“I fill 2,000 prescriptions a week, so I should get more hours.”
“My script growth is up 10% versus last year, but my technician hours went down.”
“If I don’t use up my hours, corporate will take them away from me.”
The never-ending cries of retail pharmacists continue: “Corporate never gives us enough hours!”
Pharmacists flaunt their weekly script numbers to make their case.
The logic doesn’t make sense, does it?
Maybe corporate really is to blame for all the misfortunes of pharmacists everywhere.
Or maybe, some pharmacists don’t know what they’re talking about.
Why Do The Hours Keep Decreasing?
Why don’t they flaunt their foot traffic or immunizations given?
One could argue that giving shots and patient foot traffic take more time than filling prescriptions.
That’s because no one is thinking about dollars and cents on their profit and loss report.
Payroll is measured in dollars and cents, not hours.
Yet hours are all pharmacists comprehend and care about.
So why do you hear the same cries of “We’re getting less hours even though we fill more prescriptions?”
A few reasons:
1. Paper budget doesn’t account for true script growth and technician demand
Budgets and scheduling systems are estimations using last year’s trends and some basic forecasting data.
No technology to date will predict what our real time demand will be with 100% accuracy.
In other words, your true demand is higher than what you’re budgeted/funded for (script compensation).
2. Actual script count is under budget
Pharmacies are budgeted to make a certain amount of dollars.
This means corporate funds the pharmacy with a certain amount of dollars for a predicted return on sales.
When actual script count is under what is budgeted, it might make sense to cut hours from your scheduled allotment.
3. Scripts are not converting to actual dollars
You assume that all prescriptions filled make money, but that just isn’t the case.
With declining reimbursements and dreaded DIR fees, it is all too common for pharmacies to lose money on filling prescriptions
Not to mention that the term “Expense Control” elicits blank stares from many pharmacists and usually adds salt to the wounds.
If you aren’t monitoring your profit margins, then all the work put into filling doesn’t translate to funding bottom line or extra payroll.
4. Ratio for scripts per technician hour has been optimized
Ninety day prescriptions increase adherence, and they also decrease foot traffic.
The overwhelming push for 90 day scripts, synchronization, and delivery has reduced the labor demands in retail stores.
Not to mention automation of insurance adjudication, e-script typing, and workflow operations.
As technology grows, the more pharmacy teams can, and are expected to, do with less resources.
In a time where profit margins are declining, more corporations are opting for leaner operating costs.
The Profit and Loss Doesn’t Lie
Scripts don’t always convert to dollars.
Isn’t it possible to lose money filling prescriptions?
If a pharmacy continually does this, are they being responsible to the corporation?
Should a pharmacy get funded more payroll than another who is meeting or exceeding budget?
The hours aren’t the issue. A lack of complete information is.
And so is the negligence of the financial health.
Too many pharmacists could care less about the business side of pharmacy and never even look at more than a few lines of their profit and loss report.
But they are usually the first to complain about staffing, resources, and being held accountable for metrics they can’t meet.
The Boring Corporate Metrics
If you want to skip this section, just know that if you want to use corporate dollars to flex up your tech hours, you must speak the same language as upper management.
Weekly Script count can indicate how many technician hours we need to do the work.
But there are many different ways to look at script count.
In order to make a sound business decision around payroll, we need to see the whole picture.
Actual vs Last Year (LY) tells us how much our business has grown in 12 months
A percentage growth in scripts or sales from LY does not necessarily equate with an equal increase in payroll budget (due to optimization).
What this can tell us is what the trend is like from a 12 month perspective.
What is the budgeted script growth % (i.e. the corporate goal)?
We’re not just talking script growth vs LY.
Corporate benchmarks already predict most stores to grow (due to advertising, acquisitions, and contracting).
Therefore, a pharmacy who is growing may already be budgeted for that growth.
The real question is: are you over or under that benchmark budget?
Actual Scripts vs Demand (AvD) is the variation between true demand and a paper budget.
This is the most useful metric because a percentage growth over budget can be used to flex up payroll in real time.
Filling 20% over script budget for a day can justify a flex in payroll, but only for that day.
If you exceed budget one day by 10%, but miss budget the next day by 10%, your net sales theoretically met budget (meaning you have enough hours).
That is why analyzing a trend is a much more powerful predictor.
Ask yourself, “What does the actual scripts for the week look like compared to my budget? What does last week, month, 6 months look like?”
Actual Payroll Expense and Actual Total Sales
Payroll expenses, or operating costs, are what we pay our human resources (pharmacists and technicians) to run our pharmacy business.
This line on the profit and loss report is another indicator of growth using dollars and cents.
Put simply, how much money did we have to pay people to produce X amount of dollars in sales?
What percentage of total gross sales was spent on operating costs? [Payroll Expenses/Total Sales] or [Operating Costs/Total Sales]
This number can vary between pharmacies, but the smaller the number the “better.”
Budgeted Payroll Expense and Budgeted Total Sales
Now, it’s time to compare the actual % with the budgeted %.
In a perfect world, these numbers would equal, meaning that the actual work needed to be done to bring in expected dollars will be covered by the right staffing.
But any deviation spells trouble and results in discomfort/stress during the day to day pharmacy operations.
If your [actual operating costs]/[actual total sales] is larger than [budgeted operating costs]/[budgeted total sales], this could look like you overspent on hours because your sales were insufficient (many external factors could affect this).
If it is lower, that means you possibly didn’t spend enough in operating costs (possible service disruption and patient safety concerns).
Be Curious And Think Growth Mindset
As you can see, there are so many more lines of reporting that play a role in the decision making process for funding payroll.
No one metric can predict or justify expenditures because most reporting does not demonstrate real time results.
If we are looking at past results and trends, all we can do is predict.
As Corporate PharmD’s we are expected to forecast responsibly as if it were our own money banking the pharmacy.
The next time a pharmacist complains about their tech hours decreasing (but their scripts increasing), ask what the budgeted demand is.
What is their operating cost as a percentage of topline sales?
No one metric or line on the P&L will paint the whole picture.
They may respond that they shouldn’t be responsible for all that and it’s out of their control.
If so, then so are their hours.
You’re running someone else’s business with someone else’s money.
Be responsible, and learn quickly how to think bigger than one metric.
Stay tuned for Part 3, where we explain how to leverage corporate reporting to fight upper management, create more margin and resources through sales conversion, and protect long-term business health, our patients, and our colleagues.