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What is it About Pharmacy Ownership?

Neil Johnston
Management Consultant Perspective

Issue 76: October 2008
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There has been quite a lot of debate over the issue of pharmacy ownership - and that debate spans my entire professional life. Pharmacy seems to fascinate all those entities that interact with pharmacy in some capacity - government, major retailers, medical practitioners, investment companies, manufacturers and wholesalers.
Understandably, with all the issues thrown around at various times, the Pharmacy Guild of Australia has simply bunkered down and drawn  a blanket over themselves.
Under that cover it has built the strongest of defences it could devise.

In its own way, it has been highly successful and has developed a multi-level lobby process that even displaces some of its own members and other non PGA pharmacists, using the "divide and conquer" rule.
Because of this siege mentality, PGA solutions have not always been creative or for the long-term benefit of the entire profession.
But this is something the PGA would deny and will continue to do so, because it lacks creative vision.
It is also dividing the profession into the "haves" and the "have nots".

Pharmacy (and that is inclusive of all pharmacists) has always been resilient, moving its market mix around until it found a "fit" that created the best momentum to form financial and professional stability.
But attitudes are changing and the PGA are creating a divide between pharmacy owners and non-owners.
Non-owners used to be regarded as professional colleagues, but now they seem to be regarded as some lesser beings.
You even see ramblings on a well-known pharmacy bulletin board where the aspiration of some pharmacy owners is to look forward to the day when there is a surplus of pharmacists (circa 2013) and more than one pharmacist can be employed (on much lower wages), to cover lunch hours and annual holidays.
I would have to say that if that is the extent of proprietor forward planning, pharmacy is definitely not in the right hands.
Where is the investment in clinical services to support this pharmacist surplus?
The ability to be self-generating in income must be a more attractive outcome, and not be a burden on dwindling PBS returns.
There is a "duty of care" element to owning a pharmacy that includes investing in the future training of practitioners. It is not being observed.

However, pharmacy must have something going for it because all the parties mentioned in the introduction to this article want a piece of the action under their control.
Maybe they are imagining something that is not there?
Word has it that Coles is still trying to understand the business of Pharmacy Direct because of the major swings in activity over a given time period.
I guess the grass always looks greener on the other side.

To those external to pharmacy (as say a Coles senior management group), pharmacists are just appendages attached to a business and don't rate for much.
To pharmacists, a pharmacy is a spiritual domain where they can develop their own personal view of the profession - and what a myriad of views and diversity exists within each pharmacy.
If non pharmacist interests were to gain control of these "domains" that spirit would disappear and pharmacy would be the poorer as the entire activity is commoditised.
Other areas of the globe have non pharmacist ownership of their pharmacies, and they derive from supermarkets buying out or starting their own chain pharmacy concepts or pharmacies developing a supermarket approach to compete against the former. It doesn't matter much - they all look the same in the long term.
The Australian government, (and both flavours), endorse the supermarket concept, deep down believing it to be a cheaper (for them) form of distribution.
But they continually fail to recognise that it is not just goods that are distributed. The list also includes professional services, health partnerships and patient relationships - the heart of a pharmacy.
This group of highly important activities is little recognised by government and the other entities noted in the introduction to this article, seemingly to be "invisible" to these vested interests when considering what value a pharmacy brings to a community. 

The Wilkinson Report (circa 2000) recommended a range of options that were designed to make pharmacy more competitive and transparent in its dealing. One of the options noted was that pharmacies should be incorporated, and that while control should be vested in pharmacists both at board level and in shareholdings, there was room for non-pharmacist investors, albeit a minority in shares held and in board voting powers.
This increase in ownership diversity would have created a new environment where both sides could learn from each other, and perhaps in this way work towards an optimisation of pharmacy activity that aligned with other forms of business, in terms of efficiency and service delivery. PGA siege mentality had this process aborted.

One Australian model that parallels Wilkinson's thinking is the National Pharmacies group where the general management of the group is basically non-pharmacist, but the pharmacy environment itself is totally under the control of pharmacists. There is a mutually respectful relationship on both sides of the fence and the result is outstanding in managerial and professional terms.

The PGA certainly saw this group as a threat when it lobbied to stifle its expansion. Outlet numbers are now limited under various Pharmacy Acts and this can be filed under the "siege mentality" process already noted.
This is not a solution, because what has been stifled is a great pharmacy model, because the ownership provisions (ownership is vested in the Friendly Societies) do not sit with the PGA view of the world.
There is a definite argument for special pharmacies where there is some community ownership, as in not for profit Friendly Societies.
Perhaps the greatest argument exists for the formation of indigenous pharmacies so that infrastructure can be put in place in the more remote communities, and where that infrastructure can train and develop indigenous pharmacists providing a service tailored to indigenous needs.
Only then could some of the health imbalances of these people begin to be addressed.

