Newtown Square • Philadelphia • Detroit • Cincinnati • Sacramento • Rochester • Willow Grove • Orlando • Buffalo • Chicago
There is no disputing the overwhelming turmoil that the COVID pandemic has created for the majority of businesses around the world. Whatever the industry, most companies have had to scramble to survive, rethinking their products and services so that consumer needs were addressed and access was available, safe, and desired despite the risks of everyday commerce to public health. And even though the light at the end of the tunnel is (perhaps) finally coming into view, the effects of the pandemic on retail trends won’t likely disappear anytime soon. On the contrary, consumers have now experienced new ways of doing business, and many like it. Retailers, especially, will have to take heed, reworking their business practices to meet the needs of the post-COVID consumer, a consumer now used to, as well as controlled by, a different type of buying behavior. Take a look at some of the likely post-COVID realities for retail pharmacies, in particular:
Pre-Covid, the U.S. government was responsible for approximately 40% of prescription drug costs. Once COVID hit and people began to lose their jobs, enrollment in Medicaid has further grown, shifting the percentage of governmental insurance support for healthcare (and its associated drug costs) while simultaneously changing how state governments pay that money out.
Historically, the majority of states have utilized a managed care payment model, distributing funds to a managed care plan, which then paid for each Medicaid-beneficiary’s healthcare costs as covered by that plan. But as more people have enrolled in Medicaid over the past year, state governments have started to realize that fee-for-service (FFS) care can save them money, especially when/if enrollees don’t visit the doctor as often. Furthermore, FFS-issued drugs make use of cheaper drug ingredients and offer better (i.e., higher) rebates. Thus, post-COVID, there is speculation that more states will realize the potential cost-savings value of the FFS Medicaid payment model and make the switch from managed care programs. The result: pharmacies will receive payment for Medicaid drugs directly from the government (rather than a Medicaid plan manager), pocketing more money since the middleman has been eliminated. And, under an FFS model, pharmacies can also charge more to dispense each drug and receive reimbursements for actual acquisition costs rather than ingredient costs, providing opportunities for further profit.
Retail pharmacy industry analysis also indicates that there will be continued stabilization of prescription demand. While initial prescription demand at the beginning of the pandemic might have waned as people canceled doctor visits, surgeries, and trips to the pharmacy and, as a consequence, had no prescriptions to fill, today prescription drug demand has nearly returned to its pre-COVID level, evidence that even a pandemic can’t fully stymie prescription drug dependence!
Additionally, pharmacies will continue to provide wider access to healthcare, becoming and staying active testing facilities, as well as aiding in tracing efforts as the world most probably begins to demand COVID antibody testing in order to resume normal activities.
Finally, retail pharmacy industry analysis gives evidence for easier prescription drug access moving forward. Exceptions to regulations and drug-issuing restrictions have allowed consumers easier access to 90-day refills, out-of-network pharmacies, and postal deliveries. We don’t see that reverting back to pre-COVID exclusions, at least not fully. We believe people have experienced a type of convenience in getting their scripts that will likely become more commonplace as the pandemic ends and “normal” life returns.
COVID-19 has disrupted retail businesses in every industry over the past year with ramifications that are likely to be felt for years to come. For those in the retail pharmacy industry, analysis of past and future trends ensures that current business decisions are the most informed and have the most potential for profitable results. To learn more about how retail pharmacy industry analysis and market research can help you maintain and even grow your business during these volatile times, please contact our team at Research America.