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'People have swallowed the hub-and-spoke marketing brochure'

Mr Hewitson: Hub-and-spoke could actually be "really dangerous" for independents

A National Pharmacy Association (NPA) board member has responded to claims that hub-and-spoke dispensing could work for independents.

“There is a conflict of interest between the people who are actively pushing hub-and-spoke and the commercial interests of large wholesalers,” Mike Hewitson told C+D yesterday (March 8).

Mr Hewitson was responding to the positive messages on hub-and-spoke dispensing that came out of the Numark conference earlier this week.

“People, for example, who work in the large vertically integrated companies think this is the future,” he said.

However, hub-and-spoke puts larger organisations with a delivery infrastructure network in the “dominant market position”, which reduces competition and allows them to “dictate terms to independent [wholesalers]”, Mr Hewitson said.

“There are of course people who are very passionate and they think this is the right way forward, but it could be a really dangerous Pandora’s box for us to open, particularly in independent pharmacy, unless people understand what they are getting into,” he stressed.

Hidden costs

Mr Hewitson chaired the NPA’s hub-and-spoke task group last year, which the organisation claims helped to delay the government’s plans to change legislation aimed at expanding the use of hub-and-spoke dispensing.

While the NPA “recognises the need for dialogue” on this dispensing model, “there is no evidence to support the assumption that it will save money”, Mr Hewitson said. Instead, there could be hidden costs to rolling out the system, he warned.

“Hub providers are going to want to recoup their costs, which could mean charging a service fee or retaining more of the profit margin,” he said.

“You could potentially create headroom to deliver services if you keep staffing levels in place. But the government wants [the sector] to drive down costs, which means getting rid of staff who are currently doing the work.

“The government definitely doesn’t understand the economics of hub-and-spoke."

The NPA is not condemning the model completely, Mr Hewitson said, but the evidence and technology to support the dispensing model “isn’t there at the moment”.

“We are not against change. What we are saying is this particular change has been badly thought through and perhaps some people have swallowed the marketing brochure without really understanding how pharmacies – and the people in them – work,” he said.

Listen to C+D's podcast to find out why the director of an automated dispensing company believes "Amazonisation" of community pharmacy "isn't going to happen".

15 Comments
Question: 
How would hub-and-spoke dispensing affect your pharmacy?

Steve Churton, Senior Management

Well at least a more thoughtful and balanced piece on hub and spoke than I have seen uttered elsewhere. Although a great disservice to independents to suggest that it could be a "dangerous Pandora's box". Well managed innovation in the patient interest is never "dangerous" - except to those who resist it through fear of the changes it will bring. I will confidently predict that large scale automated hub and spoke operations will dominate the prescription supply chain by 2025, and those pharmacists who do not see their inclusion as business critical will deeply regret it. I see no reason for professional standards to diminish as a result - in fact quite the contrary. And I see no reason why any independent should resist a "leveling of the playing field" to more effectively complete with the large multiples. There will of course be challenges (I don't think anyone would dispute this) but there will be challenges of a far greater magnitude to face if such innovation is resisted. "Amazonisation" is inevitable and essential for survival, and so long as the value-added by pharmacy is strengthened in the patient interest, I cannot for the life of me understand what the soothsayers and doom merchants seek to achieve by advocating unwarranted caution and resistance. Surely it is better to be ahead of the wave than drowned by it?!

Mike Hewitson, Superintendent Pharmacist

The bottom line is that the pharmaceutical wholesale market needs reform, to disaggregate vertical interests which does not deliver benefits to the taxpayer - politicians repeatedly referred to the evils of VI in the last parliamentary debate. Independents do not trust or want their competitors (based on research not anecdote) to provide this type of innovation - there could never be a level playing field while choice is reduced to an effective duopoly of providers. The current status quo is not working, and it is patients who are suffering from falling service levels at the big three VI wholesalers, the same people who are the most likely providers of Hub services - look at the challenges: captial expenditure, logistics costs, DTP/RWA, critical mass - who else is going to provide it? 

