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Generic Drug Companies are Becoming Drivers of Community Pharmacy Change

Neil Johnston
Management Consultant Perspective

Issue 65: October 2007
Page: 1 of 1 Author's Profile | Send to a Friend | Printer Version

With a range of PBS reforms already in place, plus those placed on the record as intended in the near future, one must add a best “guesstimate” of what medium term reforms have yet to be thought up by government and added to what amounts to a revolution in the pharmaceutical industry.
The following statement taken from one generic drug manufacturer’s site summarises the market conditions.
“The strong market outlook for generic pharmaceuticals is continuing with compounded growth of over 20% per annum expected for the next three to five years. The market for generic pharmaceuticals is expected to grow to around $1 billion in 2006 to over $2 billion by 2009, a figure that includes the impact of cost saving measures announced by the federal government. The key growth drivers are the expirations of many of the top 100 PBS drugs between now and 2008; increasing government and public support for generic pharmaceuticals; and an ageing, more drug reliant population."

The economies of scale that can be found in the doubling of generic business in a three-year time span, will not be overlooked by a federal government that is documenting rapid growth in PBS expenditure, that is getting close to budgeted estimates i.e. there is no margin for error.
The need to reign in expenditure in line with increases in GDP is paramount, otherwise the system will be swamped and unable to be funded.
What this means in practice is that more generic manufacturers will be attracted to the Australian marketplace, and the high gross margins available to pharmacists (characteristic of these products), will simply evaporate.
 As competition intensifies for market share expands, generic manufacturers will seek a point of difference other than price, to bind a pharmacist’s business to their brand, and evidence of this type of activity is stirring already.

GenRx (now Apotex) has begun to organise nurse-delivered disease state management services through community pharmacy.
Looks good initially and the model has been proven in Canada, but it devalues a pharmacist service through the use of a nurse, and further, because Apotex pay for the wages of the nurse, you are not allowed to charge for the service and must give a full 100% of business to Apotex.
How controlling is that?
Your goodwill is leveraged, your infrastructure in terms of furniture, space and other staff support, marketing plus access to your patient base, all left unpaid.
You may look forward to an increasing generic script base with diminishing margin and a clinical service you never truly own.

Two generic manufacturers are rumoured to be in discussion for the purchase of a major player in the Dose Administration Aid (DAA) Industry.
Given that DAA’s eventually contain a large number of generic drugs, the association could provide a flow on benefit through the pharmacists that use that particular DAA brand.
This is a logical synergy, as an aging population becoming more reliant on drugs, will need DAA’s to pack them in, and that will become a launch platform for other services to be provided by the generic manufacturer.
Pharmacists tend to be cynically viewed through this process as a “pawn” to be moved through a series of chessboard moves as required.
Diminishing respect for pharmacists will become more evident as they are weakened through their own bottom line (PBS reforms), continuously unable to fund their own range of clinical activities and thus vulnerable to handouts (generic manufacturer subsidies).
Seeking an “insider” opinion on this trend, I asked some questions of the managing director of Persocare (Klaus Petrulis) as to what his thoughts were.

Q: Klaus, what do you think will happen as the trends outlined begin to mature and expand?

Klaus: It will undermine the independence of pharmacist choice of generic usage. The current big players such as MPS and AHPS and other sachet packers will have an impact on this involvement.

Q. Have you considered going down this pathway yourself e.g. in the event that a company such as Webstercare may fall to generic manufacturers?

Klaus: It's ironic that a few years ago I approached GenRx for an
alliance to offer a package like that of Douglas pharmaceuticals.
At that time it was Faulding that owned them and nothing eventuated.
The possibility of Webstercare purchase would be, in my opinion, a detrimental step, for Webstercare, as a corporate influence, will lose some of the personalised goodwill that Gerard has established.
This would encourage my strategy change to capitalise on this outcome.

Q: Possibly as a means of conserving costs there has been some movement to recycle DAA materials. It is also rumoured that recently, serious infection was transmitted through recycled DAA materials. Do you have an opinion on recycling and will you be going down that path?

