Introduction to pharmacy business models

This presentation defines what is a Business Model and illustrates them using a Business Model Canvas. It identifies generic business models that are common in community pharmacies and provides examples.

1. BUSINESS MODELS IN
COMMUNITY
PHARMACIES
DAVID HOLDFORD, R.PH., M.S., PH.D.
PROFESSOR, VIRGINIA COMMONWEALTH
UNIVERSITY SCHOOL OF PHARMACY

2. Slides to Accompany “Marketing for Pharmacists”

3. OUTLINE
1.DEFINE BUSINESS MODEL
2.ILLUSTRATE A BUSINESS MODEL
CANVAS
3.IDENTIFY GENERIC BUSINESS MODELS
THAT ARE COMMON IN COMMUNITY
PHARMACIES
4.PROVIDE EXAMPLES OF PHARMACY
BUSINESS MODELS

4. 1. DEFINE BUSINESS MODEL

5. A BUSINESS MODEL
DESCRIBES HOW A BUSINESS
OR ELEMENT OF A BUSINESS
PLANS TO MAKE MONEY.

6. BUSINESS MODELS ARE
GENERAL, LARGE PICTURE VIEWS
OF THE BUSINESS &
TYPICALLY GLOSS OVER
THE OPERATIONAL DETAILS
OF THE BUSINESS

7. BUSINESS MODELS DESCRIBE:
• THE CUSTOMER VALUE PROPOSITION
• RESOURCES & PROCESSES
• THE PROFIT FORMULA

8. 2. ILLUSTRATE A BUSINESS MODEL
CANVAS

9. THE BUSINESS MODEL CANVAS
IS A POPULAR TOOL USED
FOR PLANNING & DEVELOPING
BUSINESS MODELS

10. THE BUSINESS MODEL CANVAS
ORIGINATED FROM BUSINESS MODEL
GENERATION (HIGHLY RECOMMENDED) &
HAS BEEN ADAPTED FOR MANY TYPES OF
BUSINESSES INCLUDING HEALTH CARE

11. THE BUSINESS MODEL CANVAS
HAS BEEN ADAPTED TO TEACH
PHARMACISTS AND PHARMACY
STUDENTS HOW TO DEVELOP
INNOVATIVE BUSINESS MODELS

12. Organization's
Operation -
Specific
background about
the organization
where the
product/service will
be provided
Strengths,
Weaknesses - Your
capabilities to
serve targeted
customers

Value Proposition -
The case you make
to customers
Secondary
Customers - all
other people you
may serve
Partners - People
or businesses who
can help you serve
customers
Opportunities,
Threats - Potential
for success or
failure in the
market

Primary Customers
- People or
businesses you
want to serve
Competitors -
People or
businesses who
compete for your
customers
Costs - Financial
and nonfinancial
inputs needed to
serve customers


Pricing & Reimbursement - Sources of revenue to sustain
your value proposition
Communication
Plan - How your
value proposition
is communicated
to customers
Implementation - Details about critical factors for success of business
Business Model Canvas for Pharmacy Services
Lean Canvas is adapted from The Business Model Canvas (http://www.businessmodelgeneration.com)
and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License.

13. Organization's
Operation -
Specific
background about
the organization
where the
product/service will
be provided
Strengths,
Weaknesses - Your
capabilities to
serve targeted
customers

Value Proposition -
The case you make
to customers
Secondary
Customers - all
other people you
may serve
Partners - People
or businesses who
can help you serve
customers
Opportunities,
Threats - Potential
for success or
failure in the
market

Primary Customers
- People or
businesses you
want to serve
Competitors -
People or
businesses who
compete for your
customers
Costs - Financial
and nonfinancial
inputs needed to
serve customers


Pricing & Reimbursement - Sources of revenue to sustain
your value proposition
Communication
Plan - How your
value proposition
is communicated
to customers
Implementation - Details about critical factors for success of business
Business Model Canvas for Pharmacy Services
Lean Canvas is adapted from The Business Model Canvas (http://www.businessmodelgeneration.com)
and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License.