Hub & Spoke me be a very reasonable idea on paper, but it is the practical reality of our system - not just the pharmacy system but the wider NHS and the behaviours of patients which make it unworkable. Alberta in Canada provides an excellent model for how community pharmacy could adapt to the challenges and provide better care, we'd be much better off exploring that as an option than H&S in my view, that would deliver more benefits. 

The economics are far from clear cut, although I understand empirically why some might buy into the inevitability argument, you only have to look at the reversal in the US where remote filling topped out at 20% of the market and is now falling. The final mile in logistics terms is hugely costly - one major supermarket cannot deliver an iron for less than a fiver. Plus you need to retain a network to handle the remainder of the workload, the acute or urgent items, CDs, fridge items, etc which the technology could struggle to handle.

If Government wants to commit to this direction of travel they need to ensure effective competition for provision of hub services (in taxpayer interest), produce consistent standards for hub services (ISO or BS), and recognise that it doesn't save any money! In those circumstances I believe there could be a roadmap to make the concept work.

To quote Niels Bohr, "Prediction is very difficult, especially about the future". 

Steve Churton, Senior Management

23 years ago Amazon was launched. At that time its business model was considered a joke, hideously costly, operationally impossible and completely unviable. Today Amazon is a global player with an annual revenue of 136bn USD in 2016. It's model has completely disrupted the market, and brought a great customer experience to billions. It is still in growth and has plans in place to double its value in 5 years. I am sure we could all think of a plethora of reasons why automated hub and spoke won't (or shouldn't) work. It will not however stop it being introduced - and very successfully. Ask the business analysts that laughed at Amazon in 1994 - if you can find any left who will admit to their misguided cynicism!

A Hussain, Senior Management

Do you remember when Amazon used to deliver for free? Well they did until they got us all hooked and now you end up having to spend over £20.  amazon are great at what they do, but lets not forget that there have also been many similar operations that have failed miserably.  Success in one sphere does not automatically mean that it can be replicated in another.  I'm no luddite, but what is the point of these potential changes if they save no money, and who is likely to invest if pharmacy funding levels continue to fall.

Steve Churton, Senior Management

Good points. Generally speaking people will pay a fair amount for a value added service (Amazon Prime customers pay c.£80pa for speedy delivery). "First to market" operators always enjoy a commercial advantage through brand loyalty and "cut-through" marketing. The "sphere" in which Amazon operates (distributing small boxes) is exactly the same "sphere" in which the pharmacy supply chain operates. The point is that economies of scale fundamentally distort the business model in favour of the lowest cost operator. Governments love low cost operations, as this enables savings for the taxpayer and/or reinvestment in added-value services which take pressures off other services (e.g. GP practice based pharmacists taking pressure of GPs specifically and the NHS in general). Patient-centered convenience and commoditisation is now a tried and tested business model, and it aligns itself perfectly with much of the mechanics of the pharmacy supply chain. Pharmacy can and must claim the space it should rightly occupy in providing added-value clinical services, and leave the movement of small boxes from A to B to organisations who have credibility and expertise in doing it. Centralised, highly-automated, highly- efficient, low cost dispensing in registered pharmacies by competent operatives working under the overall supervision of pharmacists; efficient and reliable distribution to places most convenient for patients; and the availability of high quality pharmacy advice and clinical services in the community (with appropriate shifts in funding streams) has to be the model which the profession should aspire to in my opinion. It cannot survive by standing still and wishing for more money. "Hello" - it ain't going to happen folks!

