2011 [UNIT PH 3340] 1
Pharmacoeconomics and
Management in Pharmacy VII
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
2011 [UNIT PH 3340] 2
Pharmacoeconomic news
review
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
J. Vella [PH 3340]
Are our beliefs flawed?
3
J. Vella [PH 3340]
Does money or patient welfare
drive healthcare?
4
J. Vella [PH 3340]
Editorial
5
J. Vella [PH 3340]
Social conscience or cost-based
rationale to spending?
• This editorial makes the point that social
welfare and advancement should be used as
a yardstick for decision-making
• Rather than a set of hard-and-fast cost
effectiveness based algorithms
• What is socially beneficial or not gives rise to
the argument of how to develop indicators to
measure such an impact
6
J. Vella [PH 3340]
No public awareness on generics!
7
J. Vella [PH 3340]
The general public is in the dark
• The article states that 85% of people are not
aware of the advantages of generic
medicines
• Yet no news of a nationwide campaign to
educate the public!
• The larger originator companies still wield
considerable, and in some cases, undue
influence, to the detriment of the consumer
8
J. Vella [PH 3340]
The Malta Medicines List (i)
• A useful addition to the e-resources
available
• The only easily accessible compendium of
locally available medicine
• No need for a regular purchase of a physical
drug register
• Free of charge
• Updated by the competent authorities and
thus credible and reliable
9
J. Vella [PH 3340]
The Malta Medicines List (ii)
10
J. Vella [PH 3340]
Drawbacks
• No field to reference local distributor
• No hierarchy in the database
• Variants of the same AI are listed as a
separate entry, thus bloating the amount of
items in the initial search field
• Despite the above, an invaluable addition to
the few IT/web-based tools available locally
11
J. Vella [PH 3340]
Conflicting evidence!?
12
J. Vella [PH 3340]
Flawed conclusions?
13
J. Vella [PH 3340]
No more statins for all?
14
J. Vella [PH 3340]
Points about statins
• The current mantra has been to promote
statins for all adults at a risk of CVS, and
even as a primary care strategy to all adults
of a certain age
• This study discredits this approach, also
citing the fact that studies supporting statin-
led interventions were funded from within the
pharmaceutical industry
15
J. Vella [PH 3340]
The worth of the statin market
16
J. Vella [PH 3340]
Free medicine for all!
17
J. Vella [PH 3340]
Decreasing profits?!
• The article makes a case for partial and/or
full reimbursement
• Despite many calls for such a system, no
concrete frameworks or white papers have
been put forward on the subject
• The article also states that pharmacies are
facing a decline in profits, yet no figures are
readily available for comparison
18
J. Vella [PH 3340]
Unfounded statements
• One of the major drawbacks in the local field
of pharmacy and medicinal data
• No reliable or credible figures for basic fixed
points such as global market size, private
and public shares, community pharmacy
retail sales and splits of the pharmaceuticals
consumed
• Most data is that available externally, from
the ECB and WHO 19
J. Vella [PH 3340]
Medicine prices are still far too
high!
20
J. Vella [PH 3340]
A lack of facts
• Statements are made without being
substantiated by hard fact
• The consumer is right to complain as the
market for medicines is complex and murky
at best
• Locally, the dearth of information and public
knowledge works against the pharmaceutical
business in general
21
J. Vella [PH 3340]
Asymmetrical information
• In economics, the market for
pharmaceuticals is termed as asymmetrical
• This is because one party to the transaction
has more knowledge about the subject
matter than the other involved
• In this case, the pharmacist and/or physician
is specialised in the his/her professional
scope, whereas the average patient has
limited or no knowledge 22
J. Vella [PH 3340]
Abuse and ethical behaviour
• This asymmetry can lead to a situation where
monetary gain outweighs concerns for patient
welfare
• Hence the development of checks and balances in
the form of legislation and codes of ethics
• A pharmacist(and any other health professional)
thus must rely both on pharmaceutical knowledge
and also maintain high standards of moral equity
23
2011 [UNIT PH 3340] 24
Ethics and pharmacy
practice and administration
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
J. Vella [PH 3340]
The eternal challenge
• Running a pharmacy poses an ethical
dilemma, whether in private enterprise or in
public service
• A constant push and pull scenario between
the twin motivators of professional duty and
profit concerns
25
J. Vella [PH 3340]
Conflicts of interest (i)
• Most pharmacists who work in retail pharmacies have a serious potential conflict of interest.
