SEPTEMBER,Edition # 33, 2001

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Do you feel as though you may have spots before your eyes?
There is an explanation.
The inexorable program of acquisitions by Mayne Nickless has outpaced its ability to "re-badge" and brand each of its entities with a "red dot" logo, as it integrates them into a conglomerate of hospitals, day surgeries, medical centres, nursing homes, pathology services, radiology services, transport and logistic services....and the list keeps expanding.
Couriers, trucks, websites and buildings are starting to have red dots added to their most visible points, and with the recent acquisition of Fauldings, we will probably see future extensions of the brands in their stable as "Red Dot Terry White", "Red Dot Chemmart" etc.
The number of red dots appearing in all parts of the countryside, city and rural, is astounding, and an appreciation of the strength, diversity and reach of this group is only now starting to become apparent.
The impact on pharmacy will be considerable, because of the ability of Mayne Health to direct a major portion of health business into its integrated system, with, it seems, the active support of the federal government.
It is a little ironic that the Pharmacy Guild, at the commencement of the Third Agreement, publicly congratulated itself on being the saviour of pharmacy and on being one of the more effective lobby groups at state and federal levels.
Now it must share the spotlight in competition with Mayne Nickless, which has very close ties with the minister for health, Dr Wooldridge, who may have led a complacent and unaware Pharmacy Guild literally "up the garden path".
Mayne also have financial resources well in excess of the Pharmacy Guild, and are managed by hard-nosed executives recruited from the ranks of American bankers and oil companies, well experienced in guerilla tactics, and fighting to win at all costs, no holds barred.
So given all the changes encouraged (inflicted) by the federal government through the Pharmacy Guild, are community pharmacists being set up and trained to become the worker "drones" for the queen bee "Mayne Nickless"?
The distinct possibility exists, so there is a need to know and understand the structure and workings of a potential "enemy".

Mayne Nickless Ltd is an Australian company that operates in two core areas of healthcare services and logistics services.
The healthcare segment collectively known as Mayne Health, comprises Healthcare of Australia (HCoA) which owns and operates private hospitals, and Mayne Nickless Diagnostic Services (MNDS), which owns and operates pathology, diagnostic imaging and medical centres.
The focus of its operations is mainly within Australia at this point in time, but it does have designs on becoming a global enterprise.
In advance of its global vision, Mayne already operate three hospitals in Indonesia, with another under construction in Fiji, in partnership with local investors.

Logistics services include contract and cash logistics, also time-critical express services. These services are conducted mainly in Australia, but a foothold has been established in Asia (Malaysia, Thailand and Southern China), Europe (mainly U.K), and North America (mainly Canada).

While all areas of the Mayne Nickless empire must have a logical "fit" by integrating and cross fertilising each other, it is obvious that from a strategic marketing point of view, there have been a few gaps.
These are partially being filled through the acquisition of Fauldings, and by the purchase or building of a number of low acuity day surgeries and rehabilitation units.
It is rumoured that part of a post-Faulding "war chest" of some $2.5 billion is available for this form of development, with the balance directed to European investment.
Day surgeries within Australia, according to the Australian Bureau of Statistics, increased from 125 to 190 between 1994 and 1999.
They are seen, along with rehabilitation units, as a method of transferring less acute patients from the public system, and freeing up public beds.
Obviously, only of benefit for those patients privately insured.

The healthcare division HCoA, owns or operates 47 hospitals throughout Australia, plus three in Indonesia and one in Fiji, making a total of 51 hospitals under its control. A recent development has been to co-locate their private hospital adjacent to a public hospital, to assist in reducing pressure on the public system. The first was established alongside the Royal Melbourne Hospital in 1995 and its success encouraged further developments in Victoria, NSW and Queensland, with some actually being built within a public hospital.
In addition, HCoA manages public facilities, starting with Port Macquarie (NSW) in 1994, extending to Mersey Community Hospital in Tasmania, Joondalup Health Campus in Western Australia and the Noosa Hospital and Specialist Centre in Queensland.
Not all these projects have been judged successful, particularly the contract for Port Macquarie in NSW, which has been criticised by the auditor-general.
MNDS provides pathology and diagnostic imaging through sites located in NSW, Victoria, Queensland, the Northern Territory and Western Australia.
It also has a modest investment in medical centres.
Sources of revenue for the healthcare divisions include private health insurance funds; the Department of Veteran Affairs; the Commonwealth Government through Medicare; various state governments for management of public hospitals, or the provision of hospital beds for public patients, through its various facilities.