Klaus: I was challenged by an Auditor in NZ about recycling plastic folders let alone blisters which the latter is ridiculous.
Someone took the time to swab our packs and found various bacteria transmission possible.
Especially in nursing homes.
Hence I had to set up a protocol for prevention of this potential even though it hasn’t happened yet since 1980 or in any other country.
This is also why we use the disposable pack for indigenous population for hygiene reasons.
Managing The Chain of Asepsis

1.    On return of cards should be opened and waste blister
2.    The packer should wash hands beforehand with antibacterial wash and use disposable gloves
3.     All cards or folder and storage equipment should be swabbed with Isopropyl alcohol and set aside in a clean area for usage later
4.     The packing area should also be swabbed to break any cycle of contamination.
5.      Discard gloves that were used for swabbing and wash hands again to use new gloves for packing and checking.

Through diligence and following a system, we can ensure that we are minimising any risk of cross infection in aged care facilities where patients come in  contact with multiple blister packs, including staff administering the medication ,where washing of hands and usage of gloves would also be recommended. 
Presented By Klaus Petrulis, Director Persocare. A full copy of this abbreviated protocol can be obtained by emailing sales@persocare.com.au


No matter what your thoughts on the above, or even if you participate in DAA activities or in providing clinical services, you will no longer be able to perform the role of an interested bystander.
Consider the fact that if you are not:
1. Providing a DAA service, you will have to consider it, given that the DoHA are now providing subsidies for the development of services to patients outside of nursing homes.
Well future nursing home beds will have diminished funding and a supervised medication service will need to be provided in the home.

2. Providing the first steps towards “Pharmacy in the Home” that is pharmacy controlled.
Your professional competitors (Registered Nurses) will do it for you, if you like.
They are already in the home through their community nursing system.
They would be delighted to perform these services both in your pharmacy and in your patient’s home.
How long do you think you would be able to retain control of these types of services, given that you may not even have basic control in the first place (abdicating to a generic drug manufacturer and to a highly organised nursing system).

3. Developing a new model of pharmacy less dependent on PBS and providing a real health service to your community.
I am aware of some pharmacists making a break totally from PBS and setting up pharmacies based on compounding as the central service, coupled with consultations for health specific problems.
It’s a great life – time to personally interact with patients, a good return on services provided, no claim hassles with Medicare etc – the lifestyle is really good.

Note that I have been writing since 2000 on the need for changes in pharmacy that do not rely on protective legislation and PBS approval number licences that cause the base price of pharmacy businesses to rise artificially, and create professional environments that are not sustainable or interesting.

Crunch time is right here and now and it is interesting to see the various responses.

* Some are selling out or walking away.
* Some are creating discount model pharmacies and a life of extreme stress.
* Some are walking from the PBS and replacing with a range of services such as compounding, nutritional consulting etc. – they are doing well on much smaller turnovers.
* Some are simply crawling into a hole to “wait and see”.

I feel sorry for the last group, because they will be the first casualties in the war of attrition that community pharmacy has become.
Only a handful have had a vision and a plan, and have been methodically working along their objectives. They are the true leaders.

The sad thing is that pharmacy still has a great range of activities available that can provide interesting work and job satisfaction. The problem here is that most pharmacies that can actually deliver this are located in overseas countries.

When I first entered the ranks of pharmacy, most pharmacists were self confident, assertive and well motivated.
Today, I see a range of very timid people who have unhealthily placed their total reliance on PGA led policies and blindly followed them.

As I have often said before, an organisation that is artificially given charge over 100% of pharmacists but really only pursues the interests of 35% of those pharmacists does not exhibit realistic and mature leadership.
And that is why pharmacy is where it is, with pharmacists exhibiting true creativity being diverted and stifled.
There is a lot of money being spent on a lot of projects and systems with no satisfying outcome.
But really, ask yourself a question.
”Am I better off financially, do I enjoy my work and can I see the profession progressing as a whole?”
If your answer to that question is truly a “yes” then you are really blessed.

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