• On the one hand, they are professionals, expected to be knowledgeable about drugs and to dispense them in a responsible and ethical manner. On the other hand, their income depends on the sale of products.
J. Vella [PH 3340]
Conflicts of interest (ii)
• Conflicts also exist within the detailing
community as there is the temptation to
misrepresent and over-promote one’s
product over a competitor
• Inappropriate incentives may also be
forwarded to pharmacy managers and
physicians alike
27
J. Vella [PH 3340]
Conflicts of interest (iii)
• A variety of inducements are offered to
pharmacists in an effort to favour one
product over another
• Trade discounts, free gifts, paid for holidays
and under the counter payments are
common practice
• Drawing the line between the acceptable
and the offensive is difficult
28
J. Vella [PH 3340]
Ethics and practice
• When faced with a tricky situation, one must
always ask the question:
• “Can this mode of action be morally
justified?”
• If not, any pharmacist professional must
refuse to proceed
29
J. Vella [PH 3340]
Major ethical practice principles
• Beneficence
• Justice
• Utilitarianism
• Confidentiality
J. Vella [PH 3340]
Beneficence
• Do not harm
• Maximize possible benefits
• Minimize possible harm
• Direct benefit to subject
• Overall benefits to society
J. Vella [PH 3340]
Justice
• Fair distribution of benefits
– Equal shares
– Equal individual need
– Equal individual effort
– Equal societal contribution
– Equal merit
J. Vella [PH 3340]
Utilitarianism
• Acknowledges that the pains of some may
have to be accepted in particular situations
in which the best realisation of value for
everyone affected makes them unavoidable
• Greatest good for the greatest number
• In some cases, costly treatment for a few
must be refused to enable a cheaper
intervention affecting a larger number of
patients
J. Vella [PH 3340]
Confidentiality (i)
• The importance of the patient being able to trust
their health care provider to not reveal personal
and private information without the person’s
permission
• Building trust in your local pharmacist leads to the
development of a mutually rewarding professional
relationship
• A common deficit is the superficiality of the
pharmacist/patient exchange
J. Vella [PH 3340]
Confidentiality (ii)
• Goal: Accurate diagnosis depend on a
complete history
• Goal: Society benefits, such as with
reported diseases, by protecting others, as
in the case of polio, chicken-pox or HIV
• Epidemiological data is vital to the constant
monitoring of trends in the geographical and
temporal spread of disease
35
J. Vella [PH 3340]
Justification of confidentiality
breach
• A threat to the patient
• A threat to other unidentified persons
• A threat to some other specific individual
– EX: Child abuse and specified contagious diseases
• When benefits from the breach outweigh the “wrong” to the patient
• E.g. saving a life requires informing the patient’s family about an extra-marital relationship
J. Vella [PH 3340]
The role of the pharmacist
• An oft-quoted phrase
• What does it really mean?
• How can we explain it to aspiring
pharmacists, to the general public, or even
to ourselves?
