pharmaceutical management lecture 1 lecture 1 give introduction to course objectives give...

Pharmaceutical ManagementPharmaceutical Management

Lecture 1Lecture 1

Give Introduction to course objectives Give Introduction to course objectives

Give Introduction to Pharmacists Give Introduction to Pharmacists Responsibilities in Different Scope of WorkResponsibilities in Different Scope of Work

Evidences of Pharmacist need to basic Evidences of Pharmacist need to basic accounting, business and marketing accounting, business and marketing management knowledge. management knowledge.

Give introduction to Financial ManagementGive introduction to Financial Management

04/19/2304/19/23 11Dr. Rafiq R. Abou-ShaabanDr. Rafiq R. Abou-Shaaban

Pharmacists Responsibilities in Pharmacists Responsibilities in Different Scope of WorkDifferent Scope of Work

After graduation, pharmacists will work in the After graduation, pharmacists will work in the following:following:

Retail Pharmacies as a community pharmacistRetail Pharmacies as a community pharmacist

Hospital Pharmacy in both out-patient and Hospital Pharmacy in both out-patient and in-patientin-patient

Medical Representatives to market medicines Medical Representatives to market medicines and health care equipmentsand health care equipments

Pharmaceutical Factory in research and Pharmaceutical Factory in research and developmentsdevelopments

Research Field. Research Field.


Pharmacists Duties in Retail PharmacyPharmacists Duties in Retail Pharmacy

Pharmacist focus on obeying prescription Pharmacist focus on obeying prescription orders or helping patient on the use of OTC orders or helping patient on the use of OTC drugsdrugs

Pharmacist dispense medicine and counsel Pharmacist dispense medicine and counsel patient on drug use, side effects, drug-drug patient on drug use, side effects, drug-drug interaction, precautions..etcinteraction, precautions..etc

Contacting physicians for any inquiry on Contacting physicians for any inquiry on prescriptions.prescriptions.

Hiring cooperating staff and dealing with Hiring cooperating staff and dealing with competition (Transparent competition with competition (Transparent competition with ethic)ethic)

Make orders to suppliers and prepare the Make orders to suppliers and prepare the financial statements for managing decisions.financial statements for managing decisions.


Pharmacist Duties as Medical Pharmacist Duties as Medical RepresentativeRepresentative

The main duty of medical representative is to The main duty of medical representative is to redirect the physician’s dispensing style . This redirect the physician’s dispensing style . This means that medical representative is responsible means that medical representative is responsible of prescribed drugs and there rotation in of prescribed drugs and there rotation in pharmacies . pharmacies .

Medical representative is responsible of Medical representative is responsible of marketing medicines through periodical visits to marketing medicines through periodical visits to physician (calls), making appointments with head physician (calls), making appointments with head consultants, meeting or sponsoring physician and consultants, meeting or sponsoring physician and or pharmacists.or pharmacists.

Prepare daily, weekly, and monthly report to Prepare daily, weekly, and monthly report to supervisor .supervisor .

Prepare the financial statements for his sale Prepare the financial statements for his sale targets that helps managing decisions.targets that helps managing decisions.


Characteristics of Medical Characteristics of Medical RepresentativeRepresentative

ConfidentConfident

Good looking with a smiling face.Good looking with a smiling face.

Has a strong literature background about Has a strong literature background about the products he/she is handling (e.g. the products he/she is handling (e.g. memorizing latest clinical trials which memorizing latest clinical trials which proves the superiority of the product)proves the superiority of the product)

Flexible and practical.Flexible and practical.

Having patienceHaving patience

Well prepared and have planned calls and Well prepared and have planned calls and visitsvisits


MP Preparing Calls and VisitsMP Preparing Calls and Visits

Medical Representative willMedical Representative will: : Segment market , then choose the right target Segment market , then choose the right target market(s)market(s)

Segment target market (s) into areas which can be Segment target market (s) into areas which can be completed and covered in one month time (20 working completed and covered in one month time (20 working days)days)

Each segment stated above must be in one area (e.g. Each segment stated above must be in one area (e.g. one street or one building)one street or one building)

Start with physicians of priorityStart with physicians of priority

Prepare each “Call” according to physicians availability Prepare each “Call” according to physicians availability and free time.and free time.

