Published by Computachem Services

P.O Box 297.
Alstonville. 2477
NSW Australia

Phone:
61 2 66285138

In the September edition of the Australian Journal of Pharmacy, John Bronger discussed the Woolworths Pharmacy proposals and his views on the subject.
Let me say that for a pharmacy leader he was short on strategy and had no defence to offer to counter future Woolworth's plans. This was predictable, given his views on corporatisation (follow this link) and his slavish attachment to protectionism.
This smacks of a catastrophe in the making for traditional pharmacy and represents a "head-in-the-sand" attitude by John Bronger and the Pharmacy Guild of Australia, for there are a multiplicity of alternatives available, and this publication has been warning pharmacists for nearly four years of what was likely to happen and how to fight it.

Official Pharmacy has never ever come to grips with what it has to do to remain a viable health structure in the community, and I have seen history repeat itself endlessly.
We are urged to let retail markets go and concentrate on cognitive services, while simultaneously handling punishing dispensing loads with little or no margin of profit.
Pharmacy has been successful in creating and developing a wide range of markets including photofinishing, perfumery, toiletries, giftware etc. etc. The list is a lengthy one.
What has not occurred is the necessary accumulation of capital to continue the development of each market. We need to be able to progressively build our business without having to abandon valuable components to fund new ventures.
Instead, the market is wrested away by stronger competitors such as Woolworths, simply because pharmacist have not been allowed a level playing field.
Lack of capital limits the the amount of retail space that can be afforded, and the volume of merchandise required to back an expanding sales base generating a level of profit that enables strong staff training programs and the development of a middle range of management and health professionals.

This AJP article is one of the weakest responses yet to a pharmacy problem.

Let's dissect what has gone on the public record.

1. John Bronger: "The Woolworths campaign to open pharmacies within its supermarkets rolls on, but as yet there is no indication if the retailer has had any success in attracting pharmacists into any of its stores."

NEIL JOHNSTON: Well John, you obviously do not follow the media very closely.
Apart from the fact that Roger Corbett had announced in media conferences prior to your article being published, that he had secured a pharmacist for a single trial store, there were other announcements.
In an interview with Helen McCombie on Channel Nine (Sydney) during their Business Sunday program on the 31st August 2003, Roger Corbett (Woolworth's CEO) responded to a question regarding pharmacist interest in the Woolworths Pharmacy concept:

ROGER CORBETT: "And I might say, there are hundreds of pharmacists who have spoken to us and applied to participate in this initiative."

And in response to another question relating to franchised pharmacy groups:

HELEN McCOMBIE: "You haven't had any approaches from any of the chains have you because there are a couple of chains of pharmacies, could you buy them or joint venture with them?

ROGER CORBETT: "Well some of the chains are interested in a partnership and joint venture in some way, I don't say too much more about that but on the one hand you know, the official voice, as it were, for the pharmacists is taking one point of view but there's a great body of people out there that are saying hey, this type of restrictive regime cannot remain indefinitely."

NEIL JOHNSTON: John, I think you are misinforming Guild members and pharmacists generally.
Most PGA members are probably not intending to join Woolworths, but there will be a few who would like to give it a go.
And what about newly graduated pharmacists who see themselves being shut out of ownership?
They would see this as an opportunity to get into business early, and Woolworths would bend over backwards to offer them a package they could not refuse. They don't carry the excess baggage of the PGA membership, nor will they into the future. They will also bring a "freshness" due to youth and vitality. Coupled with Woolworths business guidance and marketing structure, this will represent a potent combination.
You also mention an abortive meeting with Bernie Brookes, chief general manager of Woolworth's supermarkets, because there was a refusal by Woolworths to discuss their plans with the PGA.
Why not?
Would you give away strategy to your opposition?

2. JOHN BRONGER: "By refusing to discuss the issue Woolworth's representatives have clearly demonstrated their commercial objectives, and that is to open pharmacies within Woolworths supermarkets regardless of the Guild's position. Be assured that the Guild will continue to advise its members of the importance of community pharmacy and ownership of pharmacy by independent pharmacists."

NEIL JOHNSTON: Well, that's very reassuring John. And those Woolworths people really do need a slap on the wrist.

3. JOHN BRONGER: "There is also no question that Woolworths will abide by every rule and regulation. They take their corporate responsibilities very seriously and Roger Corbett is known for his integrity and personally is a fine Australian."

NEIL JOHNSTON: There are a couple of points here John.
With a comment like this regarding integrity, I presume you would believe Roger Corbett when he says he has 'hundreds' of pharmacists wishing to be part of Woolworths Rx, yet you say that there is no indication of any success in this recruitment.
Secondly, it has been a PGA policy to restrict the number of pharmacies owned by a pharmacist, because of the supposed inability of a pharmacist to discharge professional responsibilities and control the individual retail environments.
Well, you do not seem to expect that Woolworths will not be able to exercise this ability, judging by the above comment.
Over the years this has particularly rankled various entrepreneurial pharmacists who have been unable to get a scale of economy going in the form of a chain group. The critical mass appears to be about 10+ outlets-sufficient to support a central administration
So I would be interested in hearing your explanation as to why you don't have the same confidence in Guild members.
Just because some people oppose any sort of large scale enterprise, or a marketing mix that sullies someone's version of a professional environment, is no reason for restriction.
The consumer is "king" and they will always be the judge.
I doubt that you would think Woolworths incapable of controlling their own pharmacy environment, right down to the micro area.
You have already admitted that!
And further, in the 1970's when Soul Pattinson (SP) was operating its 40+ corporate entities across NSW, my consulting group performed a survey, comparing professionalism of each corporate unit, compared to the average PGA member.
Guess who won hands down-Soul Pattinson by a country mile!
And this at a time when there was always a continuing outcry over Soul Pattinson by community pharmacists, saying that S P were unethical and unprofessional.
There were dangers in believing your own propaganda then, and particularly now.
With the PGA having supported these restrictions on pharmacists over the years, there is not one true chain of pharmacies able to mobilise and meet this very real Woolworths threat.
With the PGA continually opposing incorporation of pharmacies, you don't even give your members an efficient structure to work out of.
There is now no level playing field, and this negligent lack of strategic thinking by PGA leadership has allowed this to happen!

