Risks and Challenges of Expanded Retail Pharmacy Offerings

Risks and Challenges of Expanded Retail Pharmacy OfferingsPosted by Kelly Sauders, Partner, Deloitte & Touche LLP

Many retailers are considering expanding their pharmacy offerings to tap into bigger margins and new revenue sources. Attractive opportunities range from high-priced specialty drugs to a variety of health and wellness services. However, as retailers broaden the scope of their pharmacy operations, they are likely to encounter a number of significant regulatory issues and risks. Including:

  • Stricter requirements for drug tracking. In an effort to reduce counterfeiting and enable more effective product recalls, new laws will soon require detailed tracking of prescription medications across the entire value chain — from manufacturer to end-consumer. To satisfy this requirement, pharmaceutical companies and retailers will need to develop and deploy new systems and product packaging that use technologies such as RFID and bar codes to track products at the unit level.
  • Improved capabilities for specialty drugs. Specialty drugs that are hundreds or even thousands of times more expensive than common drugs are an attractive and potentially lucrative source of revenue. However, to operate effectively in this high-end market, retailers may need improved inventory systems and controls to avoid costly stock-outs, excess inventory and theft. In many cases, they may also need more advanced medical facilities and certified personnel to administer the drugs.
  • Advanced billing systems that can handle services. Many retail billing systems are primarily designed to handle products, not services. For example, when billing for a flu shot, an existing system might be able to bill for the medication but not for the service of actually administering the shot. This issue will be increasingly important as retailers expand their pharmacy offerings to include a broader portfolio of health and wellness services, as well as specialty drugs that require more sophisticated levels of service.

Issues such as these are not insurmountable. However, managing them effectively will likely require both a deliberate effort and significant investments in new systems, processes and capabilities. As retailers develop strategies to expand their pharmacy offerings, they should understand all of the risks and regulatory requirements before getting started on implementation.

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