Permissionless innovation in the pharmacy business model: The case for the membership pharmacy model

Abstract

Background

There continue to be calls to move away from traditional “fee for service” health care models in favor of patient-centered, value-based models. Concurrent with national efforts, grassroots innovation with novel practice change models are developing at the local level and holds similar potential to transform the pharmacy practice model. One of these innovative models, the membership pharmacy model, may be the least dependent on existing barriers to practice transformation because it is centered on the sale of services rather than products.

Objective

To discuss the difference between volume-based and value-based pharmacy models, focusing on how these models impact prescription adherence and patient outcomes. Application of the value-based pharmacy model will be described in the context of Good Shepherd Pharmacy located in Memphis, TN.

Case Summary

The volume-based model is centered on prescription fulfillment, with pharmacies incentivized to maximize the number of prescriptions filled. Conversely, the value-based model treats prescription fulfillment as an expense and emphasizes medication adherence as the primary goal. This shift in focus leads to a radical change in the pharmacy’s business model, aligning economic incentives with patients’ best interests. In the value-based model, pharmacies operate on a membership or subscription basis, where revenue is generated through recurring membership fees instead of individual prescription fills. This encourages pharmacies to manage prescription fulfillment efficiently and helps patients reduce their prescription burden, ultimately improving their bottom line.

Practice Implications

The value-based pharmacy model is distinguishable from the volume-based model in several aspects. In the value-based model, prescription fills are considered an expense rather than a profit center, and the inventory model shifts from “Just-in-Case” to “Just-in-Time.” Medication synchronization of patients’ refills is a key feature of the value-based model, as it reduces operational costs and maximizes profit per patient. Key performance indicators also shift from being product-centric to patient-centric and reward the organization for improving adherence.

Conclusion

The value-based pharmacy model represents a significant departure from traditional pharmacy practices. By incentivizing pharmacies to promote medication adherence and focus on long-term customer relationships, this model has the potential to improve patient outcomes. Further research is needed to study the model’s impact across different settings and patient populations, financial sustainability, and means of spread and scale.