RSM Australia

Open and shut case? Deregulation NOT an option. Or is it?

The big news of the past month has no doubt been the Competition Review draft recommendations around pharmacy. This has set the hounds running with strong views being circulated on both sides of the case around deregulation.

Do we have to be the same?

The review, by its very nature, has a clear focus on competition and its mantra is the choice available to the consumer and alleged creation of efficiencies. The language used in the review of pharmacy was certainly pitched at these areas. It was interesting to read that the same focus and language was present in the review of gambling and liquor. What was of concern was the lip service given to social impact of the increase in availability of these establishments. In relation to pharmacy there was some commentary indicating there was justification for 'some regulation of pharmacy to uphold patient and community safety'. However ownership and location were deemed to be outside of those things that needed regulation in the management of these areas. 

The targeting of pharmaceuticals by illicit drug manufacturers is well documented. Controlling their activities has been challenging for the authorities and I am not sure how the availability of more dispensing points is going to assist this. There have been many official and unofficial campaigns over the years to reduce dispensing points (closure package of 1980) just as there have been tighter restrictions on gambling and liquor establishments and services. I think the public see these actions as those of responsible government. It intrigues me that 'they' seem to be always rushing to emulate overseas models when we are told that overseas governments are envious of the various environments we have created in areas such as liquor control (particularly in concerns shown for impact on the family) and the PBS. 

Is pharmacy reacting?

As an adviser to pharmacists buying pharmacies, the announcement seems to have had little impact on the prices of pharmacies - for now. The view coming through is that 'it won’t happen' so let’s get on with business. I presume that some out there, not to mention industry financiers, must be asking 'but what if it does?'.

All of this has been of great interest and will continue to occupy the headlines right through to the release of the final paper from the Competition Review committee scheduled for March 2015 and then subsequently the government’s response. Following hot on the heels from that will be the Federal Budget and the conclusion of the negotiations around the 6th Community Pharmacy Agreement. Now flying under the radar, though, but having a more immediate impact, are the further price reductions under PBS reform.

Price reductions are a reality and deregulation an uncertainty. This certainly means that owners should be dealing with, no - have dealt with, the price reductions and made plans to ensure their business is on a strong footing. For several years, the day of reckoning has been heralded and is now here. Owners have had time to prepare and hopefully are well into a strategy to maintain the sustainability of their business, and this strategy will be ongoing.

But what of deregulation? The Competition Review also talks of transitional arrangements. Despite the envy held of our PBS system by others overseas, will the government be tempted? I remain unconvinced that access to medicines by all Australians will be a mantra taken up by non-pharmacy owners. Look at how much trouble some towns have in attracting doctors, despite the flag-waving given to the ownership model in this sector by the Competition Review. Will there be a change to location rules? As noted above, I am sure our authorities will love to see more dispensing points to have to control and, no doubt, the pharmacists will yet again get the blame for blowing out the PBS. But if these changes are to happen, how is your pharmacy placed to deal with the new competition?

Who is my competitor?

PBS reforms have driven owners to look hard at what is going in inside their pharmacy and the impact of some outside influences. The threat of deregulation should be raising the hard questions about competition and who the competitors might be. If it is considered tough to get cut through in the market place now, how tough will it be if three more competitors can move to within 500 meters of your pharmacy? There are many new entrants to the profession and some of them will be very impatient owners-in-waiting. 

There is no doubt that preparing for a competitor who is not there yet might be considered as jumping at shadows, but those who do their homework will get first-mover advantage and hopefully stay above the pack. A SWOT on your own pharmacy and then a Competitor SWOT to identify what the external threats might be can only assist in helping you dig deeper into where the strengths of your pharmacy business lie and what opportunities are there for you to take advantage of. Unless you take deliberate steps to turn the rudder on your pharmacy in a particular direction, you will remain a 'me-too' pharmacy and be overrun by the competition. What are one, two or three things your pharmacy wants to be known for? Don’t say customer service, that is a given.

The economic rationalists can’t see what the fuss is about. Can you?