What is a Pharmaceutical KPI?
A pharmaceutical key performance indicator (KPI) is a quantifiable measure that is used to monitor a pharmacy’s performance. KPIs help the business successfully pursue its goals. In the pharmaceutical industry, the goal is often ensuring good patient health while staying profitable.
How to Identify the Right Pharmaceutical Metrics
Before we dissect pharmaceutical KPIs, let’s define what a good KPI is. First and foremost, KPIs are a form of communication. And like any good communication, KPIs are far more likely to be absorbed and acted upon if they are concise, clear, and relevant. Even if you have the most formidable set of KPIs in your repertoire, if you don’t have an effective method of communication, your efforts will go unnoticed.
All of your KPIs must relate to a specific business outcome. Before choosing any KPI, you must ask yourself a series of questions. For example, if your objective is to increase revenue, here is what the questionnaire will look like:
- What is the desired outcome? Increase revenue by 10%.
- Why does it matter? Increased profits.
- How is progress measured? In dollars.
- What actions can you take to influence the outcome? Better marketing and optimizing inventory.
- Who is responsible? Pharmacy manager.
- How do you define success? 10% increase in sales.
- How often is your progress reviewed? Monthly.
An easy check to make sure your KPIs are relevant to your pharmacy is to verify they follow the SMART criteria: specific, measurable, attainable, realistic, and time-bound.
A common mistake among businesses is choosing too many KPIs to monitor. It might feel counterintuitive but if you’re only starting on your KPI monitoring journey, you must select only a handful of KPIs. It’s important not to overwhelm your team with too much data. Exhausting your resources at the beginning of this long-term program will result in a demotivated team and will derail the process. A good KPI program doesn’t need a large quantity of metrics. It needs a dedicated team that diligently tracks and reviews a few vital metrics.
Research has shown that the most effective KPI programs have a holistic approach and include metrics from all sectors of a business. A pharma KPI program incorporates metrics that showcase the pharmacy’s dedication to a high quality of practice, involve patient care and patient outcomes, consider the individual needs of the pharmacy or pharmacist, commit to meticulous financial planning and are feasible to measure.
Arguably, the most important part of a KPI program is monitoring the metrics. In order to tap into the full potential of your pharmaceutical KPIs, you must develop a detailed internal process. A successful KPI program has a defined workflow and a dedicated manpower. If your pharmacy is starting from scratch, it is important to focus on the fundamentals. This will save you time and prevent you from re-inventing the wheel. The following steps have been collected to guide you in shaping your program:
- Develop a Baseline: All pharma KPIs–no matter when they are introduced in your program–need to have a baseline. It’s vital to record the time and the value of a metric when it’s created, because a baseline is the value the future KPIs will be compared to. Without it, you don’t know your progress.
- Analyze the Data: Your pharmaceutical metrics must be trended, analyzed, and correlated. Without consistently analyzing the data, you won’t get the full benefits of a KPI program. Remember that your metrics have been created to provide you with insight regarding the current state of your business.
- Take Action: If your pharma KPIs are not actionable, they shouldn’t be in your program. A metric’s purpose is to identify opportunities for maximization and optimization. Spend time to understand what your KPIs are telling you and act accordingly.
- Review: KPI programs include regular reviews of the metrics and their trends. Reviews bring visibility to the metrics and evoke a sense of accountability in the team. If your team sees the results of their hard work, they are more likely to take more responsibility in their job and help improve the metrics.
Remember that the purpose of tracking KPI data over time is to enable informed decision-making, improve quality of service and create a sustainable and successful business. As you have seen so far, your KPI program is heavily dependent on data. Your metrics will not show an accurate image of your pharmacy if they are not based on good data. If your business relies on multiple databases for its day-to-day activities, or if you have trouble manually updating your records, you are not alone. Most businesses operate this way. That’s why insight software has developed Business Intelligence Software. This easy-to-use software allows your pharmacy to merge its data and communicate quickly and effectively with its stakeholders.
This article has collected 15 pharma KPIs categorized into four groups of finance, patient care, productivity, and competency for you to consider.
