Computachem
E-Newsletter
Editor:
Neil Johnston
Regular Contributor:
Rollo Manning
|
Home February 2000 Edition
#1 |
1. CoAG Comment |
| 2. Retailing and the Internet | |
| 3. National Health Moves to Public Hospitals | |
| 4. FREE Website Offer |
COAG
controversy raged this month as
the full import of the Warwick Wilkinson recommendations to the Federal
Government began to filter through.Most of the recommendations are quite
positive and pharmacy is set for many years of change as the modified
recommendations come to fruition.
The recommendation to allow pharmacies to incorporate is one that is
long overdue. More than 20 years ago this writer put forward a similar
proposal as a means of heading off the licensing of pharmacies through
approval numbers. The argument was that if pharmacists could incorporate,
then a number of strategic alliances could take place involving share
exchanges. The
effect of these alliances would have been to reduce the overall number
of pharmacies, enhance the size and scope of activities on offer from
such pharmacies, to create a middle management structure giving a career
path for employed pharmacists, conservation of human resources and capital,
and an ability to fund professional interaction that pharmacists have
so long been deprived within their current practice structures.
Benefits that become available are that new pharmacists can progressively
buy into a practice utilizing the option to purchase shares as part
of a salary package. Women may find the purchase of pharmacy shares
as an attractive and recognizable form of investment when family commitments
preclude active management and ownership of a pharmacy. Most importantly,
a retiring pharmacist can exchange his pharmacy for shares in another,
transferring goodwill and the ability to become a part-time human resource.
In
the latter instance, shares could be of the preference variety, giving
a fixed or variable income. The permutations and combinations of the
variety of share types available provides flexibility of management
and capital structure, and the creation of a safe investment.
It is my belief that pharmacy has become the most restricted form of
business in Australia with just about every government agency believing
that they should have some form of control. The result is a stultifying
and mind-numbing process that certainly does not attract new people
to the profession. This is coupled to an artificial market for approval
numbers which is definitely not in pharmacy's best interests.
Another interesting COAG recommendation is the removal of the number
of pharmacies that can be owned by a pharmacist. Some commentators believe
that this will lead to pharmacy proliferation once more. Not so, if
corporate structures were allowed, for two reasons:
* With an evolving middle management structure in a larger corporate
entity, a pharmacist has a career choice without being forced to set
up a new practice, as has previously been the case.
* With a larger corporate structure would come improved management skills
and training structures that would be inherited as the company developed.
This would lead to more reasoned and mature decision making, which means
that homework would be done well before contemplating a new opening.
A rational decision not to open a new or additional pharmacy is a distinct
possibility.
The
Health Insurance Commission argument that there are economies in reducing
pharmacy numbers is an argument that just does not hold water. Economies
to who? The government may experience some economies of scale in bookkeeping
costs, because of a lesser number of pharmacy accounts, but this is
a pittance compared to the total. This has nothing to do with the way
the government reimburses pharmacists, which is on a "piece-rate"
basis, the cost of a pharmaceutical benefit being the same in a large
or a small pharmacy. Wholesalers may experience a greater economy of
scale with fewer and larger pharmacies.The fact is that National Health
is not the total offering of a pharmacy. As such, government or big
business have no right to interfere in the number, location or basic
operation of the business of a pharmacist and pharmacists should sort
themselves out, without outside interference.
The COAG recommendation to allow non-pharmacist (other than direct family)
shareholders is one of the negatives to emerge from the Wilkinson report.
Pharmacists should strenuously resist this recommendation for the following
reasons:
* Pharmacy is a profession which utilizes some commercial activity to
subsidize its operations. This should not be an excuse for commercial
interests to enter into a professional preserve. Being a member of a
profession requires professional discretion of the type that is inherent
only in the training and aspirations of the profession. Pharmacy wholesalers,
market groups and franchise agencies do not possess these qualities
and would eventually subvert professional principles under the guise
of "discipline".
* Pharmacy, in its current structure, would have insufficient lead time
to organize itself into an entity that could compete with pharmacy conglomerates
controlled by wholesalers or Woolworths. The immediate effect would
be to demoralize independent pharmacists, which would quickly lead to
their extinction.
* More importantly, as wholesalers move to "brand" the particular
pharmacies that they control under franchise and as a "minority"
shareholder, how do they actually reconcile their conflict of interest
and service fairly those pharmacists who remain outside of the "brand"?
The solution is relatively simple for pharmacists in that they should
move to have any corporate structures involved in pharmacy ownership
legislated as "exempt proprietary companies". This means that
public companies would then be prohibited from owning shares directly,
or indirectly, as say, in the case of a public company director holding
shares in private hands. The exempt provision may then allow a pharmacist
to allow his family to have a minority pecuniary interest to provide
tax alleviation or capital input under genuine pharmacist control.
More on COAG next month.
Retailing
on the Internet took a definite upswing for Christmas 1999, with
sales figures for established sites (trading for two years or more),
reported to be increasing at a greater rate than "bricks and mortar"
store retailers. Some sites had so much traffic they had serious difficulty
with their courier delivery services delivering on time. It is estimated
that over 500,000 Australians shopped on the web in the lead up to Christmas,
which represents an average increase of 350% over the previous year.
Worthy of note is that 61% of Internet shoppers preferred to deal from
Australian sites.