““Cash Cows” Physician must be visited more often than Cash Cows” Physician must be visited more often than others (i.e 20% of cooperating physicians make 80% of others (i.e 20% of cooperating physicians make 80% of your target)your target)

Collect as much information as you can on Physician Collect as much information as you can on Physician attitude and prescription pattern.attitude and prescription pattern.

Enter to the physician well prepared.Enter to the physician well prepared.04/19/2304/19/23 66Dr. Rafiq R. Abou-ShaabanDr. Rafiq R. Abou-Shaaban

SummarySummary

Retail Pharmacist should have financial Retail Pharmacist should have financial management knowledge, sales, marketing management knowledge, sales, marketing and accounting experience to manage and accounting experience to manage business and make decisionsbusiness and make decisions

Hospital Pharmacy in both out-patient and Hospital Pharmacy in both out-patient and in-patient also should have business in-patient also should have business management knowledge and accounting management knowledge and accounting experience to prepare financial statements experience to prepare financial statements and make decisions and make decisions

Medical Representatives should have Medical Representatives should have marketing management skills to market marketing management skills to market medicines and health care equipments.medicines and health care equipments.


Lecture 1


Pharmacy practice has changed dramatically over the last several years . Pharmacists are more likely to be employees than

owners; they are more likely to work for large ,organizations, such as hospitals and chain pharmacies ;and than in small, independently owned pharmacies and

,They are more likely to have clinically oriented patient care responsibilities than to have purely .distributive duties

Although these changes have been associated with a dramatic decline in the number of pharmacists who own their own businesses, they have not so affected the number who is managers. In fact, because of the increased need for coordination and direction in large ,organizations such as major hospital pharmacies .managed-care organizations, and chain pharmacies

The need for pharmacy managers has increased

Pharmacy practice has changed dramatically over thelast several years . Pharmacists are more likely to be employees than

owners; they are more likely to work for large organizations, such as hospitals and chain pharmacies, and than in small, independently owned pharmacies; and

They are more likely to have clinically oriented, patient care responsibilities than to have purely distributive duties.

Although these changes have been associated with a dramatic decline in the number of pharmacists who own their own businesses, they have not so affected the number who is managers. In fact, because of the increased need for coordination and direction in large organizations such as major hospital pharmacies, managed-care organizations, and chain pharmacies.

The need for pharmacy managers has increased


Managers are responsible for planning, organizing, and controlling resources so that the organizations in which they are employed meet their goals. Many contemporary pharmacists meet this definition of a manager. Owners of independent pharmacies continue to function as managers, as do directors of hospital pharmacies. Chain pharmacies employ pharmacists as pharmacy and store managers, district managers, and directors of professional operations. Large hospitals and managed-care organizations employ pharmacists as clinical coordinators.The essence of the manager's job is making decisions.

Many of these decisions have important financial implications.

The purpose of this text is to help pharmacists develop the skills they need to make more effective financial

decisions.


Financial management focuses on making wise decisions about obtaining and using financial resources. These resources include both funds the owners of an organization have invested in it and funds the organization bas borrowed. Pharmacist-managers face many such decisions: how much inventory to carry, whether to raise or lower prices, whether to participate in third-party prescription plans, whether to buy a new computer, whether a new store should be opened, whether the hospital can afford to institute a pharmacokinetic dosing service. Being familiar with the tools and techniques of financial management will help pharmacists make better decisions when faced with such questions.


The principal goal of financial management is to increase the value of the organization. This goal is achieved by making the most efficient use of financial resources. Pharmacies, for example, carry inventories of prescription and nonprescription drugs. They must invest cash--a scarce financial resource--to buy inventories. Pharmacies make most efficient use of cash invested in inventories when they carry the smallest amount of inventory necessary to meet consumer demand. Carrying larger inventories is a waste of resources because it takes cash away from other, more productive uses.


Making the most efficient use of financial resources is more important than ever before in pharmacy practice.

