Are pharmacies ready for digital competitors?

But current players are concerned that their declining share of the $ 16 billion Australian pharmacy market will continue to decline.

"In a perfect world, we would be partnering with these kinds of people," says Mark Hooper, CEO of Sigma.

Sigma is one of Australia's leading wholesale and distribution companies for pharmaceutical products. Its brands include Amcal, Chemist King, Discount Drug Stores, Guardian and PharmaSave.

On Monday, he announced that negotiations for a five-year contract with Chemist Warehouse had failed, allowing a competitor – EBOS Group – to move in and secure "The worst thing I can do is to pretend that they [Amazon] are not going to have any impact and ignore [the threat]"says Hooper. "In a perfect world" "In a perfect world, we would be partnering with these kinds of people," said Mark Hooper, Sigma's CEO, about Amazon

. ] Photo: Darrian Traynor

Hooper says if Amazon is moving into pharmaceuticals – and for now, he thinks that the online giant has other priorities – Sigma has the following. infrastructure to ensure fast delivery to homes. Try to look for ways to He adds that Sigma reached out to Amazon "but there was no detailed discussion."

"I have to make sure I have a strategy that will allow them to overcome them."

The industry has already experienced severe disruptions due to reforms government and increased competition from discount pharmacy chains, despite longstanding rules that limit the number of pharmacies that may be held in certain locations.] 19659015] STP Barriers

Entry of New Actors corporate, including private hospital operator Ramsay Health Care, also intensifies competition.

To survive, mergers are on the rise. <br /> <br /> Under the leadership of EBOS, Terry White Chemists merged with Chemmart in 2016 and now operates approximately 500 pharmacies across the country.

While the chains are scaled up, the number of independent pharmacies continues to decline.

Pharmaceutical Benefits Scheme (PBS) – the government system thatsubsidizes the cost of drugs for all Australians – which has had the biggest impact on wholesalers like Sigma over the last decade.

He says that if a government reform of the PBS was necessary,

IBIS World predicts that the revenues of the pharmaceutical industry will increase by 1.1% over five years until 2022-2023, for reach $ 17 billion, mainly because of the demand for drugs from Australia's aging population.

pharmacies went from selling prescription drugs to providing community-based health services such as influenza vaccines and health checks such as blood tests and diabetes tests

. The federal government, under the Sixth Community Pharmacy Agreement (6CPA) with the Guild of Pharmacists, has allocated $ 600 million as of July 2017 to allow pharmacies to offer new community pharmacies.

Marc Clavin, who leads an Amcal chemist in Sorrento, Victoria, worked as a pharmacist for more than 35 years. "The reality is that we are retailers on the street and we have to pay the high rents we need to take advantage of retail opportunities."

Pharmacists can not sit idly by and see major discounters take away market share, he says. Clavin now offers new services, including drug vouchers to its clients.

When he visits people at home and watches the medicines stacked in their shoebox, he finds cases where people buy cheaper drugs from foreign sites that are not suitable for their particular needs.

worried about the rise of discount chains. "The advance of these predators in our industry is very worrying," he says. "The danger is that the consumer will face the cheapest option."

And for digital competitors, it is clear that the Amazons will target Sydney and Melbourne, which means that people in the areas rural are missing. They [remote-based Australians] will be just too expensive [for Amazon] to serve. "

The Managing Director and General Manager of the Australian Pharmaceutical Industries (API), Richard Vincent, says," I do not take a minute to underestimate Amazon. "The CEO and CEO of Pharmaceutical Industries ( API), Richard Vincent, says, "I do not underestimate Amazon for a minute." Srcset = "https://static.ffx.io/images/$width_768%2C$height_433/t_crop_auto/t_sharpen%2Cq_auto%2Cf_auto / f69ad6e278f6d8c4e42733ea39c89d7f64129e57 "itemprop =" image "/>

"But I think we're well positioned to defend any entry into this space."

API runs 466 Priceline stores across the country, and its focus The company is also diversifying – the June 25, the API announced that she had spent $ 127.4 million for l & # 39; 9, acquisition of Clearskincare Clinics which offers women a laser service. nd other beauty treatments. Vincent says this will allow them to cross-sell between Priceline and the clinics.

Vincent says that there are patients on chronic medications who will always want to talk to their pharmacist face to face.

"Patients trust their pharmacist for many reasons rather than simply ordering online," he says.

John Cullity is the CEO of EBOS. negotiations to provide Chemist Warehouse for the next five years.

EBOS already supplies Terry White Chemmart and Cullity says its existing infrastructure can handle the extra work that will come if Chemist Warehouse

He also believes that some people will still want to have a face-to-face interaction with their pharmacist .

"You get sick and you need drugs – what will you do, do you expect the next day? take your script and go to your pharmacy to get it.

"We do not claim that [Amazon] is not a risk but we think we are well placed to manage these risks."

Electronic Prescriptions

David Quilty, executive director of the powerful Guild of Pharmacists of Australia, says that the nearly 5,500 community pharmacies that he represents could be overthrown by a digital disruptor.

He says that the rules that control the industry remove the two main temptations that saw the consumer go online for their buying needs – price and convenience.