In a global survey of online retailing, conducted by consultants Ernst
and Young, it has been found that Australian consumers will spend an
average of 23% of their shopping budget on the Internet within the next
two years. This represents a 300% growth rate on today's expenditure
and certainly represents a market extension that cannot be ignored.
Some factors inhibiting growth include credit card fraud, with some
50% of Australians reluctant to divulge credit card details online (this
compares to 19% of American consumers).
The ability of Internet
retailers to process orders is also an inhibiting factor. E-shoppers
have come to expect almost instantaneous results on the Internet and
become very impatient with a slow order turnaround. Success on the Internet
is inextricably linked with speed of service. Established Internet retailers
are already looking to own or control their own courier service, while
others such as Coles and Pharmacy Direct have moved to form a strategic
association with Australia Post.
Window shopping is a feature of Internet shopping with approximately
eight to ten visitors per site equating to one sale. Sites should be
interesting and vary content on a regular basis to encourage return
visits. Many are just comparison shopping, or experimenting with Internet
form-filling so there is an 80-90 percent dropout rate. This statistic
will improve positively as consumer confidence grows in a site i.e.
as it becomes a recognizable "brand". Retailers such as pharmacy,
with an existing "bricks and mortar" presence, have a greater
advantage than those retailers who present a cyberspace image only.
Pharmacy traditionally has had strong community acceptance and trust,
and should find little difficulty in developing a strong niche on the
Internet.
The Pharmacy Direct marketing strategy has been successfully built on
this process.
One major problem confronting Internet marketers at the moment is the
fact that women are timid consumers on the Internet. Women are by far,
the major consumer force in pharmacy, so success on the Internet will
be geared to how quickly pharmacists can educate their female customers
in Internet technology. This must be a first step.
Health sites are the most trafficked sites on the world wide web and
women are the nurturers of family health. Therefore, pharmacy web sites
should be aimed at providing some strong content of health self-management,
and promoted heavily to women. This is the second step.
Complementary medicine is taking off in Australia with about 50% of
the population supplementing or treating themselves in some way, usually
without the knowledge of their doctor. This is an obvious area for pharmacy
to assume a "gatekeeper" role and is a entry point for a pharmacist
on the Internet
Now is the time focus and to be thinking of this process, starting with
the production of pamphlets giving simple instructions on how to get
involved with the Internet. Loyalty clubs built around Internet purchases
would seem to be an obvious inducement, to create a learning environment
for women. Marketing budgets need to be skewed accordingly.
Concurrently, there should be some experimentation with web site design.
Here is another steep learning curve, because the site we would all
like to be identified with will inevitably be heavy with graphics (
and therefore slow to download). Customers will literally walk out of
your cybershop if the action is too slow. Designs that are light on
graphics, heavy on content, with pages that are quick to open and easy
to navigate, will win the day. While you are about it, check out www.pharmacydirect.com.au
and see how quickly and efficiently this site operates.
Computachem Services will be devoting a great deal of its research budget
to Internet marketing, for it seems that pharmacy is an ideal product
to promote on the Internet. What needs to be resolved is that pharmacy
professional bodies get their act together to support this process and
provide clear guidelines. This will ensure that individual pharmacists
are not criticized unfairly for daring to come to grips with some pretty
exciting technology.
Internet and e-commerce will be a regular feature of this publication.
National
Health dispensing is set to be a feature of the public hospital
system in the immediate future. It has long been rumoured that this
would occur and has been, in principle, opposed by hospital pharmacists.
Victorian hospitals will commence dispensing on July 1st this year,
other states adopting a "wait and see" approach.
Initially, community pharmacy might appear the major benefactor, as
dispensing of national health prescriptions will be avoided, where possible,
by hospital dispensaries. Although the actual processes have not been
elaborated upon it would seem likely that patients would be able to
bring their own medication into the hospital environment, be topped
up with full issues of their repeat items as an inpatient and then be
discharged with prescriptions to have dispensed at their community pharmacy.
The overall effect will be a major saving to the public hospital system.
Hospitals will inevitably be reimbursed for pharmaceutical benefits
minus a markup on the drug and no dispensing fee. It is obvious that
this form of payment will prove attractive for the "bean counters"
at the Health Insurance Commission, as their long-term interests are
best served by having as much dispensing done in hospitals as possible.
The alternative can only be if community pharmacy is prepared to match
hospital reimbursement i.e. NHS dispensing becomes a loss leader!
So how can manipulation back into the hospital system occur?
How about floating the impost and ensuring that hospital imposts are
lower or nonexistent!
What about the shortage of hospital pharmacists you say?
Well maybe they can hire those community pharmacists forced out of business!
Not a very nice scenario, but given the normal duplicity of government
agencies and their penchant for control and manipulation of pharmacy,
it does bear some very serious thinking.
Back
To Top
Free web sites are being offered by the publishers
of this newsletter to interested pharmacists who wish to have a presence
on the Internet. To be prepared for the rapid changes that are already
occurring in retailing, would appear to be a sensible strategy. New
entrants are rapidly entering the marketplace with innovative offerings
and those not looking to compete will be left behind. If you are interested,
check out our web site at www.computachem.com.au
and then e-mail your interest to neilj@computachem.com.au
and we will have you up and running as quickly as possible.
More next month.
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* Looking for an organised reference site for medical or other references?
Why not try (and bookmark) the Computachem Interweb Directory , for
an easily accessed range of medical and pharmacy links, plus a host
of pharmacy relevant links. The directory also contains a very fast
search engine for Internet enquiries