Computachem
E-Newsletter
Editor:
Neil Johnston
Regular Contributor:
Rollo Manning
This month's newsletter has been an exercise in compression. There is so much to report! Reflect on the article prepared by Rollo Manning and where the budget trimming for National Health expenditure and the direction CoAG recommendations, for more efficiencies in pharmacy, may lead. Check out the major e-commerce initiative by Coles-Myer and read how other businesses are being affected by globalisation and how this may impact on pharmacy. With the explosion of activity within the Pharmacy Profession, plus all the events in the surrounds that have, and will, impact, it can only be stated that the stage is now set for a massive roll-out of change, never before experienced by pharmacy, and in such magnitude. This change, or more aptly, "re-engineering", has been initiated by government, and is being driven by the globalisation of business (in particular, pharmaceutical manufacturers and supermarket retailers), the increasing power of the consumer movement plus the revolution of e-commerce on the Internet. It is hard to determine the borders of each of the above influences and how they will overlap and challenge pharmacy. It sometimes seems, from a pharmacy perspective, that they are all in bed together. Pharmacists need to realise that this change process will be constant and ongoing, it will be rapid, and it will require high skill levels in the area of change management. There is no room for complacency, nor is there any lead time to strategically adjust. Just take the ball and run. If you are looking for measurement for one aspect, e-commerce, in another market, consider that researchers are predicting online revenues in Europe to surge up to eight times the current volume by the year 2005. This translates from EUR 8 billion to EUR 64 billion. Concurrently, the number of online buyers will expand by a factor of four, totalling 85 million by 2005. The most dramatic growth is expected in the timeframe of the next two years. The increase in range and diversity of choices for consumers is the main stimulant, and Australia is set to emulate this pattern, but with more subdued growth rates.The level of success of the e.Coles-Myer venture, reported below, will be a major factor of growth stimulus in Australia. These figures and projections should be sounding alarm bells for pharmacists. They represent loss of market share for those not properly prepared or organised to compete in e-commerce, but a great opportunity for those with the vision to grasp the potential. Our newsletter appears to filling a gap, with increasing news items flowing in, along with an increase in subscribers. We will have to look at frequency and presentation in the near future, possibly going to press every two weeks instead of monthly. The publication is sent in full text because of the apprehension created using attachments, which sometimes contain viruses, if they originate from an unfamiliar source. A spate of viruses appearing in e-mail has been reported, but many of the most recent have been hoaxes. It is a pity that others seek to destroy confidence in a medium of communication, which is destined to be part of every business and every household. Contrary to popular belief, e-mail viruses are unable be transmitted via plain text or HTML e-mails. If this were the case, the system of Internet would be in such a turmoil, that users would desert in droves. Viruses arrive as attachments and are usually .exe files. They may appear deceptively harmless, but are capable of wreaking destruction within your computer. If you receive a message with an attachment which you did not expect, then delete it immediately or run a good anti-virus program which detects macro viruses as well as the more traditional program ones. This newsletter is always posted to http://www.computachem.com.au and future editions may have part of an article contained in an e-mail format, with a link pointing to the balance of the article on the Computachem web site, to cope with the increasing content.
From Rollo Manning
Footnote: The views expressed are those
of the author and no other party
The Federal budget looms
The media is speculating on what the Federal Government might do with the Pharmaceutical Benefits Scheme (PBS) in the Budget to be brought down in May (next month). The PBS is a common target at this time of the year and it is not known whether this is genuine speculation or the Government itself "flying a kite" to see how much "flak" it receives for the idea. The article in the daily press on April 19 stated the Government planned to "slash" $120 million from the $3.5 billion PBS outlays. This amounts to 3 per cent of the total. Hardly a "slash", more like a "trim". Still in all, at a time when the PBS is increasing in cost each year at a rate of $300 million a year it takes a bit to turn it around. News of the outcome of the "third community pharmacy agreement" should be in the public arena any day and if not on Budget night, certainly soon after, as it is to commence on July 1, 2000 for a supposed five year term. The pharmacy leaders of today should consider putting to Government a public submission calling for savings in obvious areas where they know savings could be made. "Doctor Shopping", and "drug smuggling" of PBS items to overseas countries costing an alleged $20 million a year could be targeted. The $120 million could then be picked up from fringe items on PBS, which can be purchased over the counter, and from these measures. Public sympathy may then be with pharmacists and the assertion of the pharmaceutical manufacturers that "existing expensive anti-depressants would be pulled from the scheme and breakthrough medicines for cancer, diabetes, hepatitis B and osteoporosis may not be made available" buried. At the moment it may be a "smoke screen" for what is really in the Federal Budget through the third "guild/government" agreement. Before pharmacists start to defend the plight of the chronically ill and their need for life saving medication, they should consider the changes, which may be mooted in their own area of Commonwealth spending. It should not be overlooked that when talking Government spending on PBS, approved pharmacies receive almost 25 per cent of the spending. $773 million 2 of the cost of PBS is to pharmacists to cover costs, including the cost of goods. Recommendation nine of the CoAG report on pharmacy regulation could assist savings in bringing about competition in the supply of PBS listed drugs. This proposes measures to reward efficient pharmacies, and with inefficient pharmacies being made to compete, or become unviable. This could be as simple as tendering out the approval for PBS supply in an overcrowded big city area, effect savings through efficiency, and spend some of the savings on ensuring pharmacies remain viable in rural and remote areas. The other part of the savings could then be used to ensure all "life saving" drugs remain on the PBS list. If a suggestion such as this was floated in the media there would sure to be an uproar from pharmacists all over the nation. In the context of saving money for the Government so it did not have to consider the limiting of drugs to patients the public opinion may be divided. The next month will be a fascinating one for "pharmacy industry watchers", and the 2000-01 Federal Budget one of significance to the retail sector of the pharmacy industry.
