispensing fees have created pharmacy incentives to increase the volume of prescriptions dispensed and dispensing efficiencies as well as a deterrent to providing cognitive services unless directly compensated. Despite this trend, there is growing recognition of the need for medication therapy management services for at least some patients. Designers of pharmacy school curricula, as well as national and state pharmacy associations, continually work to train and promote community pharmacists as providers of clinical or pharmaceutical care services.
References
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