• This must first be defined before we can
tackle the functions of a pharmacist within
the context of a pharmacy environment
37
2011 [UNIT PH 3340] 38
The basic fundamentals of
pharmacy administration
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
J. Vella [PH 3340]
Pharmacist duties
Main Functions
Pharmacy Professional
Administrative Duties
Financial Responsibilty
39
J. Vella [PH 3340]
Main pharmacy practice settings
• Community pharmacy
• Hospital pharmacy
• Detailing
• Regulatory
• Academic
40
J. Vella [PH 3340]
A varied skill-set
• In all settings the pharmacist must exercise
a multi-disciplinary set of skills
• Administrative (& financially relevant) and
professional decisions must be taken
• This section will focus on the administrative
functions of the pharmacy profession, with
particular relevance to a community and
hospital setting
41
J. Vella [PH 3340]
Introduction (i)
• Administrative functions within a pharmacy
setting can be further divided into two:
• (i) is always applicable, whereas (ii) is post
dependant
42
Administrative Functions
Professional (i) Managerial (ii)
J. Vella [PH 3340]
Introduction (ii)
• The distinction applied here between
professional and managerial functions is
arbitrary as there is significant overlap
between the two
• However this sub-division enables us to put
down on paper a highly complex and inter-
twined set of responsibilities
43
J. Vella [PH 3340]
Introduction (iii)
• One of the basic problems identified in multi-
personal environments is the lack of a clear
definition of each employee/unit’s global
responsibilities
• This lack of defined responsibility leads to a
lack of accountability as deficiencies cannot
be transparently and fairly attributed
44
J. Vella [PH 3340]
Introduction (iv)
• Locally, the opposite problem is evident
• Most small to medium scale pharmacies
have one pharmacist present, possibly with
a full- or part-time sales assistant
• This leads to the necessity for the execution
of multiple roles concurrently
• Such a function can only be carried out with
the right training and internship
45
J. Vella [PH 3340]
Multi-tasking (i)
• This is an essential in the local environment
• Retail considerations, patient welfare, the
dispensing of POYC medicinals, stock
control and ordering all vie for attention
• In some cases the roles of stock placement
and cash point reconciliation are also
necessary
46
J. Vella [PH 3340]
Multi-tasking (ii)
• A pharmacist with a restricted skill set will
never be a top community professional
• A grounding in management, both financial
and inter-personal is vital to avoid errors in
the initial stages
• A major deficit is that most pharmacists are
becoming too tightly focused and loosing
interoperability across various disciplines
47
J. Vella [PH 3340]
Time management
• In a situation where a multitude of factors
demand a pharmacist’s attention
• Prioritisation of the most relevant tasks is
essential
• Apart from the daily fixed duties, two or three
tasks a day must be allotted, and in that
manner all the vital duties are carried out
over the course of the week
48
J. Vella [PH 3340]
Delegation
• In a multi-person environment, delegating
less important tasks is vital
• Micro-management will lead to an archaic
and very slow moving system of
management
• As the pharmacist in charge of a community
or hospital pharmacy, team-building and
concerted efforts are vital
49
J. Vella [PH 3340]
Interpersonal skills (i)
• These are vital, for two main reasons
• Firstly, the pharmacist must be able to
sustain an agreeable relationship with
patients, whether within the context of a
private retail outlet, or a public sponsored
healthcare centre
• Patient satisfaction is imperative in both
situations
50
J. Vella [PH 3340]
Interpersonal skills (ii)
• Secondly, inter-staff relationships are vital
• All members must be treated equally, with
praise being given where required, and
criticism applied judiciously
• It is vital to point out unacceptable behaviour
immediately, otherwise it may become
habitual
• Improvement must be noted and the staff
member encouraged 51
J. Vella [PH 3340]
Interpersonal skills (iii)
• Preferential treatment towards a particular
member of staff must be avoided at all costs
• This will only lead to behind the scenes
bickering and a high staff turnover
• Regular staff get-togethers, on a work and
also a social level help identify potential
conflicts and possible remedial action/s early
on
52
J. Vella [PH 3340]
Professional Duties (i)
• The discharge of all functions related to the
pharmacist’s role as a health professional,
including but not restricted to :
• Dispensing, patient counselling, medication
review, blood pressure, blood glucose and
other point-of-care monitoring functions,
treatment follow-up
53
J. Vella [PH 3340]
Professional Duties (ii)
• The second subdivision of a pharmacist’s
professional duties is that of the
maintenance of accurate and relevant
records for the practice of pharmacy within
the environment for which responsibility is
defined.