It is currently possible to have a completed online prescription and delivered to your door – and is offered by Chemist Warehouse, for example – but it requires that the original manuscript be sent to the

"C & It's much faster to go to the local pharmacy, "says Quilty, who explains why online orders represent only a tiny portion of the market. In 1965, the federal government committed $ 28.2 million over five years in the most recent budget to offer an electronic prescription system, which could pave the way for more user-friendly digital services.

Meanwhile, an online backlog could not offer any price advantage over most drugs due to the operation of the pharmaceutical benefits scheme.

Just over 70% of the 280 million subscriptions filled Since 2016, pharmacists have been able to offer discounts on these scenarios, but only up to $ 1 – leaving little However, 85 million scripts – or 30% of the total – were for drugs below the $ 39.50 co-payment threshold [1965]. 9002] For these drugs, pharmacists can charge what they want, which creates opportunities for discounted local pharmacies.

Pharmacies in Australia must belong to a pharmacist, which would prevent a giant like Amazon from adding pharmaceuticals. But the laws have not prevented channels like Chemist Warehouse from using franchise agreements with pharmacists to build national chains with centralized services.

If online pharmacies took off, they could question one of the key regulations that protected bricks and mortars – rules preventing the opening or relocation of new pharmacies to a certain distance from an existing pharmacy. [19659002Guilders-composedoftheserules-badertthattheymaintainfinancialviabilityapartoftheparticularhealthsystemintheregionsbutthecriticalclaimisthattheyreprievethecompetitionagainstconsumers

An online pharmacy would operate outside of geographic boundaries, delivering to customers in any location, no matter which is their "local" pharmacy. calling for restrictions on online gamblers, one should ensure that they do not compromise his share of the health system.

Similarly, he fears that an entirely online transaction removes the role of pharmacist to ensure that the patient's adherence is appropriate. "

" If there is a system that reduces the safety and quality of advice, it's something that worries us a lot, "he says.

Stephen Duckett, director of the Grattan Institute's health program the market share of existing entrants is shrinking, their demands for protection are increasing.

. Medications prescribed by Pfizer that are not routinely stored by an individual pharmacy and are presented at the end of the day on a Thursday are not available until the end of the day on the following Monday.

Pfizer confirms this: "Orders are delivered by the next business day if orders are placed before 3pm the day before delivery or before 4pm on Thursday," adds a spokesperson, but adds "there are procedures for urgent or critical situations where drugs can be delivered to any pharmacy the next business day "sometimes earlier if possible – regardless of when the order is placed."

The spokesperson says that Pfizer, in partnership with logistics provider, DHL, achieves "on-time delivery performance at 99.6 pe Pfizer achieves this without claiming any share of CSO funding, allowing wholesalers to access proportionally more to this funded grant by taxpayers, "he says

Hooper simply says that the system has not yet collapsed, which does not mean that no.

" You now have a reasonable proportion of product That will not be guaranteed within 24 hours, "he says. "Manufacturers carefully choose profitable products and leave unprofitable products with us because they were obliged to do so [deliver within 24 hours]."

He says that if the government does nothing, "finally the system falls apart". 1965-9002] Hooper says that Health Minister Greg Hunt understands that there are problems, but that he does not seem to want to do anything about it. "What would make the problem worse is that there is a serious medical problem because a patient can not access it – that's the last thing everyone wants," he says. but it's a real possibility. "

Cullity also says that the current model of CSOs works" without serious threat ".

"Without the CSO, he makes the whole model [delivery] unprofitable," he says.

He wants Hunt to establish a floor price of PBS on margins of 7% or less, it's about If the price of a drug is $ 9 or less, we get the same margin, not less, he says.

Supply Chain

"This is the exclusive direct model that we have. Indeed, we have no problem competing with other distributors, but we We strongly believe that all national distributors of CSOs should have access to these products on the PBS, "said Mr. Cullity. Hunt did not say whether the government would respond, saying only that the safe and safe PBS supply of all Australian patients who need it is a priority and the minister "recognizes the crucial role of A viable pharmaceutical supply chain in this sense ".

The Federal Government Recently Ordered a Revision of the

Professor Stephen King, who chaired the panel, and who is also a commissioner to the Productivity Commission, says that the review focused on the issue of CSOs.

He did not specify whether the direct model or wholesalers model was better or worse

But he suggested that the government undertake a full badysis of the entire pharmaceutical supply chain for s & # 39; 39 ensure that taxpayers' money is spent as best as it could.

was "determined to ensure that timely and affordable access to PBS drugs is available to consumers," but he did not specify whether an examination would take place.

t clear that the current delivery model is effective, "says King. "Through the CSO they [wholesalers] are paid to fulfill this obligation, this obligation is not cheap."

He says that the review did not have time to consider the localization rules in detail, but he said that he It was time for it to be examined.

and "emergency" medical records and that consumers get the choice of where this electronic prescription is to be issued.

"Any consumer should be able to ask when prescribing that his scenario is directed to a particular community"

What is Chemist Warehouse or Amazon's defying the status quo, "consumers vote with their feet," he says.