Pharmacy Barometer

Future Challenges for Community Pharmacy – Current Situation

Speaker: Professor Charlie Benrimoj

Professor Benrimoj:  As you know, we (academics) have been working in the area of community pharmacy now for about 30 years and, like you, we’re all suffering from all the current changes.  As a result of this we, didn’t predict it as such, but we sort of smelt something was going to come along and we thought that we were going to go through a massive period of change.  And one of the things that we thought was that we might go to pharmacies actually on the ground and get their views about these changes and what’s going to happen with those changes.

So that then started the concept of “How do we go and measure the changing trends in community pharmacy, particularly at a time when there’s a lot of change and a lot of people are suffering in terms of having to change their way to work?”  So we thought, “Well, let’s start some sort of scientific rigorous survey that we can do on a regular basis,” and that’s where the barometer came along.  All those things are hitting us all at once.  No wonder that we are having an industry of change.

You can’t do business like you’ve done in the last years.  You’ve got to make some decisions after looking at your business and (then) doing (something about it) … (if not) it just won’t not exist.  You know, I get figures of about, say, 100 pharmacies are in trouble in New South Wales.  You know, I don’t know whether that’s true or not, but that’s the sort of figures you get. 

So, community pharmacy infrastructure and the way we do business is under considerable pressure, and I don’t really think I need to tell you that because you’re suffering it probably more than I am.  But it will certainly need to be changed.  And the issue is, what do you change to and how do you change and how do you manage the transition.

Our view was that if we could measure what the industry was doing then we can perhaps help the industry survive and prosper through using research data.  So the three barometers, essentially what we do is we measure the confidence level, we look at how you believe the value of your business is going to change over time, we then measure some opportunities and challenges, and in this particular wave the topic was expanded and accelerated price reduction. 

In the second one, out of this one people told us that services were the big opportunity, so we dug a bit deeper there.  The third bit is we want to identify markets for you that will make you think about whether you can expand your business.  The dispensary side is going to have less prominence, still a very important element, but OTC is an area that we felt that we’re going to try and expand. 

So, over the next sort of probably two years or so we are going to look at markets that we want to help you identify so that then you can have options in developing your business. 

In the April 2013 report – this was just before accelerated price reduction (indicates sentiment level on graph) – look at the massive drop in (the following report).  So in a year (between the April report and now) there’s been over a 20% drop in confidence in the industry.  You know, that’s massive.  So, all this sort of negative stuff that you hear is reflected in this data.  People are unsure; people don’t think it’s a good industry to get into.  That has a tremendous impact on a whole lot of people. 

The next thing we did is look at what the expected change in value of the business will be, okay.  And we measured that in one year and in three years (indicates change reported in one and three years).

So, again, let me just repeat this key message.  You can’t do business like you’ve done.

End of Recording.

Future Challenges for Community Pharmacy – Opportunities

Speaker:  Professor Charlie Benrimoj

Professor Benrimoj:  One of the interesting things is that in this period of change there’s masses of opportunity.  And I always get very upset when people tell me there’s no future in community pharmacy.  Look, if there’s no future in community pharmacies, there’s no future in terms of local healthcare delivery, because that’s what we are. 

So, in my view, there’s really, really positive things that can come out of this.  We’ll sweat a bit, probably for the next two years or three years, but I think out of that I think we’ll have a much stronger industry and an industry that at least will be really involved in healthcare delivery, I hope.  The main message out of today is that you can’t carry on doing your business as you did before, because if you do that I can’t see anybody surviving.

The fascinating thing for me is when we sort of dig into this and we say “What are you going to do about it?” there’s a lot of uncertainty.  So people say “My business is going to go down; what should I do about it?” Where does everybody see their opportunities?  The other interesting thing is that not only government is willing to pay you for services.  We are now running projects with the pharmaceutical industry, who can’t give you discounts anymore, and what they’re saying to us is “How can we get our market share if we can’t give discounts?”  And everybody comes up with exactly the same answer: “We will help you deliver services if you put our product as part of that service.” 

