Lots of pressures are hitting the pharmacy market at the one time and all will cause downward pressure on margins which in turn may affect the sale prices of pharmacies in the future.
The recent move by Pfizer to deal direct to pharmacy through DHL has sent shock waves through the industry. The withdrawal of Pfizer products from mainstream wholesalers has resulted in a drop of turnover of between 10% and 15% and all wholesalers have reviewed their terms and pharmacies have had their discounts cut by as much as 1.5%! This will cause dramatic reductions in net profits far greater than the estimates made by the Guild.
On top of this price reductions on PBS items are cutting deep and it is vital pharmacies have negotiated a top generic deal with their supplier and are substituting generics wherever possible. There is a window of opportunity that will enable pharmacists to protect their bottom line for a while longer by maximising generic substitution.
Sluggish retail sales and lenders applying much stricter criteria and deep discounters are all factors that are combining to rapidly change the pharmacy landscape. We wrote in last month’s newsletter of the need to make changes in your business and to stay on top of your game otherwise the tsunami of change sweeping through the industry may overcome those that do not adapt, refresh and renew their businesses.
The Guild has announced many new initiatives that pharmacists need to take advantage of in order to maximise their profits. We recommend all owners take advantage of as many of these programs as possible in order to receive available funding from the federal government.
It is easy to get stuck in a rut when change is happening at a rapid pace around you and to take no action until it is too late. Many industry experts have been saying for years that pharmacists must develop a better front shop offer in order to remain relevant. Many owners are not making changes and the risk is that many pharmacy businesses are becoming marginalised.
If you are in the category of owners where it is all getting too hard we encourage you to contact us to receive a free market appraisal of your business. Pharmacy Solutions has been established for 16 years and holds its market leading position due to the professional way in which we handle the sale of pharmacies. We are licensed in all states and can provide confidential advice on whether to sell or ‘bat on’.
One thing we are certain of is that the pharmacy market is not going to get any easier. Speak to us today if you are uncertain of whether to sell or stay. Spending an hour with one of our consultants could be the best investment you make all year!