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

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J. Vella [PH 3340]

The Malta Medicines List (ii)

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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

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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

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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

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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

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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

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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

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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

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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

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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

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