1.The Australian 19 April
2000
2.CoAG Report into pharmacy regulation February 2000 pp 217-218 3.Australian
Pharmacist Vol 19 No 3 April 2000 p146
Ends
An enterprising pharmacy duo have combined to produce a useful service for pharmacists. We are happy to promote such enterprise, and we invite any other Internet start-ups to give us your story as well. Simon Duffell and John Marshall have prepared the following press release:
" A web site for pharmacy at http://www.nood.com.au , designed by two pharmacists, has been launched in March for use by all members of the Australian pharmaceutical industry as an interactive e-trading tool to trade short dated inventory & surplus stocks. The web site has been hailed by pharmacists as much welcomed & long overdue. Gold Coast pharmacists Simon Duffell & John Marshall, the directors of Nood Network, first explored the idea for http://www.nood.com.au in August 1998. Their joint concern about the levels of economic waste of ethical & OTC product, and the adverse environmental impact on our soils & waterways arising from indiscriminate disposal of toxic drugs, was the cornerstone of their strategy to develop an online networking system with win-win benefits for all trading members. The name NOOD is an acronym for NEARLY OUT OF DATE. The website http://www.nood.com.au refers to NEARLY OUT OF DATE STOCKS as NOODS. Members can list their own NOODS directly online at reduced prices of their own choosing. Some members buy, others sell. Obviously, the more competitive the price, the quicker the sale. Members may change the listed sale price of their own NOODS at any time to encourage a quicker sale. Access to the membership section is restricted to approved members who have been allocated specific ID and passwords. Member categories include Retail Pharmacy, Hospital Pharmacy, Pharmacy Buy Groups, Central Stores Hospital, Pharmacy Wholesaler, and Pharmaceutical Manufacturer. Each membership application must pass rigid scrutiny for authenticity before approval is given. Members are able to search the database of NOOD and SURPLUS stock in many different ways. The search enquiry can ask for the list of products by Name or Price or State or Postcode or Expiry Date or Membership Type. The search under Membership Type is a particularly useful way of identifying products at special sell-out prices from wholesalers. This provides profitable buying opportunities for large shopping centre style pharmacies to acquire large quantities of runout stock at very modest prices for use in promos & advertising. In a similar way, hospitals can search the hospital lists for hospital products that are surplus stock or short-dated stock in other hospitals. It is also anticipated that astute Pharmacy Buying Groups will quickly identify the opportunity to use Nood Network as a marketing tool to access chemists nationwide, & so broaden their customer base & their buying power with their product listings being exposed to chemists nationally 24hours a day, every day. Pharmaceutical manufacturers will shortly be advised that they too may apply for membership and once approved, may list their short dated & surplus products at reduced prices. It is hoped that manufacturers will embrace Nood Network as their first choice in clearing stock, before forwarding it for disposal. Transactions on http://www.nood.com.au are simple and easy. A buyer submits item ID and Quantity purchased. Immediately, the buyer receives screen confirmation of the transaction, & an e-mail is sent to the seller. Each party has access to all the information necessary to conclude payment & dispatch. All the buying & listing functions on Nood Network are free, and of course, membership is free.Only the seller pays a small fee of 5% to Nood Network on goods sold. The seller has direct access to this account, & may choose one of several payment options. To date, membership enquiry, registration & buying activity have far exceeded expectation. API and Faulding have registered as Wholesaler members, and their product listings may be accessed via the dropdown menu at Membership Type. Often, products listed are sold within hours of listing. All membership feedback has been complimentary. As more pharmacists become more comfortable with the Internet, NOOD NETWORK will quickly consolidate & become a valuable resource tool for Pharmacy. Enquires may be faxed to 07 3251 0130, or e-mailed to support@nood.com.au . The web address is http://www.nood.com.au "
E.COLES -MYER SPRINGS INTO ACTION
One of the greatest re-education processes with Australian shoppers has begun, with the recent launch of e-colesmyer, the e-commerce division of Coles-Myer. Forget the fact that pollsters, sampling the supermarket queues, have found quite a bit of negativity towards Internet shopping. This will change as Internet usage increases, and it is increasing exponentially. Large companies (other than Coles-Myer), offering their employees home computers and Internet connection, at a subsidised cost, drive part of this process. ANZ has recently announced a $20 million program to be implemented over five years. Staff will receive a complete PC system and unlimited Internet access for $5 per week, over three years, with the total cost being around $800 per employee. This means that ANZ are subsidising each employee by $1000. BHP, Ford and Intel have already announced similar plans for their employees, and encouragement is given to freely utilise the Internet and develop a customer perspective to e-commerce. At the same time, thousands of new potential customers are being generated, who will eventually find themselves visiting a Coles-Myer site. It is inevitable. As the computer becomes