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- Issue 81: April 2009
- Issue 80: March 2009
- Issue 79: February 2009
- Issue 78: December 2008
- Issue 77: November 2008
- Issue 76: October 2008
- Issue 75: September 2008
- Issue 74: August 2008
- Issue 73: July 2008
- Issue 72: June 2008

More Archives
We are in the process of moving all of our articles to the new site.

In the meantime you can find them on the old i2P site.

Will the Real Community Pharmacy Please Stand Up?

Neil Johnston
Management Consultant Perspective

Issue 79: February 2009
Page: 1 of 1 Author's Profile | Send to a Friend | Printer Version

The end of 2008 saw a range of what I would call “positioning” reports/articles – mostly providing a list of “evidence” of pharmacy transgressions, giving a range of reasons as to why the current structure of pharmacy should not exist i.e. it should be parcelled up for big business to take over.
The first of these reports was published by the Centre for Independent Studies (CIS), a supposedly independent “think tank” that is obviously well funded.
The CIS exists by virtue of member's subscriptions, grants and donations, so one can be forgiven for thinking that the obvious opulence of this organisation derives from the “big end of town”, and as a corollary, would promote the interests of that sector, even though it wears its “badge of independence” on its sleeve.
David Gadiel is the author.
He has previously worked as a consultant on projects managed by the PGA in 2001 that resulted in a published study entitled “Pharmacy Workforce Supply and Demand 2000-2010).

The title of his latest report is “Harmacy: The Political Economy of Community Pharmacy in Australia”
For those who have not read this rather large report, you can access it by clicking on this link.
I have very little comment to offer, as most of it is re-hashed material denigrating pharmacy.

Anti-pharmacy forces however, will not be deterred from using this report, as we get closer to deregulation trade-offs bartered under the Fifth Agreement.

Not to be outdone, the Australian Financial Review published an article on the 30th December 2008 titled “The Amazing Power of Australia’s Chemists”, an article that details the traction that the Pharmacy Guild of Australia (PGA) is able to wield within the political landscape.
Better written and more factual than the Gadiel diatribe, but still negative for Australian Pharmacy. This one is worth reading and is located here.

Just before the AFR article, another pharmacy article appeared in the Canberra Times on the 27th December.
This one is favourable to pharmacy and one suspects the guiding hand of the PGA in this version. It can be read here.

The forces for deregulation of pharmacy in Australia have been building for at least the last 20 years, gaining momentum in the year 2000 with the publishing of the Wilkinson Report that recommended a range of changes designed to free up the pharmacy marketplace.
The recommendations of this report have never been fully implemented, with the PGA opposing most of the issues raised.

There have been moves globally to completely deregulate pharmacy in most economies, to the extent that privately held pharmacies are now in a minority in most western countries.
It was therefore very surprising when this press release dated 17th December 2008 appeared as follows:

”Daniel Lucht, Senior European Analyst
Pharmacy liberalisation on hold - a portent of things to come?

London, 17th December 2008 - While the EU’s decision to halt the process of pharmacy liberalisation is clearly based on the merit of the specific case (Doc Morris “ the leading European online pharmacy “ trading as a bricks and mortar discounter under a franchise model in Germany) we could be witnessing a sea change in terms of EU decision making. Arguably we are slowly moving away from favouring excessive deregulation towards a slower and more considered approach“ with all the costs and benefits this brings for EU consumers and patients.

Yves Bot, advocate general at the European Court of Justice, has released a non-binding statement supporting German and Italian laws restricting retailers from owning pharmacies in both countries. According to Mr Bot, the laws are valid if the objective is to ensure an adequate supply of medicinal products to the public. While this is not the final say in the matter, the European court usually follows its advisers’ guidance. This also sets back liberalization in Austria, France and Spain. Another factor in the decision is the fact that the European Union has no overriding power over national health policy.