Logistics services are operated through three major divisions.
MPG logistics is engaged in Australia's growing contract logistics industry, which involves providing integrated contract distribution, warehousing, inventory control, fleet management and import/export services to a broad range of corporate clients.
It also has dedicated facilities in Malaysia, Thailand and Southern China.
It is this division that could possibly integrate with Fauldings, and there is an obvious fit here for mail order/ Internet pharmacies.
With state of the art supply chain management, it is possible that larger client pharmacies and MNDS medical centre pharmacies will be serviced by MPG, with all smaller pharmacies potentially being left with Fauldings.
This is only conjecture on my part, but represents a distinct possibility.
Obviously, the major clients of Fauldings in the form of Terry White pharmacies or the larger Chemmart pharmacies, could be invited to become tenants of MNDS medical centres, always with the view of a takeover, should pharmacist ownership be a contested issue down the track.

Cash logistics is provided through Armaguard, which provides armored car transport, non-armored car transport, servicing of automatic teller machines (ATMs) and other ancillary cash services to the public and private sector.
Security, as a market, now rivals healthcare as one of the fastest growing markets in Australia.
With the gradual withdrawal of bank branches, cash logistics does give an extra dimension for Mayne Nickless owned operations.
Also,with banking services becoming more popular in retail environments, as well as being a major marketing tool (Woolworths and Ezy Bank, Pharmacies and Guild Bank), the cash logistics division will dovetail well with any banking services of medical centre pharmacies, should they go down that track.

Time critical services are operated through Mayne Nickless Express (Australia), Interlink Express and Parceline (U.K) and Loomis Courier (Canada).
In Australia, services include parcel and document deliveries, which are offered as same day, next day and international services.
These services could be a fit with Fauldings delivery services, and are becoming more important as part of a fulfillment strategy for online business, which is steadily expanding in the Australian marketplace.
Obviously, there will be a niche for an online extension to an MNDS medical centre pharmacy.

Another recent and significant announcement, by Mayne Nickless, has been the alliance created with MedcomSoft, a Canadian e-health software solution provider.
A licensing agreement has been signed, valued at CDN $25 million, which gives Mayne Nickless exclusive distribution rights for selected products, and will allow the MedWorks system to be installed through all Mayne Nickless healthcare operations.
This software is designed to link the 7,000 specialists and the 10,000 GPs through their radiology and pathology facilities. No doubt there will be some planned "seamless" extensions into medical centre pharmacies as the system develops.
The MedWorks system enables secure and standardised electonic patient medical records, replacing all handwritten text records covering a patient's health and clinical history.
Accessibility will be 24 hours a day seven days a week by the patient and authorised healthcare professionals via Internet and Wireless devices, through a secure numeric-based Virtual Health Information Network.
MedcomSoft aims to provide the international standards for this type of technology in respect of electronic clinical patient records.
So important is MedcomSoft deemed to be in Mayne Nickless future development, it has been given a board position plus a 25 percent interest.
MedcomSoft is pursuing similar alliances in America and other unspecified countries.

The above system has a familiar ring to it, for when the announcement was made (May 23,2000), it was around the same time that the federal government announced a similar system was planned for the Australian public hospital system, also to link pharmacies and other healthcare providers.
Given the close contact between Dr Wooldridge and Mayne Nickless, it will be interesting to see if Mayne Health are offered contracts to manage/develop, part or all of the eventual system, envisaged for the Australian Better Medication Management System (BMMS).

Mayne Nickless are on recent record as stating that they have developed a model in Indonesia, which they intend to roll out as standard.
The model comprises integration of the hospital with pathology, pharmacy, imaging and day surgery.

A few questions need to be considered:

1. What will happen to those private pharmacies left outside of the above model?

2. What steps have been taken to encourage a model competitive to Mayne Health from within community pharmacy, and would the Guild oppose an approval number for such a model?

3. What will happen when the inevitable second, third or beyond integrated health operators start up in competition to Mayne Health?
(It should be noted that Healthscope, a competitor to Mayne, has recently begun to secure capital on the open market, for expansion.)

4. How will traditional pharmacy compete through the Pharmaceutical Benefits Scheme if the federal government calls tenders for supply, given that Mayne Health can utilise the buying strength of Fauldings, tender a price at absolute cost (or at a loss) and thus transfer profit to medical centre pharmacies?

5. What strategies are in place, through the Pharmacy Guild, to combat all of the above?

The "Big Red Dot" has now reached the status of a "Big Red Blob".
Its aspirations have been assisted by the federal government through Dr Wooldridge, it has close relationships with AXA insurance (managed health care), and can count on a number of major banks and insurance companies as substantial shareholders.
Profit maximised is the driving motive for this integrated service entity and its shareholders.
This will clearly cut across some aspects of traditional professionalism inherent in most individual providers.
It is clear that an alliance of all Australian professional health organisations will need to coalesce, for it is also obvious that the Pharmacy Guild and the Pharmaceutical Society will be way out of their league in trying to deal with the multifaceted attacks on traditional control structures, within the pharmacy profession.
While the effects of Mayne Health will not be felt directly in the short term, there will definitely be upsets in the intermediate to long term.
I cannot understand the complacency that pervades community pharmacy, and if anyone is really alert out there, please post some comment on the forum provided, so that some debate can occur.
Ends

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