part of the entertainment centre in the lounge room of each household, acceptance will rapidly build. Not that the computer will look exactly as it was-more a giant digital TV with an interactive screen, coming complete with a discrete keyboard and modem ie Internet ready. Coles-Myer is expected to produce profits within two years, and to generate sales of $250 million in the 2001 financial year.The new division will remain attached to the "bricks and mortar" entity, with a separate float not considered at this stage. Considering the recent shock waves on the stock exchange, and e-commerce plummeting share values, this is probably a wise move. The e.colesmyer Managing Director Jon Wood, former Coles Myer chief information officer, has pointed to the substantial buying power of Coles Myer, placing the company at a huge advantage over other start-ups that do not have a recognisable brand, or the capital resources. The group has formed an alliance with Yahoo, and it is thought that this may lead to free Internet access for customers of the e-commerce entity. Customers will be able to use Yahoo's address book, calendar, briefcase and notepad, which are all aids to shopping. Some Coles senior store managers worry that if the online division has up to $200 million of investment capital pumped in; the "bricks and mortar" chain may become terminal. The more likely scenario is approximately 10% of total business will be done online in the first year, rising to around 25% in the third year. Apart from a general online shopping site, support will also be given by vintagecellars.com.au, myerdirect.com and the "@now" sites promoting music, travel and other lifestyle products. The Coles-Myer online move is partly driven by the share market, which would be particularly harsh on any major publicly listed retailer that did not embrace the Internet. The strategy to develop an online division began in 1997, when Coles-Myer signed a software licence agreement with the first American online grocery store, Peapod. This software has been tested through a pilot online service in selected suburbs of Melbourne and Sydney. It is not hard to envisage the impact that the first entrants into online retailing will have on those businesses, including pharmacies that have not even thought out an Internet strategy. It is the success of operators such as Dstore and Wishlist, who have already won market share away from Coles-Myer, that is driving their Internet startup. Do you think that your pharmacy site will be the first bookmark established by your existing customers?
GLOBALISATION:
American Wheat Farmers the new casualty
In America, multinational agribusinesses are dominating independent family farmers. They are turning them into virtual slaves on their own land, through the employment of predatory pricing. The independent farmers are desperately lobbying for stronger antitrust and fair-competition laws to prevent this unfair competition. A similar complaint was made by Australian independent food stores in respect of the retailing giants Coles, Woolworths and Franklins, and a government enquiry was completed a few months back, to investigate these claims.. Unfortunately, the plight of the small operator was not sympathetically considered, both for the farmers of America, or for the independent food stores of Australia. Will a similar fate, in the guise of efficiencies promoted by government or as pressure from some globalised source, occur for Australian Pharmacy? Pharmacy was indeed fortunate to escape the imposition of unqualified ownership during the recent COAG enquiry, but will this continue into the future? As reported last month, a number of global supermarket operators, many with chain pharmacy operations already set up in other countries eg Wal-Mart and Tesco, are planning to set up business in Asia and Australia. At least five companies have emerged as contenders in a very competitive market, and they have the Australian supermarket operators running scared. Australian operators are opening new supermarkets in areas with future potential (but not necessarily profitable in the short term) as a means of crowding new competitors out. Franklins have had takeover offers, as has Woolworths, and it is not beyond the realms of imagination that a strategic amalgamation of Australian supermarkets could take place to pool resources to defend the local market. Pharmacy is not exempt from all this manoeuvring. One of the COAG recommendations to allow corporate structure and unlimited ownership of pharmacies, which on the surface, is a good recommendation. This allows some entrepreneurial activity to emerge in local pharmacy, through strategic mergers and amalgamations. However, with reciprocal registration being allowable for British pharmacists to practice in Australia, what would stop a pharmacist director of Boots Drug Store migrating to Australia and establishing a Boots franchise backed by the financial resources of this giant pharmaceutical conglomerate. Given that Boots already has a manufacturing presence in Australia, it is a real possibility. One way this could be prevented is that Australian pharmacy corporate structures must be legislated as "exempt" proprietary companies. Exempt status excludes public company ownership directly, or indirectly. Even then, it could be difficult to prevent if the business operated as a franchise, similar to the operation of a McDonald's or KFC. Pharmacists must not be complacent, and realise that their professional and business lives, as they have known it, is set for massive and irrevocable change through competition, both in "bricks and mortar" form, as well as "clicks and mortar" through the Internet.