Pharmacies of all types face substantial competition and economic challenges. The community pharmacy market

has become increasingly competitive because of the increase in the number of chain pharmacies and the

variety of new types of outlets from which Consumers may obtain prescription drugs. These new outlets

include pharmacies in supermarkets and mass merchandising stores (such as K-Mart and Wal-Mart),

mail order pharmacies, and physician dispensing. In addition to the influx of new competitors, community

pharmacies face additional financial pressures from the reimbursement policies of government and private third

party prescription programs intent on controlling prescription drug costs. These policies have

dramatically decreased the prices and gross margins pharmacies receive for prescriptions. In the new

competitive environment, pharmacies of all types must use financial resources efficiently if they are to survive.


Hospital pharmacies face similar financial pressures. Insurance companies and federal and state governments have, over the past several years, instituted a number of programs to control the increases in hospital costs. The federal Prospective Pricing System, for example, mandates that hospitals be paid no more than a fixed and predetermined amount for each patient with a given diagnosis. If the hospital spends more than this amount to treat the patient, it must pay for the excess. The result of this and similar programs is that hospitals must manage resources efficiently or face bankruptcy. The pressure that cost containment efforts have placed on hospitals is passed down to each department in the hospital-including the pharmacy. To prosper and progress in this environment, hospital pharmacy managers must understand and be able to communicate the financial implications of decisions they make and programs they plan.


To use financial resources most efficiently, .pharmacy managers must consider both the costs and the benefits of courses of action open to them. For example, in deciding whether or not to purchase a computer system, a chain pharmacy district manager should consider both the cost of the computer and its potential benefits. The costs will include the costs of purchasing and installing the computer and of training the pharmacy staff in its use. The benefits may include decreased labor costs associated with both dispensing prescriptions and filing third party insurance claims. He should also consider the costs and benefits of alternatives, such as not buying the computer or buying another type or brand of computer. A hospital pharmacy director, in deciding whether or not to institute a unit dose distribution system, should also consider both costs and benefits. The costs may include greater drug costs and Increased pharmacist labor. The benefits might include those easily measure( in monetary terms, such as decreased nursing time, and benefits not so easily quantified, such as improved patient care. In both of these examples the pharmacy manager should select the alternative with the largest positive ratio of benefits to costs. Doing so ensures that the most efficient use is made 0f financial resources.04/19/2304/19/23 1515Dr. Rafiq R. Abou-ShaabanDr. Rafiq R. Abou-Shaaban

In making the benefit to cost comparisons, managers must also consider the timing of costs and benefits and the risk involved in the course of action. Money has a time value; a dollar received today is more valuable than a dollar to be received in the future. Managers must account for the time value of money in their financial decisions. This is especially true of investment decisions such as, the purchase of a new computer system or the opening of a new pharmacy, which typically involve immediate costs and future benefits. Risky must also be considered. A safe investment with a modest return may be preferable to a risky investment with a potentially much larger return.As these examples illustrate, financial management is as necessary and appropriate for nonprofit organizations, such as hospital pharmacies, as it is for profit making firms. Both have limited resources and both are under considered. Using resources most efficiently will maximize the value and effectiveness of both types of organizations. Even in nonprofit organizations, there is no excuse for using funds inefficiently.04/19/2304/19/23 1616Dr. Rafiq R. Abou-ShaabanDr. Rafiq R. Abou-Shaaban

Three Roles of Executive ManagersThree Roles of Executive Managers


A proper understanding of the tools and techniques of financial management requires a basic working knowledge of accounting. Accounting is a specialized language used to communicate financial information. This information is communicated via financial statements . Accounting data, and the financial statements developed from them, are maintained because they aid decision making.


Financial statements facilitate decision Financial statements facilitate decision making in three areasmaking in three areas

FirstFirst, financial statements , financial statements provide information to provide information to decision makers. With this information, decision decision makers. With this information, decision makers can better assess the financial implications of makers can better assess the financial implications of various decisions they must make. various decisions they must make. For example, For example, bankers are decision makers. Before making loans bankers are decision makers. Before making loans they will carefully evaluate the financial statements they will carefully evaluate the financial statements submitted by applicants to decide whether or not submitted by applicants to decide whether or not these applicants can repay the loansthese applicants can repay the loans . .