A Hussain, Senior Management

I get what you're saying Steve and agree to a point, but when you've got 'skin in the game' like I have you do get frustrated at what seems like an assumption that this new model will be better than what already exists.  I know that pharmacy carries out many mundane tasks, but I don't feel that in the scheme of things we are an expensive resource.  The government want to save money at all costs, but these are more than just 'small boxes', these are very important boxes to our patients.  Do you remember when Faceless operators such as Pharmacy2U left their patients without medication for weeks over Christmas?  I couldn't do that as I'm not hidden away on some industrial estate and I wouldn't do that as I know my patients.  Amazon are the best by far and they still have issues.  You pay for every delivery if you don't spend £20, you pay if they supply the item through another company and even their delivery can be sporadic as can the returns procedure.  By the way if there is a problem in GP then in my opinion, regardless of where the solution comes from,the money should come from GP.  It's like the government giving every pharmacy a free delivery driver, but expecting the courier firm to foot the bill.

 

 

Steve Churton, Senior Management

Stand in the shoes of your patient and ask yourself a question. Would I give my business to a provider that regularly, reliably and conveniently delivers my prescriptions to my door, and provides 24/7 access to high quality professional advice from a pharmacist who can access my records, my medication and medical history. A pharmacist who has the time to follow through on my enquiry by contacting my prescriber on my behalf, and who has the ability to commicate with me via Skype or refer me to fellow professional expertise based locally or readiliy available for same day home visits - when perhaps they could also conduct an MUR or a diabetic or healthy living assessment. Just how convenient would this be for me? Would I buy into it? - in a heartbeat! Would it present an attractive financial model to Government? - preferentially directing funding to support such patient-centric innovation. Is it conceivable that Amazon are considering partnerships to make this vision a reality? - absolutely! As a pharmacist would you be excited to be part of this market disruption? - or would you be content just to watch others do so, and take your chances? Think this scenario is unlikely to ever materialise? - Really?! Just a thought!

David Miller, Hospital pharmacist

Maybe they could operate as a centralised co-operative that possibly includes local hospitals-although most are automated already many will need upgrade in next few years.  From experience they are safer, more efficient especially if integrated with prescribing systems. They do not however save pharmacist time (unless they are the one dispensing and accuracy checking) although that final function if integrated could in part be barcoded especially with FMD pending.  

Mike Hewitson, Superintendent Pharmacist

 

Hi David, I think this is part of the problem. The benefits you describe of automation are one thing. Hub and spoke is potentially another thing entirely. It is true that the sorts of hubs that govt wants are automated, they don't have to be. Inter-company hub and spoke potentially creates new types of safety problems, such as the risk of catastrophic failure at the hub, or of the delivery network which would be of a serious scale and impact. Many of the safety benefits of technology could be engineered into FMD systems e.g. accuracy checking by scanning, we don't have a problem with that.

 

L H, Community pharmacist

Scanning the barcode of the dispensed product(s) as part of the final check has been considered good practice in antipodean countries for close to a decade. Quick & easy. Seen it first hand. The idiocy of the FDM fine print is another matter, however. Time limits? Really? A law written by the drug industry for the drug industry with little, if any, consideration for patients or especially the pharmacists enacting it. 

David Miller, Hospital pharmacist

Totally accept comment on FMD sledgehammer to crack nut and targeted at wrong point in supply chain

Simon MEDLEY, Community pharmacist

can't be more efficient time wise, we have rx's ordered by patinet in morning , and sometimes signed by the afternoon and delivered !- A lot of patients will have to be re-trained to add an extra day to their schedule to allow for the hub and spoke step

 

Barry Pharmacist, Community pharmacist

Well said Mr Hewitson, there are some very strong conflicts on interest behind all the latest desire for H&S. 

Ben Merriman, Community pharmacist

Despite its claimed efficiencies, surely hub and spoke will destroy the way the NHS pays for medicines too?  PI wholesalers and shortliners won't be able to offer this sort of service and all medicines will have to be sourced from one of the vertically integrated companies.  Competition will be reduced and prices will go up.  Any savings made by DH will be dwarfed by an increased drugs bill.

Valentine Trodd, Community pharmacist

Probably one area where employee/locum pharmacists and contractors are on the same page. H&S would not be good for either of us.

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