The release this week of the much anticipated changes to the Pharmacy Location Rules has ended speculation circulating in the marketplace that long re-locations would go.
To utilise the existing long distance relocation rules (rule 106), pharmacists will require a leasing commitment on a premises arranged prior to 18th October 2011 and need to complete by 15th April 2012. This effectively means there is a very small window indeed for pharmacists wishing to buy an approval number for long re-location.
Prices for Approval Numbers have varied wildly over the life of the last Location Rules. The market value for approval numbers, at the time rumours began to circulate in the marketplace that long relocations would be terminated, was between $450,000 and $500,000. Once rumours started, pharmacists held off with projects thinking perhaps they may receive a free number for the opportunity they had in mind. While this will be the case if the opportunity is located in a ‘facility’, opportunities outside ‘facilities’ are going to be very difficult indeed and the overall effect of the new rules will make it harder for pharmacists to take advantage of some opportunities.
In the short period remaining, astute pharmacists will realise that in many cases only a long re-location will enable them to be able to take advantage of an opportunity. Pharmacy Solutions have several Approval Numbers available to purchase but we suggest that anyone who needs one contacts us without delay.
Pharmacists amalgamating businesses will hand the spare Approval Number back to the Government, while short re-locations up to 1km will still be possible. This raises the prospect that values of some smaller businesses may rise but the market has been seeking these opportunities for some time already and the effect may only be marginal. So the value of small, marginal pharmacies value will obviously vary depending on the market opportunity in their local area. If there are no opportunities available within 1 km the chances are their value will fall, as always the
market will determine the value. There will no doubt be cases where a group of pharmacists club together to provide a ‘golden handshake’ for a pharmacist who decides to close his pharmacy. It will be worthwhile as it will remove one more approval number from the area. So in the absolute sense, approval numbers still have a market value as they are the licence to operate within the PBS system
Pharmacists wishing to establish pharmacies in ‘facilities’ will make application to the ACPA and if approval is granted they will receive a free Approval Number. This will be welcomed by pharmacists establishing new pharmacies as the change represents a significant reduction in establishment costs. It is well recognised that the early years of most new pharmacies are very difficult and it is not uncommon for a new business to take two or three years before it turns a profit. A significant reduction in establishment costs will ease the costs pressures for newly
established businesses.
By the same token, pharmacists amalgamating businesses will have lost a significant way to reduce the often significant costs involved because there will now be no opportunity to off-set costs by the sale of the spare Approval Number.
Back fills from shopping centres are gone except in exceptional circumstances. One unintended consequence, and this existed under the old rules, is what happens to a pharmacist operating in a shopping centre who at the end of their lease is refused a new lease by the landlord? The only option for the pharmacist is to apply for a short re-location however the requirement that the new premises is located more than 500 metres from an existing pharmacy could leave the pharmacist in an untenable position and end up in premises well away from where he/she is currently located with the risk that a large amount of turnover and value would disappear. Fortunately, there have been very few instances where landlords have acted in such a way.
Rules for large medical centres are largely unchanged and it will still be difficult to gain a pharmacy in a medical centre and impossible if there is another pharmacy within 500 metres in a straight line, although pharmacies in large shopping centres no longer count to block such an application.
Our view is that the changes have made it more difficult in many cases to establish a new pharmacy. The granting of new numbers to pharmacies located in ‘facilities’ will be welcomed but as with all changes to rules there are often unintended consequences. Over time we expect the number of approval numbers to reduce.
For confidential advice on your particular situation please contact Pharmacy Solutions and we will provide you with advice on the best way to proceed.
John Neilson
Director
Pharmacy Solutions Australia
john@pharmacysolutions.com.au
0414 719 212