4. JOHN BRONGER: "But make no mistake. The issue for pharmacists is that if you sign up with Woolworths, you may become, in effect, a tenant of Woolworths, and may be subject to all the demands and limitations that the landlord imposes on you."

NEIL JOHNSTON: What is so different here to what already occurs with shopping centre management?
In fact, centre managers may have an objection to a pharmacy tenant disappearing under a head lease controlled by Woolworths, at the discounted rate we know Woolworths are able to negotiate.
It is a potential loss of revenue to the shopping centre management.
Location rules would currently protect existing pharmacists established in shopping centres, unless an existing shopping centre pharmacy wanted to relocate within Woolworths.
There would have to be a real advantage for an established pharmacy to relocate, and at first glance, advantage is hard to find.
John Bronger highlights issues such as trading hours and control of the marketing of pharmacy products, and these are the first substantial points that he makes.
If we are talking about a complete pharmacy relocating within the Woolworths shopping perimeter, the physical security of scheduled drugs becomes an immediate concern. This would probably translate to a section of a Woolworths store being partitioned, but having doorway access to the Woolworths environment as well as to the common pool of customers in the centre precinct. This pharmacy would be owned by a pharmacist and control of the marketing of that pharmacy would be legally vested in the pharmacist.
The rules of the ACCC would apply, so Woolworths would have to be careful in terms of market manipulation, or face penalties. They could not legally direct the pharmacist not to sell products held in common, nor could they insist on activities such as the price promotion of Panadol.
There is also a security problem (for Woolworths) in that customers in common might be able to wander out of the pharmacy front door without paying. It is highly likely that Woolworths would want to control all the checkouts, including those in the pharmacy, with an adjustment for cost finding its way into a sublease agreement.
There are not too many advantages here, so there should not be a stampede to sign up.
However, another model is talked about where Woolworths totally own a pharmacy and employs the pharmacist. This can only occur in areas where Pharmacy Acts allow open ownership, and as most states generally restrict ownership to registered pharmacists, the opportunity for open ownership only occurs in places like the Northern Territory (NT), but they will have to be quick as restrictive pharmacy legislation is pending.
A Woolworths pharmacy established in the Northern Territory would serve to develop and trial various models of pharmacy, in the hope that long-term, restrictions would be eased within the various states.
The precedents established in this style of pharmacy would be used to demonstrate low cost operation, safety and professionalism-all future arguments for de-restricting pharmacy nationally.
However, the NT market is very small and probably not worth the effort.

5. JOHN BRONGER: "We worked long and hard to win the right for pharmacists exclusively to own pharmacies. That ownership is in the public interest. It allows us to spend time with our customers and not to treat people as numbers. Our members pride themselves on their individual service and individual advice and counselling they give.

Here we have a point of agreement. I am passionate about pharmacies being owned by pharmacists, but I am cognisant that the public interest is not being served if pharmacists are unable to match organisations like Woolworths with competitive offerings.
The differences relate to the scale of operations, and if pharmacies are not allowed to become larger in scale, they can never match Woolworths, and hence the public interest argument becomes progressively weaker matching pharmacy's weakness in turn.
The point on individual service, advice and counselling is also becoming weaker with pharmacist and other skilled labour shortages, increases in mindless paperwork etc all combining to reduce effectiveness in this important area.
The arguments we progressively hear from people such as Priceline, in that pharmacists should leave retailing behind to the experts and get on with professional activity, are fraught with danger.
Leaving retail behind means a loss of skills in this area, that once abdicated, would be difficult to bring back. Retailing provides a profit buffer to assist in the development of professional activity or to bolster income when the professional side is down, for whatever reason. There is always an optimum balance between commercial and professional activity.
In pharmacy, the customer is always right, but the patient isn't necessarily right.
It is this schizoid balance that sets pharmacy aside from all other forms of business and it is one that pharmacists do well.
The downside is that this balance is not readily understood by politicians and other professions, and even we as pharmacists, have dificulty in explaining what we do.

6. JOHN BRONGER: "This battle is not primarily about Woolworths. It is primarily about looking after the best interests of pharmacists and their customers."

NEIL JOHNSTON: I would have phrased that slightly differently John, and in the reverse order, in that this battle is totally about the best interests of customers and patients as a paramount issue.
Pharmacists see themselves as being the best people to service and achieve those interests, but this has to be earned.
We cannot earn this right unless we are prepared to match the offers of all non-pharmacist contenders with equal or better offers.
We are continually being hampered by the restrictions being placed on us through our leaders, and forever seem to have to fight with one hand tied behind our backs.
We can win this fight John, if you have the vision to set free those pharmacists with the passion to realise their dreams without unnecessary restrictions.
And just a word of warning.
The single pharmacist that has decided to relocate his pharmacy within the Woolworths environment, will probably be identified in the near future. Should the PGA give him a hard time, directly or indirectly, you will not win any "brownie" points.
The Woolworths PR machine would just love to "spin" that story along.

Next article in Woolworths series-------->