14. 3. IDENTIFY GENERIC BUSINESS
MODELS THAT ARE COMMON IN
COMMUNITY PHARMACIES

15. ALL BUSINESS MODELS FALL INTO
THREE GENERIC CATEGORIES
1.SOLUTION SHOPS
2.VALUE-ADDING
PROCESS
BUSINESSES:
3.FACILITATED
NETWORKS

16. ALL BUSINESS MODELS FALL INTO
THREE GENERIC CATEGORIES
1.SOLUTION SHOPS
2.VALUE-ADDING
PROCESS
BUSINESSES:
3.FACILITATED
NETWORKS
PROVIDE SOLUTIONS
FOR COMPLICATED
PROBLEMS THAT
HAVE FEW, IF ANY,
CLEAR SOLUTIONS

17. ALL BUSINESS MODELS FALL INTO
THREE GENERIC CATEGORIES
1.SOLUTION SHOPS
2.VALUE-ADDING
PROCESS
BUSINESSES
3.FACILITATED
NETWORKS
INTERMEDIARIES IN
MARKETING CHANNELS
WHICH TAKE SOMETHING
FROM ONE CHANNEL
PARTNER (E.G.,
MANUFACTURER), ADD
VALUE (E.G., REPACKAGE
MEDICATIONS AND
PROVIDE COUNSELING ON
PROPER USAGE), AND THEN
SHIP THEM OUT TO THE
CONSUMER OR NEXT
INTERMEDIARY

18. ALL BUSINESS MODELS FALL INTO
THREE GENERIC CATEGORIES
1.SOLUTION SHOPS
2.VALUE-ADDING
PROCESS
BUSINESSES:
3.FACILITATED
NETWORKS
PROVIDE VALUE BY
CONNECTING PEOPLE
TOGETHER VIA A
PLATFORM THROUGH
WHICH USERS CAN
OFFER THINGS OF
VALUE TO EACH
OTHER

19. 4. PROVIDE EXAMPLES OF
PHARMACY BUSINESS MODELS

20. SOLUTION SHOPS
Solution shops provide highly customized
solutions to clients. Problems are unique and
not subject to solutions that can be standardized
with algorithms. Examples include:
B2B consulting firms which advise businesses on
solutions to delivery, financing, & management
Research & development organizations which
design studies to evaluate causal relationships
between health care interventions and outcomes

21. VALUE-ADDING BUSINESS PROCESSES
This describes any health care that can be
guided by rules-based & standardized
processes. The majority of pharmacies are value
adding process businesses.
Most pharmacy services in community, specialty,
hospital, & managed care setting are relatively
routine and lend themselves to standardized
treatment plans
A specific type of value-adding process is a retail
business model

22. RETAIL BUSINESS MODELS (RBM)
Community pharmacies often work under RBMs which
generate most of their revenue by selling merchandise.
RBMs typically offer one (or more) value propositions:
Economic: offers customers greater utility (compared to competitors) for
the costs paid
Functional: offers greater convenience by finding the right products with
as little time and as little physical and cognitive effort as possible
Emotional: offers an arousal of feelings associated with the act of
shopping itself, e.g., enjoying shopping with others, the hunt-for-a-
bargain, relaxation
Symbolic: attaches positive consumption meanings associated with
shopping itself e.g., shopping local, shopping that supports environment

23. Economic? Functional?
Emotional? Symbolic?
http://time.com/3947684/starbucks-cold-brew-nationwide/

24. FACILITATED NETWORKS
This describes any platform that provides value
by connecting individuals and organizations.
Facilitated networks in pharmacy include:
pharmacy associations which connect individuals
& organizations around a similar cause
pharmaceutical purchasing groups where
members band together to negotiate lower
prices from suppliers

25. SUMMARY
The business model may be the only thing a
pharmacist needs in planning for a new
service OR
It might be a tool to help build a business
plan
Models need to evolve as they are tested in
real marketplace conditions