So let us have a look at a view from the other side of the world in the United States of America.
Daniel Hussar, who writes an e-newsletter under the title of the Pharmacist Activist offered the following in his September edition (his comments in coloured text).  

"North Dakota has a law regarding the ownership of pharmacies that is unique among all the states. Many within our profession are not even aware of it. This law requires that the majority ownership of pharmacies must be held by licensed pharmacists. The question that almost immediately follows this observation is, "What about chain pharmacies?" The answer is that publicly-held chain pharmacies may legally operate in North Dakota but there must be a contractual arrangement through which pharmacists must have majority ownership of the pharmacy department within the store."

And the above is an idea that might be extended to the Australian context. At least supermarkets (if they can overcome their greed) can have a true pharmacy and share in its rewards, even if they are unable to have full ownership.
Currently, the PGA has circumvented this type of development through legislation, showing yet another side to the "siege mentality".

"In my opinion, the extent to which corporations own pharmacies at the present time is the most important reason for which pharmacy has lost control of its destiny. These corporations are typically managed by executives, most or all of whom are not pharmacists and who are beholden to their boards and stockholders. Although some chain pharmacies have developed programs that expand the professional role of pharmacists for the benefit of patients and the community, these initiatives are often limited in scope and duration rather than representing an ongoing chain-wide commitment. My sense is that such commitments are not likely to be made by these corporations unless they anticipate that it will be financially beneficial. We all know how difficult it is to attain equitable compensation for the dispensing of prescriptions. Being compensated fairly for the provision of additional professional services represents such a formidable challenge that most chains and some pharmacist owners do not pursue offering additional services from which their patients will benefit. However, for a pharmacist owner, there is often more of a professional incentive to be a leader in the community, not only in the provision of pharmacy services, but also as an active participant in business and civic activities from which the entire community and state benefit."

So some of our US counterparts think almost identically to us in our approach to pharmacy ownership and professional development even though they have grown up in a totally different culture - a culture that governments and drug manufacturers are trying to foist on to Australian pharmacists.
In Australia, many pharmacists think that they have lost control of their destiny due to the mindless activities generated by the Pharmaceutical Benefits Scheme, allowing pharmacies to become "sausage machines" and pharmacists to be robotic dispensers.
It has to be said that this process has been aided and abetted by the PGA and the seductive management of government grants, allowing themselves to be bought by government as a policy extension of the DoHA.
Further to the above, it has to be said that the US has the worst and most expensive health system in the western economies and that Australia is light years ahead, even in something as simple a Schedule 3 Drug supervision.
Up until now, the US has had no S3 type regulations, and this has resulted  in significant numbers of deaths of children under two years of age, because no pharmacist oversight has existed.
This actually caused Australian authorities to "knee jerk" and ban the pharmacist sale of cough medicines and antihistamine products for children under two years of age in Australia.

Yet there were no deaths in Australia and authorities are still debating whether pharmacists should have the right to an S3 schedule?
What price the life of an Australian child?

"There have been previous challenges to North Dakota's pharmacy ownership law, and there are challenges now from organizations such as Wal-Mart and Walgreens. However, North Dakota's law serves its citizens well, and the legislators and governor must reject the challenge to the current ownership law! In addition to the reasons identified above, permitting these corporations to fully own the pharmacies in their stores would result in more revenues leaving the state to their corporate headquarters elsewhere. There are also questions regarding the commitment of some of these large retail organizations to the provision of the scope and quality of pharmacy/health care services that should be expected. In a Boston Globe editorial (September 7, 2008), the CEO of Walgreens is quoted as having told analysts in May that - "One thing I'd like to make clear is we are definitely not becoming a healthcare company... If you're going to go into a store, and you're going to see various accessories - it could be toys, it could be candy, cosmetics..." Not only is this executive not promoting a healthcare identity for Walgreens, but his comments send a message that he wants to avoid such an identity. This corporate philosophy/attitude is not needed in the ownership and operation of North Dakota pharmacies.

One of the arguments put forth by those challenging the North Dakota law is that the other states permit them to own pharmacies and that North Dakota should have laws like those in these other states. My response is - The other states should have laws like those in North Dakota."

So there you have it.
Chain stores and supermarkets will never invest properly in health services both in the US and in Australia.
And in these days of constant change and predatory activity, Australian pharmacies need to develop a strategy that minimises predatory practices by supermarkets and super-sized pharmacies.
This means that an investment in fee for service clinical models is so necessary.
There are a few successful innovations around, so get out and do your homework.

You may also like to consider how you could invest in pharmacist training to deliver these services.

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