For years it seemed likely that liberalisation of the German pharmacy market was to go ahead to allow for increased competition. EU legislation looked to change Germany’s restrictive ownership model, under which every owner had to be a licensed pharmacist and was allowed to run and own a maximum of four pharmacies. Retailers, private equity players and pharma wholesale companies were closely monitoring the situation and many expected drug store chains such as Schlecker and Rossmann to be in a prime position if liberalisation was to get the go ahead to work existing footfall harder and increase their sales. Grocers also showed their interest in the market and considered moving into the lucrative sector. The German pharmacy market is worth around 35bn euros and margins are attractive at between 5.0% and 12.0%, considerably higher than in grocery where the typical margin lingers around the 3.0% mark. In the meantime many non-pharmacists (such as Schlecker, Rossmann and DM) have started operating Internet mail order services with the pharmacy located in the Netherlands and prescription drugs sent directly to consumers in Germany. That said, the online channel accounts for only a marginal proportion of sales at the moment.

While countries with a relatively liberal trading environment such as the UK and the Netherlands (where Doc Morris is from) show that the basic supply of the population with medicines can be guaranteed by a different system, than the one in use in Germany, Spain and Italy, the status quo regarding pharmacies in these countries looks likely to remain unchanged for now.

What has come as a big surprise to many market observers and companies in the sector might hang together with a broader change in the political climate. In the wake of the sub prime crisis and the credit crunch excessive deregulation” of the financial services sector has come under heavy criticism. The EU will remain committed to its core principles, one of which is the guarantee of free trade among its borders. However we could be witnessing a change of paradigm and a much more considered and slower approach to deregulation in future, says Daniel Lucht, Senior European Analyst at Verdict Research.

Meanwhile the outlook for the European pharmacy/drug store sector is rosy as the EU is suffering from a rapidly ageing population profile. This increasingly ageing demographic will need more medical attention and care in future, as such these players will grow whether they can add pharmacy services to their offer and proposition or, as it looks increasingly likely for now - not.”

Note that deregulation of the global financial market is regarded as one of the major factors in the “sub-prime mortgage” induced credit crunch that is still sweeping the world.
This has had an impact on government policy makers in the EU to the extent that they appear to be pulling away from health deregulation.
The argument seems that the “big end of town” cannot be trusted to run a sensitive market. Having stuffed up world finances, governments would see little joy in a flow on stuff up in the delivery of health.

This would seem to be a relevant argument that PGA negotiators can put on the table when negotiations begin for the Fifth Agreement.
How could the “big end” justify any supposed cost savings if it were to leverage the healthcare market to a similar disaster point as for “sub-prime”?
Taxpayers around the world will be paying the costs of major financiers and bankers for decades to come.

While Australian pharmacies will weather the economic storm and possible recession still to come,they will be hammered by government to make more concessions within the PBS system, as progressively, the government is running out of money to keep funding its spending programs.
This is a real danger.
More than ever the maxim of “working smarter, not harder” needs to be observed and new methods of doing business, particularly by developing Internet-based systems of marketing and information, will need to be looked at.

However, the big issue for pharmacy is the PGA itself and its quest to dominate primary health care.
The pharmacy profession – our profession – must exert every effort to block the initiatives that tie all primary health services to a pharmacy.
It is simply not the right environment for all service delivery.
While i2P has been highlighting this issue for over eight years, it seems that only now, a realisation is growing that the professional side of pharmacy is disappearing fast in favour of supply side activities.

Kos Sclavos, president of the PGA, has just released a paper on his view of pharmacy to come. He states that the findings of a recent survey indicated that a substantial number of patients (71%) would be willing to see a pharmacist as their first contact for health concerns.
He goes on to say that:
“The challenge for community pharmacy and government therefore, is to look at ways of encouraging more of the 71% of people who indicated a willingness to ask their pharmacist for health advice on common ailments, to do so.”

And that brings us back to the core issue repeatedly addressed in these pages, and that is to develop programs for pharmacists wishing to provide an independent clinical service to assist the “71%” of people mentioned above.
We are waiting for the Pharmaceutical Society of Australia (PSA) to show leadership and be counted here.
So far, we have only seen back-pedalling for the sake of PGA/PSA unity in dealing with government.
Do not let the PGA kill off our profession!


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