AUGUST,Edition # 32, 2001

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The corporatisation of medical centres and the recent takeover bid of Fauldings by Mayne Health (a division of Mayne Nickless), has set the stage for an irrevocable change in the supply of medical services and the distribution of medicines.
And there is more to follow, with rumoured takeover offers for Sigma, alliance proposals involving API and Mayne Health, and a further offer for Fauldings from an unnamed buyer.
While only being rumours at the moment, the dust has not settled around these initial skirmishings, and there will be moves, and countermoves, before new structures begin to emerge.
The wholesale pharmaceutical industry is in for some unsettling times, with the potential for traditional structures and alliances able to evaporate overnight.
There is a lot to digest because of the introduction of large scale capital, which will inevitably involve community pharmacy as a target.
It is no secret that Mayne Health, and other corporate health operators, are seeking to own pharmacies in their own right, and integrate them into their medical conglomerates.
This will initially translate to eliminate uncooperative pharmacists (and others) in the marketplace, before making them an offer too good to refuse.
In the short term, some of these offers will be quite lucrative, particularly for those pharmacists wishing to sell out and retire.
However, the long term effect will be to weaken the financial and political strength of independent community pharmacists, with the potential for a total loss of control over their destiny.
Organisations such as Mayne Health, by themselves or in association with similar organisations to themselves, have the strength and resources to negotiate separately with governments for their own specific benefit. The Pharmacy Guild, despite its excellent track record with government at all levels, may not have the strength to combat the threats from these new entrants.

Pharmacists in community pharmacy practice must brace themselves for a time when their relationship with wholesalers is under siege, not just from the media, but from the industry itself.
The announcement that Fauldings is to be taken over by Mayne Nickless should be the spark for attention.
As much as the Pharmacy Guild wishes to gloss over the subject, and respond on the noble grounds of "professionalism", it is the younger generation of pharmacists who have just bought into businesses who are likely to be hit.
They are not amongst the pharmacies that the Guild says:
"…..can - and do - change wholesalers to get the best combination of prices and service, finance guarantee notwithstanding."
Sydney Morning Herald 23rd May 2001.

How much would a new owner like Mayne Nickless want the money out in bank guarantees as a liability to the Company turned into an asset?
"Very much" will have to be the answer, and wouldn't the shareholders love it!.
A figure of $600 million was being talked about as the amount of money Faulding had in bank loan guarantees to pharmacists in exchange for their loyalty, during the Wilkinson Review of pharmacy regulation.
Recently, the Australian newspaper alleged:
"…the three drug wholesalers and manufacturers -- Sigma, Faulding and Australian Pharmaceutical Industries -- have lent or guaranteed $1.5 billion to pharmacists nationally in return for the pharmacists buying 90 per cent of their stock from them."

In defence of pharmacists the Pharmacy Guild came out with statements such as: "…it was not unethical and it had grown out of a time when the wholesalers were chemists' cooperatives, set up to maintain their practices."
Sydney Morning Herald 22 May 2001.

"Pharmacists have fought long and hard to retain professional ownership, precisely to ensure the independence of the advice and service they offer."
Sydney Morning Herald 23 May 2001.

On Adelaide ABC radio (13/7/2001), Guild National President John Bronger, pleaded to history to allow the tradition of Faulding to remain. He expressed this concern after meeting with Mayne Nickless and noted that Mayne Nickless had already consolidated elements in the health care area.
He also feared an American style health maintenance arena.
John Bronger highlighted that Fauldings is not just a manufacturer, but a wholesaler who supplies to many pharmacies across Australia, and believes that many pharmacies may not be able to trade with products now being sold by Mayne Nickless.
The ordinary pharmacist will be hit by the "draw back" of interest, and must therefore start to think about ways of gaining support for their cause.
Business acumen is one thing that a dedicated professional may not have.

There will also be a significant shift in the rules governing professionalism, written and unwritten, and one cannot escape the feeling that the changes will inevitably discriminate against individuals, in favour of corporate giants.
The basis of all professions are the rules, written and unwritten, that traditionally sets professional endeavours apart from all others.
In the professions of medicine and pharmacy, the basic rules are:

* Individual professional practitioners put their patients and their community first,
* Individual professional practitioners put their calling second, and
* Individual professional practitioners put their remuneration last

It is only in the performance of these principles and rules, which has set true professionals apart from other commercial operators.

Consider the rules that govern a corporatised integrated health organization:
* They put the shareholder first, above all,
* They put the individual practitioners second, and contracted in such a way as to generate maximum cash returns to the corporation.
* They put patients last, because the primary customer is really a government agency or a health insurance organization.

The only corporate model which may modify the problems which beset existing models of integrated health centres is that where the shareholders of the corporation will be comprised totally of health professionals, and the management is totally under the control of health professionals.
Such a company will also be an "exempt" company i.e. a company which prohibits public company shareholdings, direct or indirect.
This type of model has been discussed in previous articles published in this newsletter and links can be found by utilising the search engine on the left hand side of this page.

The existence of an integrated medical centre immediately concentrates the market.
Where a number of pharmacies once shared prescription output from a range of individual medical practitioners, only one pharmacy will become the beneficiary if the medicos agree to be corporatised, and then only if the pharmacy is located within the medical complex under a very tight lease.
The prognosis for those outside the medical complex is very bleak, unless they can provide a competitive response i.e. become part of another corporate giant, or finance and develop their own complex.
Certainly, one pharmacy problem will be solved (the human resource one) because with a limited number of pharmacies, there should be a surplus of pharmacists as other pharmacies are forced to close down

In America, the introduction of a corporate market-driven health system has resulted in a system where patient interests have been subjugated to the financial demands of the share market, and have been used as a means of generating profits without regard to their welfare or rights.
It has exhibited a high level of fraud, exploits disadvantaged groups (the elderly, mentally ill and children), and is intensively regulated.
This has resulted in a health care system that is the most expensive in the world and when measured with health care systems of other countries (particularly not-for-profit and national health systems), performs poorly.
Little has been done in the past 20 years to address the inequities of the American system.
Market theory seems to have replaced common sense.
Yet there are ominous signs that the American model is about to be transplanted in Australia to replace a system that many regard as one of the world's best.
Dr Wooldridge, the federal Minister for Health, is on record as stating that he supports a market driven health service.
The working group which made recommendations to the CoAG review, while stating that pharmacist ownership had proved of public benefit to date, is still not convinced that pharmacist-owned pharmacies are in the long term best interests of consumers.
It would seem that the count down has begun.
Ends

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