I hope the festive season was relaxing and that you are ready for a busy 2013. This year will continue to pose challenges, (as have the last few), but if these are met with a willingness for change, an eye for detail and a positive attitude – the pharmacy business will continue to provide solid returns for those who are meeting these challenges.
Certainly 2012 saw an increase in the number of insolvent pharmacies, but in perspective there were two large groups that accounted for many of these. We also handled several other single insolvencies that were not related to the current economic climate, or the changes in pharmacy, but rather to personal issues that forced banks and wholesalers to remove their support for the particular business. There will be at least one other large group in trouble in the first part of this year and there are other pharmacies that remain on financial institution watch lists, but I sense that by the latter part of this year we will have seen the majority of the bloodletting.
I assume that most owners are quantifying the 1 December changes and noticing the accompanying reduction in profit. These reductions have been factored into the business sale market already, as have the April reductions, but are still unpleasant as the increased profits from the Atorvastatin molecule have been welcomed.
A strong theme of 2012 was an aversion to shopping centre pharmacies, which I believe will continue into this year. However, I am of the opinion that astute buyers will begin seeing the increased importance of the front of shop sales as the reason to add select shopping centre pharmacies to their portfolios. During the last year, landlords showed a willingness to accommodate the general decrease in profits of their pharmacy tenants with rent reductions. I feel that we will continue to get results with landlords into this year but I would think that toward the end of 2013, as the economy slowly improves, that this willingness will discontinue. Why is the economy going to improve? That’s the feeling I have from listening to and reading the commentary.
I spent a few weeks in the U.S. in December and visited many pharmacies in a number of states. This is not where we need Australia’s health system to head but unfortunately it is being ever so slowly guided this way. Mini supermarkets that provide limited counselling for patients is a long way from ideal but I must admit it was handy picking up a six pack when getting some Chlorsig.
All the very best for 2013. As always if you would like to discuss anything, I am always available and if you have plans of expanding or contracting your pharmacy portfolio please pick up the phone or drop me an email.
by Peter Marshall, Managing Director Pharmacy Solutions Australia