AUGUST,Edition # 32, 2001

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On the 28th June, 2001, a conference was held in Sydney entitled "E-Pharma", which brought together information technology developments from all facets of the medical and pharmaceutical industry.
One of the pharmacy speakers was Brett Clark, the founder of ePharmacy (a division of his Calamvale Pharmacy based in Queensland), and occasional writer for this newsletter.
Brett's paper covered issues in the development of his e-commerce project from a background, as well as an individual perspective.
His paper commenced by outlining some of the new trends in community pharmacy, specifically those dealing with the mail order and online retailing of medicines. This led in to a general illustration of the ownership issues and location issues, followed by some of the problems being experienced by community pharmacies.
These were identified as:
* The availability of pharmacists and doctors.
* Looming deregulation.
* Issues arising from the Galbally Report and the sale of S2 and S3 medications.
* The new alliances that were forming up within the industry (noted was Sigma Pharmaceuticals and Foundation Health Care).
* The quality use of medication.
* Government incentives for decreases in prescriptions.
* The shift away from front-of-shop sales with more reliance on prescription sales.
* The higher cost of new medications e.g. Zyban, oncology medications etc., accompanied by margins down to 6%.
* Customers requiring more product information.
* The recent budget announcement of the intent to reduce wholesaler margins.
* The removal of wholesaler guarantees, the traditional financing structure of community pharmacy.

Amidst all the above problems and issues, Brett saw opportunities and alternatives for pharmacists to grow their market and sustain market share.
He specifically identified the following:
* Unit dosage medication.
* Medical centre dispensaries
* Medication Reviews
* Retailing
* Compounding
* Online and mail order
* Further education
Most pharmacists would be aware that with an aging population, unit dose medication demand increases. With the emphasis on increased clinical input from pharmacists, it is logical to more closely associate with other members of the health team in a medical centre, leading in to medication reviews,case conferencing etc.
Retailing has been a traditional endeavour, and has always provided a buffer for downswings in dispensing returns. There are still opportunities in retailing, despite intense competition. Different forms of retailing, such as online and mail order help to expand market share and offset some of the competition other retailers present.
Compounding prescriptions and further education were seen as other avenues of opportunity in the total offering of a pharmacist.

Brett's progression within his paper touched on the suitability of mail order and online business for pharmacy, and understanding some of the elements involved, such as:
* The nature of the medication user.
Someone seeking out medication from online or mail order sources is usually highly motivated to protect their health, or the health of their family.

* The motivation of different customers to venture online or mail order is diverse, and an understanding of their needs creates a successful outcome.
Motives include:
a. Being medically embarrassed. There is a high demand for personal items such as condoms, depilatory products and lubricating gels.
b. An ageing population, who need to access medications more efficiently.
Online/mail order can deliver this service.
c. People who need private prescriptions filled ( no government subsidy) and who may have a limited budget, turn to cheaper sources of supply.
Online/mail order have cheaper overheads and can provide this facility.
d. The time poor-cash rich people who have long working days and an inability to get to a "bricks and mortar" establishment during the day. These people are usually computer literate and want to access service at odd hours of the day and night.
e. The chronic medication user (for diabetes, hypertension, heart disease etc.) is easily serviced online or by mail order. Acute conditions may not be able to be serviced as quickly as the condition demands.
f. Lifestyle medications such as Xenical, Viagra and Propecia have formed a group of their own and have become very popular purchases online and by mail order. They encompass aspects of privacy, chronic health and price, which is why they are particularly suited for online/mail order sale.
g. Bargain hunters form another subgroup and have only one motivation...the cheapest price.
h. The international customer could be motivated to take advantage of the low Australian dollar, or could be an expatriate seeking a local product.
As online purchasers become more savvy, they could begin to counter global drug companies and their variable pricing policies in different countries by becoming truly global customers in their own right.
i. The rural Australian customer, who because of isolation, is motivated towards the online/mail order source by price, range and delivery service.

Brett also touched on the traditional margin structures within pharmacy, that they have been relatively high and that not all discounts had been passed along to consumers. This had often created disadvantage when competition occurred, as was the case with mail order/online businesses.

He also touched on other aspects of the profession relating to credibility, as an essential quality for online/mail order operators, noting that:
* Public opinion polls always rated pharmacists highly.
* The pharmacist's accessibility to the public had created an expectation by customers to receive direct access at all times.
* The low wage costs of pharmacists (compared to other industries) and the many roles filled under this remuneration structure, was forcing pharmacists to develop new and cost-effective forms of activity.
* The need to keep up with new medications, their drug interactions etc. had created a natural progression to an IT system, where consumers could also have direct access to a specific level of that same information.

All these factors pointed to the introduction of an e-commerce system, and the high credibility factor of the pharmacists assisted its introduction.
Traditionally, pharmacists have been conservative to introduce and implement change, but after delays in analysis, move very quickly.

There were also a number of other factors noted by Brett as identifying pharmacy's suitability for the online/mail order world, and these were identified as the weight and package size (relative to sale price) of pharmaceuticals, and the "bricks and mortar" existing structure.

Distribution of parcels Australia-wide can be prohibitive due to size, and some products have been removed from Internet sale because of this.
Because pharmaceuticals are high in cost, low in weight and low in surface size, they are easily transportable at a low cost.
Brett has used this to advantage in his marketing strategy by having a flat delivery fee Australia-wide, with freight being totally free for sales exceeding $100.

Most Internet failures have been due to not having a "bricks and mortar" structure. Pharmacy already has this structure which is taken for granted.
However, this structure comes with twice daily wholesaler delivery services (including Saturday) which gives the ability to meet fulfillment deadlines without a tie up of operating capital.
Historical credit and trading terms have a multiplying effect on cash flow.
Staff costs and other overheads are covered in existing "bricks and mortar" business, so extensions into online business can be at minimal cost.
Existing pharmacies also have a wealth of knowledge and detail about their business, their markets and their customers.
This important knowledge was totally absent in other forms of Internet failures.
By extending to an Internet presence, you allow your customers access, seven days a week, 24 hours a day, without staffing costs.
(Consider the above-award wages that have to be paid to pharmacists and staff after hours.)

Brett's E-Pharma paper was a long one, rich in content and valuable detail.
With permission from the author it may be possible to follow-up this article with some more of that content.
I had the opportunity to meet Brett personally at the conference and was impressed by his energy and vitality, coupled with his astute insights into the world of pharmacy.
The future of pharmacy is guaranteed while pharmacists of his calibre are around to inherit a profession, currently in transition.
We hope the direction is to a new and better place in the total scheme of things.
Ends
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