Financial KPIs for the Pharmaceutical Industry
Any successful business, no matter what sector it belongs to, needs a steady and reliable financial backbone to flourish. That is why financial metrics are often common across industries. There are hundreds of financial KPIs available, but it is paramount to start with the most basic KPIs and only expand if the operation demands it.
The following financial KPIs for the pharmaceutical industry have been handpicked to propel your organization forward.
- Operating Cash Flow: this metric is not unique to the pharmaceutical sector, but it’s one of the most important and most basic financial KPIs for any organization. Operating cash flow measures the amount of cash generated by the daily business of the pharmacy. A positive operating cash flow is an indication of proper business handling, whereas a negative operating cash flow signals a financial problem and a possible need for external financing. Operating cash flow provides valuable information about the financial health of the pharmacy.
- Gross Profit Margin: as the name suggests, this KPI highlights the profitability of a pharmacy. Even though making a profit might not be the ultimate goal in the pharmaceutical sector, without making a surplus, it is difficult for any business to stay afloat.
Gross profit margin is calculated by the following formula:
Gross profit margin = (net sales–cost of pharmaceutical goods sold)/net sales
- Operating Expenses (OPEX): this financial KPI for the pharmaceutical industry is another common metric among all industries. OPEX include the cost for equipment, inventory, payroll, insurance, lease, and any other costs associated with running a pharmacy. By reducing OPEX, a pharmacy can gain a competitive advantage. However, reducing this metric too much could sacrifice the quality of the service provided. A balance must be found to allow the pharmacy to prosper without weakening its integrity.
- Average Revenue per Customer: this pharmaceutical metric measures the amount of money that each customer brings to the pharmacy. This KPI offers insight on the growth potential of the business. If the pharmacy knows the average revenue per customer, it can predict revenue growth for each additional patient or even justify an acquisition.
Average revenue per customer is calculated as follows:
Average revenue per customer = total revenue/number of customers
Your pharmacy can utilize a variety of methods to create a financial dashboard. But you must bear in mind that any manual process that relies on personnel is error prone. And if you outsource your reporting to bypass this problem, it could be costly. insightsoftware’s financial reporting software will provide you with a fast and flexible solution that will empower you to take charge of your own destiny and never worry about cumbersome data handling again.
Quality of Care Pharmaceutical KPIs
Quality of care is an important area of focus for the pharmaceutical sector. By improving quality of care, the pharmacy is able to:
- define a standard within their organization.
- elevate and promote professional accountability.
- and most importantly, it can advance the pharmacy towards the more desired path of evidence-informed positive patient outcomes (fewer readmissions).
The following pharmaceutical KPI examples have been carefully chosen to help your pharmacy reach its quality-of-care goals.
- Pharmaceutical Care Plan: this pharma KPI measures the number of patients for whom the pharmacy has developed a care plan. A pharmacy care plan often includes a patient goal which could be anything from lowering blood pressure to treatment of a chronic disease. The care plan contains all patient allergies, dosing changes, medical history, and any lab results. By initiating a care plan for the patients, the pharmacy improves its quality of care and customer retention rates.
- Interprofessional Patient Care: this pharmaceutical metric highlights the number of pharmacy patients that are involved in interprofessional patient care. Interprofessional patient care consists of multiple care providers (pharmacists, family members, healthcare team, caregivers, etc.) who come together to improve the medication management of the patient. Interprofessional patient care provides a safe, effective, and appropriate medication plan for the patient.
- Patient Education during Hospital Stay or at Discharge: this pharma KPI measures the number of patients who receive proper information from their pharmacist about their illness and medications during their hospital stay. This communication could take place face-to-face or over video chat, as long as it is customized for the need of the patient. Educating patients about their disease and medication helps them take a more active role in their treatment, which will in turn lead to a better health self-management. An empowered patient is more likely to return to the same pharmacy that has allowed them to be an effective participant in their healthcare.
- Bundled Patient Care Interventions: this pharmaceutical metric counts the number of patients who receive a comprehensive patient care from a pharmacist working with the healthcare team. Comprehensive patient care includes all three KPIs mentioned above. Studies have shown that patients who receive the full bundle of patient care experience a more meaningful improvement in health compared to individuals who only receive one or two of the aforementioned patient care activities.