• In community pharmacy these records are
referred to locally as pharmacy registers
54
J. Vella [PH 3340]
Professional Duties (iii)
• As part of the administrative responsibilities
of a pharmacist, it is imperative that such
duties are carried out and/or delegated
accordingly
• The POYC scheme has a added a new
dimension to the professional duties of a
community pharmacy
55
J. Vella [PH 3340]
Managerial functions (i)
• In a basic community pharmacy scenario,
the main duty under this classification would
be that of stock control
• Inventory is the most valuable asset on a
pharmacy’s balance sheet
• Stocks have several inherent complexities,
however proper monitoring and control is
pivotal to the functioning of any pharmacy
56
J. Vella [PH 3340]
Issues with pharmacy inventory
Factor Relevance
Highly perishable (temperature
sensitive)
Cost of a controlled environment, utility
costs and capital investment
Time limited, expiry dated Quantities and dates must be monitored
Costly, especially new medicines Tight control on the introduction of novel
pharmaceuticals
Finite funds Therefore not all products can be
stocked
Fickle clientele Patients might not take to new and
innovative products, regardless of the
marketing hype
57
2011 [UNIT PH 3340] 58
The basics of pharmacy
accounting
[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]
J. Vella [PH 3340]
Accounting reports (i)
• Accounting records are based on three main
financial statements:
• The profit and loss account or P&L
• The balance sheet
• The cash-flow statement
59
J. Vella [PH 3340]
Pharmacy P&L
SALES €350,000
COST OF SALES €291,667
GROSS PROFIT €58,333
OPERATING EXPENSES
WAGES €25,000
€9,000
INSURANCE €1,500
W&E €2,500
EXPIRED GOODS €1,500
TELEPHONE €1,000
RENT €7,000
MISC €1,500
TOTAL EXPENSES €49,000
NET PROFIT €9,333
60
J. Vella [PH 3340]
Accounting reports – P&L
• This statement records revenue for a period
of operation, usually twelve months
• All revenues or income are totalled and take
place at the top
• Next come the COGS or cost of goods sold
• Logically, subtracting these first two figured
gives the profit for the year
61
J. Vella [PH 3340]
Gross profit
• This figure is the gross profit for the period
• To obtain the net gain for the year, all related
expenses must be deducted
• Once the net profit is calculated, income tax
must be also deducted, plus any bank
interest
• Some companies report earnings as EBIT,
or earnings before tax & interest
62
J. Vella [PH 3340]
Pharmacy Balance Sheet
Assets Liabilities
1020 CASH CONTROL ACCOUNT €5,500.00 2010 BANK OVERDRAFT €41,500.00
1200 INVENTORY €95,000.00 2011 BANK LOAN €85,000.00
1208 PHARMACY LICENCES €100,000.00 2050 Trade Creditors €85,000.00
1210 PROPERTY €80,000.00 2430 INCOME TAX PAYABLE €3,500.00
1400 FURNITURE & FITTINGS €8,500.00 Total Liabilities €215,000.00
1402 OFFICE EQUIPMENT €5,200.00
1404 COMPUTER EQUIPMENT €4,500.00 Owner Equity
1410 AIRCONDITIONING €1,300.00 3500 RETAINED EARNINGS €35,500.00
3501 SHARE CAPITAL €4,500.00
Current Earnings €45,000.00
Total Owner Equity €85,000.00
Total Assets €300,000.00 Total Liabilities + Owner Equity €300,000.00
63
J. Vella [PH 3340]
Accounting reports – Balance
Sheet
• A balance sheet reports on the assets (or
belongings) and the liabilities (or monies
owed) of an enterprise
• It is termed so because the assets and
liabilities are stated in a manner as to
balance each other out
• An increase in one side of the statement
must lead to a change on the other side, the
basis of double-entry in accounts 64
J. Vella [PH 3340]
Points on the balance sheet
• Basic formula is :
• Assets = liabilities + owner equity
• or more simply
• owner equity = assets - liabilities
65
J. Vella [PH 3340]
Administrative targets (i)
• The obvious would be to increase sales,
whilst keeping overheads constant, or even
cutting costs
• When placing this within the ethical context
of the pharmacist professional, the picture
necessarily becomes less straightforward
• Sales must be increased whilst keeping
patient welfare first
66
J. Vella [PH 3340]
Administrative targets (ii)
• This can be achieved by making sure that
stock levels are not only adequate, but also
consistent and of good quality
• Short-date and packaging of questionable
provenance and quality will not generate
repeat custom
• Maintenance of a pleasant environment,
both for clients/patients and workforce is vital
67
J. Vella [PH 3340]
Administrative targets (iii)
• Supplier credit must be utilised, as it is a
source of interest-free finance
• However it must not be abused, and
previously agreed terms adhered to
• Bank finance must be evaluated carefully, so
as not to create a situation where the ratio of
an enterprises’s assets to its borrowings is
so high that it is termed to be highly “geared”
68
J. Vella [PH 3340]
Administrative targets (iv)
• Debtors, or parties owing money should be
avoided
• On no account should clients or employees
be loaned money or be extended over-
generous credit terms for the purchase of
goods
• Staff remuneration should be fair and in line
with current pay-scales
69
J. Vella [PH 3340]
Administrative targets (v)
• It must be kept in mind that pay levels
should take into account the weight of
responsibility involved and the experience of
the employee
• This must be viewed from both sides of the
equation; as pharmacists we could well end
up in a position to manage and decide on
the remuneration scales of fellow
professionals
70
J. Vella [PH 3340]
Round-up
• Pharmacy administration is a skill that
requires training, aptitude, clear thinking and
financial and managerial acumen, apart from
an extensive professional pharmacy
education
• It is not for all pharmacists as the
responsibilities that go with it are many, as is
the satisfaction to be had
71
J. Vella [PH 3340]
The future?! (i)
• Fresh approaches to pharmacy
management are required
• Most community pharmacies are slowly
waking up to the reality that the IT age came
along about 10 years ago!