And as a sad footnote, ponder this news item reported in Wired Internet Newsletter.
"If you see nothing wrong with buying books online, we report that John Smith & Son of Glasgow, the world's oldest continuously-trading bookseller and a favourite of the poet Robert Burns, is going out of business because it can no longer compete with the online discount stores. John Smith & Son opened in 1751, selling books, snuff, and coffee to nearby tobacco merchants and has been in business ever since. Its current managing director said the shop's demise, with its resulting loss of 50 jobs, was sad, but "we couldn't see how we could claw back sales."
GST is almost upon us and most of us would have attended some seminar or lecture in an attempt to come to grips with this new form of tax. I will not attempt to duplicate what you have already learnt, more to report on some of the possible exceptions to help you avoid some of the traps. If you deal with any overseas customers there is a possibility that GST will apply to online products and services as for traditional retail. If GST is applied, then it would place Australian cyberstores at a competitive disadvantage, particularly given most other countries will be tax free for the same exercise. Concerned operators are looking at the costs of establishing an offshore presence and become an exporter, as exported goods and services are supposed to be GST free. Some Australian retailers have been quite successful in establishing overseas business and will naturally look to protect what has been creatively developed.
ELECTRONIC BILLING SYSTEMS MULTIPLY
Sites for billing and the payment of bills are beginning to proliferate, with market research confirming that Australians are now ready to accept such online systems. Trials for an Australia Post site have commenced while another company, e-Bill, has launched its site with a limited number of participants, offering a billing as well as a payments system. Longer established BPay will introduce electronic billing by the end of 2000. As this company has association with more than 2700 billers plus affiliations with banks and finance companies, it is expected to remain the dominant player in this expanding e-commerce enterprise into the immediate future. Note: Australian Pharmaceutical Industries is a recent sign-up with BPay.
When all the "blue sky" Internet stocks crashed recently, Australia Pharmaceutical Industries went against the flow, its shares rising 20c to close at $2.30. This is about midpoint between the year's low of $1.95 and a high of $2.70.This could climb again to around $2.75 after the purchase of the wholesaling and non-ethical manufacturing components of Washington H Soul Pattinson (subject to shareholder approval). W.H.Soul will be issued with 25% of the expanded capital of A.P.I (valued at $2.01 per share) and will be offered three seats on the board. The expanded entity should rank number two in the market after Fauldings and expected revenue is expected to be about $1.7 billion. Sales are expected to break the $2 billion barrier in 2002. It took 88 years to make the first $1 billion but only 4 years to make the second billion
INTERNET PREPARATION
At Computachem Services we believe in being well prepared for any major
change in the market place and that this currently means to be Internet
prepared. We have a strategy to build sites in a logical progression.........Business
to Business (B2B), followed by Business to Consumer (B2C) an then on
to Business to Government (B2G). For the moment we are offering B2B
sites free of charge to pharmacists as a means of establishing and using
a web connection. Once this is up and running we will then construct
a B2C site, but not just by itself. A B2C site needs a planned marketing
strategy to make it work, otherwise it will just sit there unused. The
principles of selling on the net apply even more stringently than the
"bricks and mortar" approach i.e product, price and where you get it
plus how and when you get it. Many sites are crowding out products with
free information, creating congestion and pages that load slowly. I
urge you all to study the simplicity of the Pharmacy Direct site and
ponder what the elements were that made it a success. Please visit our
web site at http://www.computachem.com.au to see what else we do. We
have currently published a new journal-type publication titled "Australian
Consultant" which you may like to subscribe to. The first edition is
posted on our web site. It has been produced in the belief that the
clinical elements of the Pharmacy Profession need to be defined and
marketed as never before, as global events are played out and Internet
marketing takes hold. It may be all that we are left with. If you have
any colleagues who would like to receive this free newsletter, please
pass on the e-mail address: neilj@computachem.com.au
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of pharmacy relevant links. The directory also contains a very fast
search engine for Internet enquiries