Group 7

Pharmacy Service
Improvement at CVS

Casey Bass
Heather Horvath
Andrew Jones
Gordon Li

9/20/2010
Case #1
Q1. How would you re-design the prescription fulfillment process for CVS that addresses the
problems identified by the PSI improvement team? Discuss the alternatives you considered and
rationale for picking the revised approach. Were all the root causes addressed by the proposed
changes?

The PSI team found that there were no substantial problems in the drop-off step but a

variety of issues at pickup. The reason for this is because nothing is done at drop-off (see Exhibit

1). This seems to be the root cause of many issues. There are plenty of problems occurring in

other steps that could be avoided or corrected earlier on in the process, which would smoothen

out the script fulfillment process.

The first problem to approach is the placing of scripts in a bin one hour before the

customer wants to pick them up. This might be enough time for those scripts that do not

encounter many issues, but this is not necessarily true for those that are stopped in the process.

Scripts that need to go into doctor call bins may not have enough time to be resolved within the

hour allotted before pickup. For this reason we have redesigned the process flow to allow for

problem realization earlier in the process so script fulfillment runs smoother.

One problem that affects 7% of scripts is stock shortages on medication (CVS case page 8).

This should not be discovered at the production and quality assurance step, but rather at the drop-

off step. If found at the drop-off step the customer will know right away if there is a lack of stock

and can either be directed to another CVS location, or can be informed of a more accurate time

for pickup. This will then eliminate one of the issues discovered at pickup.

Next, there are a few problems that can occur at the data entry phase that would be

beneficial for both the tech and customer to know before the customer leaves. The first is when

there are no more refills for the script. If there are no more refills the tech can at least warn the

customer about it and inform them that a call will have to be placed to the doctor. The script will

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then be placed in a time bin that is more accurate for completion. Though this problem is stated

to only affect 6% of the scripts, it is a warning to the customer ahead of time so they are aware

that their prescription might not be ready by their chosen pickup time (CVS case page 7).

Another problem at the data entry phase is insurance issues, which affect 17% of scripts

(CVS case page 7). Though the customer may not need to be involved to fix the issue, it would

benefit the tech to know there could be a potential problem earlier in the process so they can put

the script in a more time accurate box. One hour before the script is needed for pickup is not

enough time to ensure the situation will be resolved.

Lastly there are DUR checks that we believe can still be handled without the customer

involvement. Since it would benefit both the customer and tech to know some of these issues that

occur in the data entry phase earlier in the process, we have decided data entry should occur at

drop-off. This will also eliminate incorrect customer information and will allow for the tech to

get the most accurate insurance right from the start. At this stage the tech can also ask for the best

number to reach the customer in case there is any reason they may need to be contacted for

addition information, or to be informed of a better pickup time.

Since another big problem seems to be the busy pickup time from 5pm - 7pm, there

should be no bins to place new scripts from 5pm to 6 pm (CVS case page 8). All scripts that are to

be picked up at these times should be placed in a bin no later than the 4pm slot, that way most

scripts are completed by 5pm. This will allow for more techs to support the heavy demand at this

pickup time.

We feel our revised process flow addresses the root of many problems. The alternatives

we chose from were similar since it was very clear certain tasks should occur earlier in the

process, during drop-off. Our main goal was to bring awareness to the tech earlier on in the

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process to allow for more time to solve problems and to inform the customer so there would be

no or very few surprise problems at pickup. By choosing this new process flow we are creating

more communication between the tech and the customer, cutting down wait time, and overall

improving the customer service provided.

In conclusion the re-design of the script fulfillment process would flow as such:

Drop-off

At this point the tech will take the script from the customer and enter all the necessary

information into the system (see Exhibit 2). Once medication and dosage information is entered,

the tech will be able to bring up inventory levels on the requested medication. If it is out of stock,

the customer can be informed as to how long it will take to get stock or can be referred to the

closest location with stock.

If there is stock for the medication, the system will check to make sure there are still

refills allowed for the script. If it comes up that there are no more refills for the script the

customer can at least be notified at this point and the tech will have a better idea of the time

needed to resolve the issue. This new time will now be a bin 2 hours before pickup time. At this

point the tech will get the best contact information in case the customer is needed for any

updates. If everything clears with no problem, the script will go in 2 hours before pickup.

