May ’13

The survivors guide to pharmacy.

Where two or more pharmacists gather to talk shop these days there is really only one topic on the agenda. FEMPI, reference pricing and how we are going to survive. The government and their fawning hand-maidens would have the public believe that there will be no cost to public or reduction in service levels in their local pharmacy. This is the government that will happily close Garda stations, small schools and local hospitals. The loss of local pharmacies won’t give them much cause for worry. The blood sucking ogre that is their local community pharmacist would just be making less profit is their line. I think that at this stage they have said it so many times that they almost believe it themselves. The media play their part by practically reproducing Dept. of Health and HSE briefings almost verbatim. Unfortunately this overlooks the fact that many pharmacies are at best breaking even and in some cases in a serious loss making situation. This does not just extend to the smaller independents but we have also seen some of the chains in a loss making situation and even some going into receivership. We may not like it but the level of service we offer will suffer.

Of course we only know about the Irish registered pharmacies. The foreign owned multiples do not release separate figures for their Irish operations so we can only hazard a guess as to how they are doing. From their behaviour and the figures released by Irish chains I would reckon that they are not doing as well as they might have us believe. It was recently announced that all the Unicare pharmacies are to be re-branded as Llyods in the next few years. While the new owners might desire a single corporate image for the Irish branch of their UK operation if they were making money why change it? If it ain’t broke don’t fix it. This also begs the question about what will happen to all the Unicares that have had large sums spent to be re-branded as Doc Morris in the last few years.

The first approach that many of us of would have made has been to see if we can squeeze any more discount out of our suppliers. While there has been some success in this by the growth of buying groups, both symbol and non-symbol I don’t think that there is much left in that pot. Indeed the demise of CMR would seem to confirm what we already knew. That pharmacy wholesaling in Ireland is no longer profitable. There is little doubt that the purchase of CMR by Uniphar does not bode well for proprietors. We are rapidly reaching a situation where we are getting close to a take it or leave approach with regard to discount and service levels from the two remaining wholesalers. It will be Tweedledum or Tweedledee. This is probably a bit unfair to the two major wholesalers. The reality now is that Ireland is too small to support three mainline wholesalers.

The balance of power between wholesaler and pharmacy is swinging the wholesalers way. It has been this way in the past. This led to pharmacists banding together to form the United Pharmacists Co-Operative Society to enable them to get better terms. This has evolved into Uniphar and to me it is ironic that Uniphar may be partly responsible for swinging the balance of power back.

If we can’t squeeze any more from the wholesalers what else are we doing to ensure survival. Previously the most obvious answer was to increase turnover. Using traditional methods this may be possible in some pharmacies for local reasons but on the whole this is another area with little scope for meaningful change. Already many are introducing new services such as vaccinations and M.U.R.s. While the GMS has been willing to pay for vaccinations as they are using us to undercut the docs I think that in the current climate they are unwilling to look at paying for anything else. Even though many of these new services would save the HSE money in both the short and long term they still have an attitude of cut, cut, slash and burn. And as any farmer will tell you after you clear a field you have to plant the next crop otherwise the field will remain barren.

All that is left is to look at all of our expenses. I suspect that up to this many of us would not have given this area too much thought. Sales were on the up and margins good and so as long as expenses seemed reasonable we were happy. Now nothing is sacred. Of course there are some expenses that we cannot reduce. The PSI’s exorbitant fees to begin. Local Authority rates are another. However the two biggest expenses for most pharmacies are salaries and rent. Here we can do something. How do our staff levels and salary rates compare to our colleagues with similar sized businesses? What’s the industry norm? Many of us would be loath to cut rates of pay, particularly for long standing staff but we can look at staffing levels. Do we need to keep the same levels of cover as in the boom days? If somebody leaves do we need to replace them or could their replacement be paid a lower rate? Would anybody prefer to work part-time instead of full time? [Edit note: you might to cut out the underlined bit, I feel that it might not work]

In relation to rent the recent Bewley’s case gives some hope. The rents set in the glory days are no longer feasible. Even for some of the bigger retailers rents have been cited as one of the reasons for going into receivership. If the landlord won’t talk turkey then maybe you should consider moving premises. In most areas there are plenty of empty shops with other landlords happy to accommodate. The cost of a fit-out could easily be made up by savings in rent.

It is clear that a new paradigm of pharmacy in Ireland will have to evolve. As well as how we practice pharmacy we need to look at how we run our pharmacies as a business. We need to get together with our colleagues (and rivals in some cases) and compare our costs. How much are they paying for electricity per square metre for instance. As well as survival of the fittest it will also be survival of the smartest. It’s time to wise up and get fit!

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