JUNE,Edition # 28, 2001

 

Globalisation is having its effect in many facets of Australian life, and fallout is being experienced within the food industry and the pharmaceutical industry. Many indirect events have their genesis through global intervention, and this is causing concern.
Some Australian businesses have found their legs and are following the Dick Smith tactic of promoting their Australian identity, and highlighting the brand names of their foreign opposition. This has obviously stung, because legal action has been initiated to prevent this, arguing that this type of competition is unfair. It has made a difference, because so many Australian brands have changed hands, without the public being aware. The public are supporting this identity advertising and market shares are changing.
Examples include Panadol taking action against Herron Paracetamol, and Pizza Hut taking action against Eagle Boys Pizza.

In terms of unfairness against pharmacy, one of the more useless pieces of drivel to appear in a newspaper concerned a perception (by the journalist writing the piece), that pharmacists were having their mortgages paid off by pharmacy wholesalers/manufacturers.
Whatever the motive for the story, it was perpetuated through various current affairs programs to highlight one reason for higher drug prices.
Without going into who planted the story, and why such an outrageously inaccurate piece was allowed to grace the pages of a major newspaper, you could only say the journalist involved had a vivid imagination and was probably on a banned substance while writing this masterpiece of misinformation.
The fact that it was released just before the Federal Budget was probably coincidental?
Not likely you say?
Is pharmacy being targeted in the fallout of global drug manufacturers causing a blowout in the Pharmaceutical Benefits Scheme?

Well I wonder where the reporter was when a recent story broke about Metcash Trading and Dairy Farm International (the owners of the beleaguered Franklins) offered $60 million for independent supermarket operators to purchase up to 112 Franklin's Stores.
Metcash is the South African organisation that purchased David's Holdings, one of the few suppliers to independent supermarkets. In addition to the funding, Metcash have also agreed to take the head lease of a store where the landlord considers that the tenant is not viable enough.
Quite a generous offer, which should keep shopping centre rentals at a reasonable level, and perhaps, indirectly helping the home mortgage of the new owners.
In the carve up of Franklins, Woolworths look like getting 67 of the stores and have agreed to take on approximately 7000 of Franklins employees.
Foodland has plans to buy thirty five of the stores in Queensland and northern NSW.
One of the more interesting contenders is the Sydney-based group, Fresco, who plans to take up sixty stores in NSW in conjunction with Pick 'n Pay, a South African chain of supermarkets. They have also purchased the national rights to the Franklin's name, so there are some ambitious plans afoot.
Because Pick 'n Pay are a major player, a further shake up of retail and wholesale activity in the food industry is inevitable. This will be further compounded by the fact that Metcash and Pick 'n Pay have formed an alliance, due to the South African connection in both.
Coles does not seemed to have been a contender in the rush to buy stores, which has astounded the industry. The only other contender, apart from a handful of independents, is the FAL Group, who plan to expand their chain of Action stores, most of which are located in Western Australia.
Thus the east coast of Australia, especially Sydney, will come under intense competition. Added to the melting pot is the Aldi group from Germany, which is quietly making inroads into the Australian market.
Now pharmacy will also be part of this competitive frenzy, as supermarkets vie with each other to compete on price and range. More pharmacy products will inevitably grace the shelves of supermarkets, and will be part of the lobby to deregulate scheduled drugs when the Galbally Review takes place again.
Pick 'n Pay is an interesting operator.
The South African giant has been operating in excess of thirty years and runs six distinct divisions: supermarkets, hypermarkets, Family Franchise stores, butcheries, auto centres and financial services.
The company originally came to Australia in 1984, and opened some of the largest stores Australia had ever experienced. Because of union difficulties and political pressures which built up over the Apartheid years, Pick 'n Pay eventually sold out. However, their initial introduction showed they were capable of building and running the largest (in size) retail establishments, also the largest turnover ever experienced by a single store in Australia.
The Australian Consumer and Competition Commission (ACCC) is still in the picture as far as Woolworths is concerned, but with the strength of the opposition forming up, it appears likely the Woolworths purchase will get the nod.

Community pharmacies, in comparison to the new breed of independents in the supermarket business, appear like a group of "cottage industry" corner stores.
The perception of regulators is that we are undercapitalised and lack skilled human resources.
They are right, you know.
We derive our strength, not from our own capital resources, but from that reflected through wholesaler resources.
In essence we are a weak and ineffective group that would blow over if the wholesaler resource were to dry up.
Consider that wholesaler margins ( and possibly pharmacy margins ) will be coming under attack in the near future, to pay for the Pharmaceutical Benefits Scheme (PBS) cost blowouts, forced by global manufacturers pressuring the Pharmacetical Benefits Advisory Committee (PBAC).
This would place wholesaler balance sheets under intense pressure, and banks may become reluctant to accept guarantees, as they have traditionally done, particularly if the pharmacist recipients of the guarantees are seen to be on a terminal pathway.
If the guarantees reduce or disappear, then pharmacy market share is proportionately lost, and we become weaker still.
Certainly the perception of the wholesaler paying pharmacist mortgages would be seen to be put to rest, and this may be the real purpose of the newspaper story referred to at the commencement of this article.

Time is rapidly running out, and if our leaders and legislators do not release the shackles that bind the current model of pharmacy, those entrepreneurs among us will never get up and run.
Our model needs to be upgraded to a corporate level as a matter of urgency, for it this model that our competitors are using. Laws restricting the numbers of pharmacies, and where they can be located, look ridiculous when we look over the fence at other business competitors.
This "head in the sand" attitude has prevailed over the past quarter of a century.
Where has it got us?
Not very far, is the answer.
This is as others see us, and this is why we have become vulnerable, in a workplace burdened with restrictions, regulations and mind boggling paperwork.
The job of a pharmacist is disappearing, because there are not enough properly structured jobs to absorb the talent our universities are turning out.
We need a solid business structure to work out of and one that can financially provide for a range of interesting jobs.
Everyone points to consultant pharmacy as the way of the future, but governments only see themselves paying for chronic patients in nursing homes plus other specific groups.
It simply cannot afford to cover the cost of every patient in Australia.
You might say that eventually, as a cost saving measure, it may turn out the light at the end of the tunnel.
Ends

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