Drug and insurance clearance

At this point 2 hours before pickup, the DUR will run. The Pharmacist will deal with any

issues that may arise. If the script is denied, the customer will be contacted by phone. If

everything is fine it will then be checked for insurance clearance.

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 Next any issues with insurance compatibility will be discovered and cleared if possible. If

the issues cannot be cleared it will either be called in at that time or it will go in the call doctor

box that corresponds to 90 minutes before. These boxes would be regularly checked at the

appropriate time and properly managed with constant follow up. If everything gets worked out

then the script will move on to production. If not, the customer will promptly receive a phone

call with updates. It is very important that all information about the script be communicated to

the tech, this way they are better able to answer customer questions at pickup.

Production

Drugs will be counted and scripts will be filled by technicians.

Quality assurance

Pharmacists would check all scripts and place them in the pickup slot in alphabetical

order.

Pickup

At this point all customers with no issues would come in and sign for their scripts after

identified. The customers who have issues will have fewer complaints since they were warned

ahead of time, either during drop-off or from a convenient phone call. Techs will also have less

angry customers due to fewer problems at this point. They will also have less customer questions

that they cannot answer since they will be briefed on script issues during the process. This results

in shorted pickup wait time.

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Q2. What inferences do you draw from your analysis of Lost Revenues and Margins? Would you
recommend CVS attempt to convert “infrequent customers”?

We infer the loss in revenue and margins is coming from lost customers, therefore we

believe CVS needs to make changes and improvements with their customer service process so

they can increase the rate of repeat business from their regular customers and concurrently gain

customer loyalty.

Regular customers, who fill at least 40 prescriptions per year and 60-90% of total

prescriptions, said that service was the biggest reason for switching pharmacies (CVS case

Figure A). In comparison, light users are only 10-40% of the business, and mostly switch due to

location, something that CVS cannot control (CVS case Figure A). Infrequent users are most

likely patients who get sick, or have an allergic reaction and need a onetime prescription. These

patients are unpredictable to target since they are not always the same group of customers and

most likely choose a pharmacy based on location just like the light users. All in all it is apparent

that the main loss in revenue and margin is due to regular customer defection. Since it is cheaper

to maintain repeat business and more expensive to either convert infrequent customers or attract

new ones, we recommend they focus on retaining their current customers. Therefore we do not

recommend that CVS directly focuses on converting infrequent customers. Rather we believe

with better customer service, those infrequent customers will choose to fill prescriptions with

CVS as they are needed.

The majority of customer complaints occur during pickup, therefore it can be inferred

that the pickup process needs improvement and is most important to CVS retaining customers.

Many of the complaints were due to various forms of poor customer service. It is also apparent

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and can be inferred that the tech has not been properly trained in providing customer service.

The tech is the last person seen by the patient and a frustrating time when picking up can lead to

a regular customer changing their pharmacy for good.

Q3. What approach would you recommend CVS take to address the concerns and resistance
from some of the retail stores? What would be the additional revenues from Service
Improvements resulting in 60% less defections?

The main concerns of the retail stores and its employees seem to be the safety and

satisfaction of the customers. The stores seem to want to ensure the safety and payment

information of the customer through the use of the Drug Utilization Review, or the DUR, and the

insurance check while keeping the customer happy by filling their medication in a reasonable

amount of time. As the current Pharmacy Fulfillment Process at a CVS stands, the drop-off

process is extremely quick and convenient for the customer, but any one issue found during the

necessary safety, insurance and refill checks forces potential problems and delays in the pickup

process. This then results in angry confrontation with the techs. Of course these problems will

lengthen the fulfillment process for that customer and will extend the service time for each

additional customer. This will lead to overall lower customer satisfaction, which will ultimately

increase the amount of customer defections to other pharmacies. However, as much as the stores

would like to decrease the potential problems involved with filling a script and speed up the

process, they refuse to achieve this by potentially risking the safety of customers by reducing the

checks and stops that the DUR is responsible for. In order to address the possible concerns and

resistance retail stores might have to create Service Improvements. It is necessary to shorten up

service time and decrease some of the potential issues a customer could have without

jeopardizing safety. (CVS Case pgs 1-2)