There’s also conversations you can have with your product provider which is how will they help you grow your business through service provision.  You know, we are doing projects on an international basis that say, for adherence, people are getting 42 Euros for adherence.  Another source or group that comes to talk to us is the healthcare providers.  Pretty simple – they want to stop people going to hospital and you can help them, and they’ll pay for that. 

Don’t think only of the stuff under the agreement.  The agreement stuff is really good because it gets you going, but there’s not sufficient money in that to sustain you.  So use the agreement monies.  Get your people accredited for HMRs.  Do meds check – diabetes – do clinical interventions.  They’re a really good transition period for the next element.  

Then we thought “Let’s have a look at a market that you can start work in straight away, a market where you’ve got clear advantages,” okay.  You’ve got lots of OTC, you’ve got pretty good product knowledge in those.  Let’s have a look whether that, people think, is a bit, a good avenue for growth.

Look (indicates chart), the people that think that there’s going to be five is massive.  So we’re getting pretty neutral effects by everybody on whether this market is going to be a potential for growth.  A monopoly product, okay.  Nobody else sells it.  Or, well, some of the products are sold, but most of it doesn’t.  You’re being squeezed to death in the PBS.  Why aren’t we wanting to grow this market?  And what do we need to grow that market?  You know, it’s roughly worth $2B, in that order, you know.  So, if you could just get it working 10% better, that’s $200M.  That $200M will pay you for what’s been taken away just for clocking the accelerated price reduction more.  So this market is a market that I think you can actually hit hard.

Interestingly enough, what we are seeing is that there’s a group of people, that see a lot of growth in this area.  So what we’re going to see in practice, if nothing changes, is a small, a relatively small group, about a third of people, hitting this market like mad, who’ll believe that they’re going to do it, and they’re going to go mad on it.  So it’s about a third of the respondents that says, “Yeah, this is a market that’s really good; I’m going to go.” A third are neutral and a third see no growth, roughly.  That’s what that data tells you.

So what’s the implication of that?  That, if in your local area you’ve got a competitor pharmacy and they’re going to get into OTCs, you’re going to suffer.

The main areas are respiratory, pain and dermatology.  That’s the main area where people see their growth mainly is in the cough/cold area here, with some people telling us asthma’s okay, COPDs okay, et cetera.  So the three big areas are already the big areas that you have.  And it’s about stimulating those areas.

End of Recording.

Future Challenges for Community Pharmacy – Financial

Speaker: Professor Charlie Benrimoj

Professor Benrimoj:  It was fascinating when we asked people where they’re getting their financial advice and in this tough period and what type of advice they want.  They certainly don’t want a specialist,that just knows about finance and accounting.  What they want is a specialist understanding of the pharmacy industry and with specialist understanding of finance and accountancy.

The other interesting thing is the number of people who don’t seek advice from a financial adviser at all.  Shucks, if my business was going to go, if my income was going to go down by 20% and the value of my business was going to go by 20%, I’d be knocking on every person’s door that I could. 

Seventy-six percent of owners are not getting any concrete advice through this tough period, about growth, or if they’re getting the advice it’s not the advice they want.  I mean, that tells me that maybe people need to change their behaviour – I don’t know – and find somebody else to advise them. 

All right, so what do you need to do?  All that basically boils down to the key message – you can’t carry on doing your business as you do.  In our view, you should look for growth areas and certainly get into the PBS for service, considering that that’s not going to be a major income source, but it’s going to help you with the transition.  That’s the key message.

And if you go “How do you do that?”  Well, you need to restructure for service provisions.  The butchers have done it, the travel agents have done it.  It’s our turn to do it now.  You certainly have to build capacity, because your staff are not trained for that.  Your staff are trained for “Do you want the big one or small one?”

And, lastly, you’ve got to have some business planning, and that business planning is part of the finance side of it.  And people at the moment are really … they have some difficulty in deciding how they can go about doing business plans for services.  So, in conclusion, your current business model is highly questionable, you can’t depend on your product PBS money anymore.  You just can’t.  It’s pretty simple.

There’s masses of opportunities in terms of new markets and existing markets.  OTC is probably the number one, and services associated with the PBS.  Those are two markets that you know already; you just need to go and work them.

End of Recording.