Pharmacy

Pharmacy Service
Service
Improvement
Improvement at
at CVS
CVS
 What is this case about?

• Capabilities conferred by enterprise IT

• All 3 IT’s principle capabilities
– Design
– Standardization
– Monitoring
• Shifted decision rights are an important
organizational complement of EIT
• Highlight business leaders responsibility
during the work of EIT adoption
 What is this case about?

• Redesign Process
• Monitor
• Standardize
• Responsibilities
 Capabilities - Redesign
• What is the End Goal in moving some process
steps forward?
• Need to take place at the pharmacy’s dropoff
window
• What is one of the solutions?
• Staff the dropoff window throughout the day
• CVS needs to identify and resolve problems
early in the process when customer is still
present
• This is similar to the Toyota Production
System – Ability to surface and correct
problems close in space and time to their
occurrence
 Capabilities - Redesign
• Is front-loading the only solution?
• How about moving DUR backward to QA steps
• Customer should not be present during the DUR
• It is also highly inefficient for DUR to be the
first step in the process
– It involves 3 people – dropoff window technician, the
customer, and the pharmacist
– This is an interruption to the pharmacist’s normal
flow of work
• The PSI Team’s new process has the following
three Main changes:
• Switching the order of insurance check and DUR
(drug utilization review) steps
• Moving the insurance check forward
• Moving the DUR backward
 Capabilities - Monitoring
• Regardless of what the first step in the new
fulfillment process, it is important that it
takes place at Dropoff
• How can IT ensure that this happens?
• All pharmacist’s to do away with their wooden
boxes and start doing data entry at dropoff
• But is this realistic?
• Will they accept the new process?
• Or continue with familiar status quo?
• How do you ensure compliance
– Store audits are expensive and time-consuming
 Capabilities - Monitoring
• How do you use the IT system to confirm that
data entry is indeed occurring at the dropoff
window
• The distribution of prescription dropoff times
is known from experience – you can compare it
with each actual pharmacy’s distribution of
data entry times
• If these 2 distributions are dissimilar
– Data entry is not taking place at dropoff
• If the distribution of data entry times looks
like the distribution of requested customer
pickup shifted back one hour
– Pharmacy is still using the wooden box
– Fulfillment process is only started 1 hour before
the requested pickup time
 Capabilities - Standardization
• Business processes must be executed as
intended by their designers
• EIT delivers both ex ante and ex post
compliance
• Ex ante means you cannot do DUR before
insurance check
• Ex post means auditors can determine if a
remote pharmacy is doing data entry at
dropoff
• These 2 types of compliance provides a high
level of standardization across more than
4000 CVS pharmacies
 Organizational complements of IT
• The sequence and timing of a couple of
tasks in the pharmacy fulfillment process is
changed
• But few alterations are made to the work of
pharmacists
• Pharmacists decision rights are still
preserved
– They still clear DUR exceptions
• So, with such few alterations, will
pharmacists resist the proposed changes?
• At first instance you would say, not really
– But since changes were made by a small team,
and all pharmacists did not really get a chance to
voice their opinion, there will be some
reservations
 Responsibilities
• Who leads the rollout of the new pharmacy
fulfillment process?
• At least some pharmacists were likely to object to
process changes
• How to overcome the resistance and “Sell” the new
process
– Communication efforts need to be persuasive and
effective
– Widespread awareness that proposed changes NOT
optional for the pharmacies. They were mandatory and
inevitable modifications to the existing fulfillment process
– Interaction of “Hard” and “Soft elements of an EIT
adoption strategy
• The buck stops at the Business Leader
• Must get the new process right
– Ensure that new workflows and decision right allocations
will actually improve and lead to desired results
 Process Analysis and Improvement
• Variability kills – it is a huge impediment to
effective process execution
• But the environment in which prescriptions are
fulfilled is much more complex
– The number of available medications has greatly increased
– Also the approval and payment process
• The number of patients, payors, formularies and
generic medications all combine to generate a
potentially high volume of exceptions
• Is the fulfillment process equipped to handle these
exceptions?
• The process begins 1 hour before the customer’s
desired pickup time, rather than when the
customer drops off the script
– This means any problems encountered during data entry or
later steps become evident when only little time remains
to correct them and when patient is not available to assist
 Magnitude of Opportunity
• What is the percentage of CVS’s 7.2 Million customers who are light vs
heavy pharmacy users
• Annual scripts, light users = 5
• Annual scripts, Heavy users = 40
• Total light + Heavy Defectors = 7,200,000
• Total Defecting Scripts = 55,000,000
• Light + Heavy = 7,200,000
• 5*Light + 40 *Heavy = 55,000,000
• Heavy = 540,000 (8% of total defectors)
• Light = 6,660,000 (92% of total defectors)
• Volume of scripts lost annually to light and heavy defectors
• Total Light Defecting Scripts = 6,660,000 * 5 = 33,300,000
• Total Heavy Defecting Scripts = 540,000 * 40 = 21,600,000
• Total scripts/year = 29,500,000*(.92*5+.08*40)=224,937,500
• Total Pharmacy Revenue = 0.67*20,100,000,000=13,400,067,000
• Revenue per script = 59.57 (from above)
• Revenue lost from lost scripts = 3,276,482,067.24
• If Defections are reduced, some real savings could be made
 Case Takeaway..

• The positive impact a relatively small

process change can have when it’s repeated
across thousands of locations
• The resistance to new EIT often comes not
because of the new processes it embeds but
instead because it centralizes decision
rights about process changes
• EIT-based monitoring can be very effective
in ensuring compliance with business process
execution
 What is MIA
Managing in the Information Age

• Function IT – FIT
• Enterprise IT – EIT
• Network IT – NIT
• Responsibilities
– Selection
– Adoption
– Exploitation
 Function IT - FIT
• IT that assists execution of a discrete task
• It is completely separable from
complements and can be adopted without
adopting any complements
• The impact is increased when appropriate
organizational complements are in place
• Examples
– Simulators
– Spreadsheets
– CAD/CAM
– Statistical Software
• Capabilities are increased experimentation
capacity and greater precision
 Enterprise IT - EIT
• IT that defines multipart interactions
• Internalizes organizational complements of GPTs
• Imposes complements throughout adopting
organizations
– Assigns identities
– Defines tasks and sequences
– Mandates data syntax
• Is often mandatory-use
• Examples
– ERP
– SCM
– CRM
– Sourcing/procurement Software
• Capabilities are design and redesign of business
processes, standardization of workflows and
monitoring of activities and events
 Network IT - NIT
• IT that facilities interactions without specifying
their parameters
• Internalizes organizational complements of GPTs
• Does not imposes complements ex ante; instead lets
them emerge over time
– Does not assign identities
– Does not specify tasks and sequences
– Accepts data in many formats
• Is usually optional
• Examples
– Email
– Instant messaging
– WWW
Prediction markets
• Capabilities are facilitating collaboration. Allowing
expression of judgment and enabling self
organization
 Responsibilities

• Selection – It is the work of choosing new

information technologies
• Adoption – It is defined as the work of
preparing the technology for initial use
• Exploitation – Ensuring that the technology
is delivering its capabilities to the maximum
extent possible