Managers are also decision makers. They use financial Managers are also decision makers. They use financial statements, for example, to make pricing decisions, statements, for example, to make pricing decisions, to help decide whether to hire additional personnel, to help decide whether to hire additional personnel, to decide whether to buy new equipment, and to to decide whether to buy new equipment, and to decide what products to carrydecide what products to carry


Financial statements facilitate decision Financial statements facilitate decision making in three areas (Cont.)making in three areas (Cont.)

SecondSecond, , financial statements aid decision makers by financial statements aid decision makers by reporting the results of past decisionsreporting the results of past decisions. The prudence . The prudence of a banker's past lending decisions will be reflected of a banker's past lending decisions will be reflected in his current financial statements. Likewise, a in his current financial statements. Likewise, a manager who makes poor product and pricing manager who makes poor product and pricing decisions will notice, on his financial statements, a decisions will notice, on his financial statements, a decrease in his profits.decrease in his profits.

ThirdThird, financial statements keep track of a wide , financial statements keep track of a wide range of financial items such as cash, debts, and range of financial items such as cash, debts, and assets. Decision makers need this information to assets. Decision makers need this information to efficiently and effectively manage their organizations.efficiently and effectively manage their organizations.


Financial statements provide decision makers Financial statements provide decision makers with the following types of information:with the following types of information:

PresentPresent financialfinancial status of the business. The balance status of the business. The balance sheet or statement of financial position indicates what a sheet or statement of financial position indicates what a business owns and what it owns at one point in time.business owns and what it owns at one point in time.

Past profit performance of the business. The income Past profit performance of the business. The income statement, also called the profit and loss statement, statement, also called the profit and loss statement, indicates whether the business made a profit or suffered indicates whether the business made a profit or suffered a loss over some period of time.a loss over some period of time.

Where the businessWhere the business is getting its cash and how it is is getting its cash and how it is spending it. This is found on the statement of changes spending it. This is found on the statement of changes in financial position or the cash flow statement.in financial position or the cash flow statement.

HowHow the ownersthe owners‘‘investment in the business has changed investment in the business has changed over some period of time. This information is found in over some period of time. This information is found in the statement of capital or the statement of retained the statement of capital or the statement of retained earnings.earnings.


Financial management is a tool managers Financial management is a tool managers can use to better assess thecan use to better assess the financialfinancial implications of the decisions they face. Its implications of the decisions they face. Its use should be limited to deciding among use should be limited to deciding among potential courses of action that will help the potential courses of action that will help the pharmacy to reach its goalspharmacy to reach its goals. In most cases, it should not be used to In most cases, it should not be used to decide what those goals aredecide what those goals are nor should nor should most decisions be based solely on financial most decisions be based solely on financial criteria. For example, a hospital pharmacy criteria. For example, a hospital pharmacy could decrease its expenses and maintain its could decrease its expenses and maintain its revenues, by switching from unit dose to revenues, by switching from unit dose to multiple dose drug distribution and by multiple dose drug distribution and by cutting out all clinical and educational cutting out all clinical and educational servicesservices..

Limitation of Financial statements


If the pharmacy's decisions were based solely on financial criteria, a financial analysis would clearly show the advisability of this course of action, but a hospital pharmacy has a higher and more basic mission than to operate as cheaply and profitably as possible. Its primary mission is to provide pharmaceutical services that improve patient care. Unit dose distribution and clinical and educational services have been shown to substantially improve patient care. Consequently, the decision whether to offer them should not be made solely on the basis of financial criteria. On the other hand, given that a pharmacy has a limited amount of financial resources, the decision as to which particular clinical and educational services to offer would benefit from a financial analysis.

Limitation of Financial statements (Cont.)


It is also important to remember that financial statements do not contain all the information, or in many cases even the most important information, about the factors which affect the finances of a pharmacy. Such necessary data as the state of the national and local economy, the demand for the organization's product or service, the extent and nature of the competition, and the health and loyalty of key employees are not found in financial statements.

This is because financial statements deal only with those events and factors that can be readily expressed in monetary terms. In using and interpreting financial statements properly, managers must keep these limitations in mind.

Limitation of Financial statements (Cont.)


pharmaceutical management lecture 1 lecture 1 give introduction to course objectives give...

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