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Quote Of The Year - Paul Shetler - "Its not Your Health Record it's a Government Record Of Your Health Information"

Sunday, July 08, 2018

I Don’t Think Traditional Community Pharmacy Will Escape Digital Disruption And Patients Will Benefit I Believe.

This appeared yesterday.

Dispensing disruption: Are pharmacies ready for digital rivals?

By Nassim Khadem, Patrick Hatch
7 July 2018 — 12:05am
When Amazon announced its purchase last week of online pharmacy PillPack, which packages and delivers pre-sorted doses of prescribed drugs direct to consumers’ homes, major US-based pharmacies from CVS Health to Walgreens saw their share prices fall about 10 per cent.
It was Amazon’s play at a slice of the United States’ booming prescription drug market that in 2016 totalled $US328.6 billion ($443 billion).
It was also, possibly, a crystal ball into Australia’s destiny.
In an age when everything from a box of fresh vegetables to someone who will help assemble your Ikea furniture can arrive on your doorstep within hours after a few taps on a smartphone, how long will people continue to line up in pharmacies waiting for their medicine to be dispensed?
If and how soon an online giant might seek to take a slice out of the retail pharmacy market, and what kind of model they decide to operate, is unknown. There’s no sign Amazon has such designs here yet.
But the prospect has existing players worried their declining share of Australia’s $16 billion pharmacy market will fall further.
“In a perfect world we’d be partnering with those sorts of people,” Sigma chief executive Mark Hooper says.
Sigma is one of Australia’s major pharmaceutical wholesaler and distribution businesses. Its brands include Amcal, Chemist King, Discount Drug Stores, Guardian and PharmaSave.
On Monday it announced negotiations for a five-year contract with Chemist Warehouse had failed, allowing a competitor – EBOS Group – to move in and try and secure a deal with the private operator.
“The worst thing I could do is pretend they [Amazon] are not going to have an impact and ignore [the threat],” Hooper says.
Hooper says if Amazon does move into pharmaceuticals – and for now he thinks the online giant has other priorities – Sigma has the infrastructure to ensure prompt delivery to peoples’ homes.
“I’m trying to look for ways of working with new market entrants than trying to fight them,” he says, adding Sigma has reached out to Amazon “but there’s been no detailed discussions”.
“I need to make sure that I have a strategy that copes with them coming in as a possibility.”
The industry has already undergone heavy disruption due to government reforms as well as increased competition from discount pharmacy chains, despite long-held rules that restrict the number of pharmacies that can be owned in certain locations.

PBS hurdles

The entry of new corporate players, including private hospitals operator Ramsay Health Care, is also intensifying competition.
To survive, mergers have been on the rise. Under EBOS, Terry White Chemists merged with Chemmart in 2016 and now operates about 500 pharmacies across the country.
As the chains aim for scale, the number of independent pharmacies continue to decline.
But Hooper says it is reforms to Pharmaceutical Benefits Scheme (PBS) - the government scheme that subsidises the cost of drugs for all Australians – that has had the biggest impact on wholesalers like Sigma over the past decade.
He says while government reform of PBS was needed, it has squeezed wholesale margins.
IBIS World forecasts pharmacy industry revenue will grow at an annualised 1.1 per cent over the five years through 2022-23, to $17 billion, mainly due to demand for drugs from Australia’s ageing population.
Increasingly, pharmacies have moved away from relying on prescribed drug sales to providing community health services such as flu vaccines and health checks like blood tests and diabetes tests.
Some GPs are unhappy saying it is not the job of a pharmacist to provide health services, but the federal government, as part of the Sixth Community Pharmacy Agreement (6CPA) with the Pharmacy Guild, allocated $600 million from July 2017 to allow pharmacies to offer new community pharmacy services.
Marc Clavin who operates an Amcal chemist in Sorrento, Victoria, has worked as a pharmacist for more than 35 years. “The reality is we are retailers in the high street and to afford the high rents we need to take retail opportunities as they come,” he says.
Pharmacists cannot continue to stand by and watch heavy discounters take away market share, he says, which is why Clavin is now offering new services, including in-home medicine checks for his customers.
He says when visiting people in their homes and looking at the medicines stacked in their shoe box, he’s found instances where people have bought cheaper medicines from overseas online sites that are not suited to their particular needs.
He is also worried about the rise of discount chains. “The advance of these predators into our industry is of great concern,” he says. “The danger is that the consumer will be faced with the cheapest option.”
And as for digital competitors, he says, “clearly the Amazons are going to target the Sydney’s and Melbourne’s - that means people in rural areas miss out. They [remote-based Australians] will just be too expensive [for Amazon] to service.”
Australian Pharmaceutical Industries (API) managing director and chief executive Richard Vincent says, “I’m not for one minute underestimating Amazon".
"But I feel we are well-positioned to defend any entry in this space.”
API runs 466 Priceline stores across the country, and its emphasis on health and beauty means it has a buffer. It does not compete on selling medicines alone.
The company is also branching out – on June 25 API announced it had spent $127.4 million on acquiring Clearskincare Clinics which offers women laser services and other beauty treatments. Vincent says this will allow them to cross-sell between Priceline and the clinics.
Vincent says there are patients on chronic medication that will always want to talk to their pharmacist face-to-face.
"There’s a range of reasons that patients put their trust in their pharmacist rather than just order online,' he says.
John Cullity is the chief executive of EBOS, which recently entered negotiations to supply Chemist Warehouse for the next five years.
EBOS already supplies to the Terry White Chemmart brand and Cullity says its existing infrastructure can handle the extra work that will come if the Chemist Warehouse deal is sealed.
He also believes some people will always want face-to-face interaction with their pharmacist.
"You get sick, and you need drugs - what will you do, wait for next day delivery or take your script and go to your pharmacy and get it?
"We don’t pretend it [Amazon] is not a risk but we think we are well placed to manage those risks."