The way we would alter the current prescription filling process at CVS reorganizes the

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steps so that the customer finds out if there will be an issue with the prescription at drop-off

instead of dropping it off and returning to disappointing unexpected issues. The customer will

know if the medication is available and if they are allowed to refill it right then and there so they

do not have to wait until pickup and possibly be forced to go to another store. We also

recommend that the DUR runs two hours before pickup time instead of one so there is more time

to contact any doctors about prescriptions and any customers about issues that came up after

drop-off. The general idea is to inform the customer of any issues before they try to pick up a

prescription that was unable to be filled, this way they do not have to physically show up and

waste their time. This should lead to shorter lines, shorter service times and increased customer

and employee satisfaction all without reducing how thorough the safety and payment checks are.

While our strategy might increase the amount of time an employee takes at drop-off, it

should more than compensate for this by lowering the time and problems at pickup and lessen

the number of unhappy customers who show up later in the work day. This is extremely

important since the problems at pickup seem to be the biggest obstacles in the workflow. If

implemented correctly this plan should provide benefit to all including the retail stores without a

significant drawback to anyone. This will improve customer satisfaction allowing for CVS to not

only retain more customers, but to also attract new customers. By doing this there will be an

increase in both pharmaceutical sales and the overall retail sales throughout the store.

The most important goal of the Pharmaceutical Service Initiative is to increase

revenue by gaining new customers and maintaining the current ones. The best way to do that is

usually by increasing customer satisfaction in order to lessen the number of consumers who

defect to other pharmacies. One of the goals listed in the case is to reduce the number of these

defections by 60 – 90% which even at the conservative end would result in much more revenue

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to CVS. In 2000 they estimated that $2.5 billion was lost from $7.2 million regular customers

leaving and the largest percentage of them listed service as the reason for leaving (CVS pg 3

Interviews & Analysis, Figure A). If the initiatives by PSI are successful in reducing customer

defection by 60% because of an improved service process, this should result in at least a 6%

increase in revenue each year from just the 60% reduction in customer defects since the $2.5

billion dollars lost was a bit more than 10% of total revenue for the year. (CVS Exhibit 3)

If our strategy for the PSI is implemented as of 2002 their total revenue in 2003 should

increase by at least $1.5 billion dollars in addition to the natural growth CVS seems to exhibit

year to year from 2000 to 2002. It should also mean that CVS could also be successful in

capturing new consumers who desire better service than their current pharmacy provides. The

revenue from retaining the customers that might have left and the potential new ones should

generate additional revenue of at least 2 billion dollars per year for CVS even if we use a

conservative estimate.

Q4. What would be the role of technology in the improved process? What would CVS
headquarters monitor to determine whether retail stores are adhering to the revised process?

Pharmacy IT is part of operations at CVS so they are willing to implement any changes

outlined by the Pharmacy Service Initiative. The major technology change in the improved

process would be a modification of the prescription data entry system. As it stands, the system

involves one step that the technician performs after the customer has left the drop-off area. The

new process will involve a two stage data entry procedure designed to alert the customer to

common problems before they walk away from the drop-off area. The first stage will be a rapid

pre-check to make sure that the script is allowed a refill and the pharmacy has the proper

inventory. The second stage will be the normal data entry including DUR that can be run without

the customer present.

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 The pre-check stage will be a software revision and should not involve any hardware

changes. These are tasks that are already performed and will now simply be performed in a

different order. CVS headquarters will be able to monitor an individual stores compliance with

the new two stage system by looking at its data entry time logs. The inventory check and the

refill allowance should take place before the rest of the data entry. If there is no time gap

between the two stages, the store is using the old system. Also, stores should be referring

customers to other CVS branches at a higher rate under the new system. If a store has a low rate

of referral, they could be ignoring the inventory check.

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Exhibit 1 Current Drop-Off Procedure

1. Customer approaches drop-off.

2. Technician takes script with desired pickup time.

3. Customer leaves.

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Exhibit 2 Proposed Drop-off Procedure

1. Customer approaches drop-off.

2. Technician takes script with desired pickup time.

3. Technician begins data entry by inputting medication, dosage and prescription refill

status.

4. Technician is informed of potential inventory or refill problems.

5. Customer leaves with a better idea of when the prescription will be ready.

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