Outsourcing Pharmacy Services

Mike Cross

Managing Director

Hambleton Medical Ltd

Outsourcing Pharmacy Services

• Overview of the concepts of strategic management

• Outsourcing dispensing

• Strategic choice

Aims

• Understand the political and environmental factors affecting outsourcing

• Understand the key drivers

• Understand how strategic management concepts can be applied to outsourcing

• Understand the benefits risks and concerns in outsourcing outpatients dispensing

• Be aware of the key considerations in making a decision

Strategy – the fundamentals

• Learning curve effects

• Tight focus or integration and scale effects

• Philosophy

• The changing nature of large organisations

• Financial climate and politics

Strategy – learning curve effects

• Principal

• Example of Pharma and homecare

• Example of a Trust board

Strategy – tight focus, or integration and scale

• The importance of focus

• Integration

• Scale effects

Strategy – tight focus, or integration and scale

• The importance of focus

• Integration

• Scale effects

Strategy - philosophy

• Communism or capitalism

• Promoting vibrancy

• Remember – there are good and bad companies in both public and private

Strategy - philosophy

• Communism or capitalism

• Promoting vibrancy

• Remember – there are good and bad companies in both public and private

Strategy-the changing nature of organisations

• The availability of information

• The importance of governance

• The ‘factory’ provision

Outsourcing dispensing

• Strategic decision

• Benefits of outsourcing

• Concerns of outsourcing

• Alternatives

Outsourcing dispensing- strategic decision

• Complex

• Long term

• Risk– Changes to VAT rules– NHS not good at commissioning– Effects on future provision of pharmacy and structures

Outsourcing - benefits

• VAT saving

• Patient experience

• Reduction in headcount

• Scale effects

• Potential to increase the scope to some inpatients

• Applicable to a wide range of patients

• Focus – avoiding lost opportunity costs

Outsourcing - benefits

• VAT saving

• Patient experience

• Reduction in headcount

• Scale effects for a focussed provider

• Potential to increase the scope to some inpatients

• Applicable to a wide range of patients

• Provider access to capital

• Focus – avoiding lost opportunity costs

Outsourcing - concerns

• Long tie-in

• Market and skills underdeveloped

• Market intrinsically less vibrant

• Information

• Purchasing

• Contracts

• Thin end of the wedge

• Margin retreat

• As the market matures will the quality drop?

Alternatives to Outsourcing

• Homecare

• FP10

• Reduction in hospital prescribing

• Social partnership

• Holding company structure

Making the Decision

• What is core?

• What capacity is there to deliver the core

• What is the ability to manage the contract

• How do the figures add up?

• How do the figures add up if the present is optimised?

• How realistic is it to optimise the present?

• What is you outpatients area like

Case history 1

• One of the very best hospital pharmacy departments

• Low waiting times

• Excellent clinical service

• Excellent governance

• Teaching hospital

• Safety focussed

• Good management good staff

• Low residual op RX

• High use of homecare

Case History 2

• 25% saving on drugs budget

• Poor staffing levels and recruitment

• Historically poorly managed

• Underdeveloped clinical pharmacy

• Long op waits

• Awful waiting area

Summary

• Usual decision– Reduce opRx– Increase homecare– Increase clinical control of outpatient prescribing

• For others– Ensure you retain the benefits and maximise the

opportunities– Manage it well

• The future?

In Conclusion -what is needed?

• An informed decision made with an understanding of the strategic context, based on the present and future capabilities to optimally deliver the core.