Electronic prescriptions

David Quilty, executive director of the powerful Pharmacy Guild of Australia, talks down suggestions the almost 5500 community pharmacies he represents could be upended by a digital disrupter.
He says the rules controlling the industry remove the two major enticements that have seen consumer go online for their shopping needs - price and convenience.
There is vastly more here:
A quick read reveals all the players are just worried about their bottom lines and how to protect their margins.
Concepts of customer service and convenience are mentioned only to say they are not important as they are a threat to profits.
From Chemist Warehouse to Amazon (and Wollies and Coles) who can deliver basic prescription supply way better than a corner shop so the corner shop keepers have lobbied to have absurdly restrictive laws in place. Now Chem Warehouse and Ramsay have worked out how to crack to model I believe it is only time before the whole pack of cards comes tumbling down.
For more advanced services (medication reviews etc.) a pharmacist is appropriate and they need a different payment model for providing those services.
The King Review which showed the way forward was scuppered by politics and the Pharmacy Guild recognized most of this and knew where things were heading. Right now the Guild looks like the boy with a finger in the dyke and facing rising water!
A great read that nicely points out the likely future.
There is also another article from a commercial perspective making similar points:
  • Updated Jul 6 2018 at 6:24 PM

Chemist Warehouse flexes muscles as independent pharmacists battle corporates

Over the past two decades David Vo has owned pharmacies in the rural community of Orange to Sydney's Rose Bay North. His latest investment was up the hill from Clovelly Beach – three months ago he bought the only pharmacy in the small Sydney suburb.

Vo still believes there is a place for smaller independently owned pharmacies which, he says, are more focused on the patient and providing health advice, rather than the till.
"We are not just a cashier," he says. "We have a concern for the customer. People feel like we are family and they talk to us and we have more time for them."

Changes in the highly protected pharmacy industry over the past 20 years have been dramatic, Vo says.

"Apart for the squeeze on government funding, we have been caught off guard with the Chemist Warehouse model. We were always more worried about Woolies coming in, but it's Chemist Warehouse that changed things."

This week Chemist Warehouse – the gorilla of Australia's fragmented retail pharmacy sector – flexed its muscles when it dropped wholesaler Sigma Healthcare and handed a $1 billion-a-year contract to rival wholesaler EBOS Group. The pair have had a difficult relationship, with Sigma taking Chemist Warehouse to court last year over breach of contract, which was later settled.

The change in contract has left Sigma relying heavily on its independent pharmacy network which is under pressure from encroaching corporates, including the nation's largest private hospitals operator, Ramsay Health Care.

In favour of deregulation

The news forced Sigma to issue a profit downgrade and wiped about $322 million off its market capitalisation on Monday. EBOS shares rose 7 per cent, adding about $NZ197 million ($181 million) to its market cap. The contract win came at a cost for EBOS, with several sources saying it agreed to give Chemist Warehouse a $75 million up-front payment and committed another $200 million of working capital. Other sources said negotiations were ongoing.

Again lots more here:

So no matter where you look digital and commercial disruption is on the way. It’s only a matter of time.
David.

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