• It is up to new entrants into the workplace,
both in private and public practice to usher in
a new age of administrative skills
72
J. Vella [PH 3340]
The future?! (ii)
• IT based systems, both on a health
information level, and also on the level of
pharmacy administration (stock-control and
record-keeping) must be made the rule,
rather than the exception
• A standard form of periodic reporting of
sales, with a breakdown of drug classes,
possibly linked to an electronic prescription
or register system could be proposed
73
J. Vella [PH 3340]
The future?! (iii)
• This could lead to the generation of reliable
and credible statistics for the consumption of
pharmaceuticals in the Maltese Islands
• Such data could also be of financial value
from a marketing aspect
• The integration of pharmacies with their
suppliers would lead to a lower percentage
of OOS items and improved patient access
to medicine 74
J. Vella [PH 3340]
Bibliography and Acknowledgements
• Deshpande PR, PharmD, Dept. of Pharmacy Practice, Manipal University, Manipal, India. Pharmacoeconomics,
Microsoft Powerpoint Presentation
• Drummond M, Sculpher M, Torrance G, O'Brien B, Stoddart G. Methods for the Economic Evaluation of Health
Care Programmes. 3rd ed Oxford: Oxford University Press; 2007
• Heaton A BS (Pharm), Pharm. D., RPh.Director of Pharmacy BlueCrossBlueShield of Minnesota, Performance
Enhancing Pharmaceuticals, Microsoft Powerpoint Presentation
• International Society for Pharmacoeconmics and Outcomes Research (ISPOR), Introduction to
Pharmacoeconomics, ISPOR Distance Learning Program
• Rascati, K. Essentials of Pharmacoeconomics; Philadelphia:LippincottWilliams & Wilkins; 2008
• Ridker et al, Rosuvastatin to prevent vascular events in men and women with elevated C-reactive protein.
NEJM, 359 (21), 2008
• Sale, L. Critical Appraisal of Research Reports, Department of Reproductive Health and Research, WHO,
Geneva, 2006
• Satyanarayana K, St.Peter’s Institute of Pharmaceutical Sciences, Pharmacoeconomics, Microsoft Powerpoint
Presentation
• Shull S PharmD, MBA. Basics of Pharmacoeconomics and Outcomes Research:Application to Patient Care,
Microsoft Powerpoint Presentation
• Quick J, Director, Essential Drugs and Medicines Policy – EDM, Health Technology and Pharmaceuticals
Cluster – HTP, World Health Organization, June, 2002Presentation
75
J. Vella [PH 3340]
Bibliography and Acknowledgements
• Smith R, Wright D. Health Economics for Prescribers, Microsoft Powerpoint Presentation
• Vella J. Medicine prices in Malta and their relation to economic indicators. Dissertation, University of Malta
2010
• Vella J. Essays in Pharmacoeconomics: The QALY as a tool in evaluating treatment outcomes. Unpublished
work, 2010
• www.nso.gov.mt, National Statistics Office website
76