Productivity Pharmaceutical KPIs
Pharmaceutical productivity metrics provide insight on the management style of the pharmacy and its effectiveness. They also offer information with regards to customer behaviour. The following KPIs will expand on these points.
- Average Prescriptions Filled per Day: as the name suggests, this pharma KPI measures the average number of prescriptions filled per day. Since the majority of a pharmacy’s revenue comes from prescriptions, this metric plays a vital role in the pharmacy’s success.
By monitoring this metric, the pharmacy gains insight about the number of prescriptions it receives throughout the year. The average pharmacy fills about 200 prescriptions a day. This could serve as an adequate target. However, for a more accurate goal, pharmacies should study the trends of this KPI for their region and set their targets accordingly.
- Average Sale per Transaction: this metric highlights the amount of revenue per transaction. Monitoring average sales is important for trend analysis. It is desirable to increase this average to maximize the pharmacy’s revenues. If average sales drop throughout the year, or if they stay constant, it’s time to rethink the pharmacy’s marketing strategy.
- Inventory Turnover: this pharma KPI is common among the retail industry. Inventory turnover metric shows how many times the pharmacy has sold and replaced its inventory. Analyzing this metric helps the pharmacy make better decisions on pricing, marketing, and purchasing new inventory. A low inventory turnover could signal a drop in sales or excess inventory, while a high inventory turnover could either imply strong sales or insufficient inventory.
To calculate inventory turnover, use the following formula:
Inventory turnover = cost of goods sold/average value of inventory
- Transaction Frequency: this pharmaceutical metric shows the number of times a particular patient makes a purchase at the pharmacy. It is a measure of customer loyalty. In order to own and operate a successful pharmacy, it is important to attract new customers, but it’s even more crucial to retain these customers. If the transaction frequencies of the oldest and most loyal customers are dropping, it might be time to revisit the marketing strategy and deploy creative solutions.
Competency Pharmaceutical KPIs
In order to continuously improve the operation of the pharmacy and to keep the pharmacists accountable, certain standards must be set and met. The pharmaceutical KPI examples below will allow you to review the service your pharmacy provides and compare your performance through time.
- Dispensary Errors and Near Misses: this pharma KPI counts the number of mistakes made by the pharmacists. Medication errors could have irreversible consequences for the patient and for the pharmacy and must be kept to a minimum. Monitoring this KPI provides valuable insight on not only the competency of the staff, but also on the pharmacy’s management. Overworked and fatigued personnel make more mistakes. If the dispensary errors and near misses are on the rise in your pharmacy, it is time to re-evaluate your practices.
- Medication Reconciliation on Admission and Discharge: these pharmaceutical metrics measure the number of patients who receive admission and discharge medication reconciliation by a pharmacist. Medication reconciliation is the process of confirming that a patient’s medication list is up-to-date. These KPIs have been identified by The World Health Organization as two of the key practices that advance patient safety and reduce readmission. Pharmacists should maintain a high rate of medication reconciliation on admission and discharge.
- Drug Therapy Problems: this pharma KPI counts the number of drug therapy problems found and addressed by a pharmacist upon patient admission. The following are some of the most common drug therapy problems:
- Too many prescribed drugs
- Wrong dosage
- Adverse drug reaction
- Inappropriate adherence to the prescribed dosage
- Need for additional drugs
A competent and diligent pharmacist is able to recognize drug therapy problems and mitigate them. Pharmacies should encourage their staff to stay vigilant and offer solutions whenever possible.
At this point in your research, you have received a lot of information and it is only natural to wonder what a good reporting software looks like. If you want to find out more about important traits of reporting solutions or how to avoid implementation failure of a KPI program, click on the link below to find out more.
As a general rule of thumb, start your KPI program small and expand it as your resources allow. Establishing and maintaining a KPI program is labour intensive and time consuming. If you don’t allow your program to find its footing in your pharmacy before attempting to grow it, you won’t get its full benefits. We understand that starting on this path could be overwhelming, that’s why we recommend insightsoftware’s business KPI dashboard. This solution will provide your business with a user-friendly platform for accessing, monitoring, and analyzing metrics. With insight software, managing a KPI program will become as second nature as opening your pharmacy doors every morning.