The Irish pharmacy sector is experiencing a welcome bounce having endured a long period of uncertainty. At a recent business briefing ‘Pharmacy – what does the future hold?’ organised by the IPU (Irish Pharmacy Union) the message was clear: stay positive – but proceed with a certain degree of caution.
Even though the pharmacy industry is still considered to be very much a growing, active and dynamic enterprise, it is susceptible to unique sectoral pitfalls and challenges and it is important for pharmacy owners to bear these in mind in order to protect their business interests going into the future.
Conall MacCoille of Davy stockbrokers initiated proceedings by providing the packed room with a detailed overview of where we are in terms of the economy. Despite clear economic growth at present, a considerable amount of damage was wrought during the recession and not all of that damage has been repaired.
“We are still only just back to where the level of employment was ten years ago and our overall recovery has very much lagged behind that of the United States and Europe”. There is still a fair amount of catching up to do before Irish business owners can truly consider themselves to be out of danger.
While greater spending on big ticket “discretionary” items like cars and furniture indicate increased willingness on behalf of the Irish consumer to spend, this should be read by pharmacy owners with a degree of caution as the trend is not replicated in “defensive” spending sectors like healthcare.
Consumption in this area of the economy still lags behind as people continue to put their financial houses back together. Conall MacCoille made it clear that growth in spending in terms of pharmacy items is proving to be stubbornly less responsive to the upswing of the current boom cycle.
A lack of available staff is leading to wage demands that small businesses often can’t keep up with. Pharmacists need to continue to monitor their environments and be responsive to these trends in order to protect their businesses from short-term shocks and longer term disruptions. One such example of this would be Brexit.
Lorraine Nolan, CEO of the HPRA, outlined in very comprehensive and technical terms the potential impact of a hard Brexit on the supply and cost of medications here. Because Ireland is generally categorised as being in the same market as the UK – thanks to our close geographical, linguistic and cultural links – the end of the joint labelling system could lead to very serious problems with supply. In other words, when it comes to pharmaceuticals in Ireland and the UK, the “market is very much joined”.
But Lorraine Nolan emphasised the HPRA’s engagement programme and their role in mitigating some of the worst envisioned effects of Brexit. She appealed to delegates to help get the message out that Ireland can and should become a Reference Member State (RMS) for many of the drugs that could be affected. The HPRA is also putting new systems in place to monitor stock levels, such as allowing stock to go to shelf life – as opposed the six-month flush out – as they plan for a hard Brexit.
Lorraine Nolan stressed the need for all stakeholders to embrace a flexible and creative approach so that the unique hurdles posed by Brexit can eventually be overcome in a way that does not risk patient safety: “A central tenet of the approach that we are taking is that we have to maintain the existing products and not lose any marketing authorisations, while probably accepting the fact that we will lose some, but we are trying to really minimise that.”
Larry Ryan is the director of the independent market research group Behaviours and Attitudes and every year the Irish Pharmacy Union commissions a pharmacy-specific piece of research which is helpful in revealing the “gradual shifts in consumer behaviour that have implications for business.”
Mr Ryan outlined his own experience with changing demographics and the impact this has had on his own professional life. Where once he spent a lot of time surveying behaviours and attitudes towards and around alcohol, he now spends a greater proportion of his time researching health.
Irish people are thinking healthier and are gradually becoming healthier as the impact of a more educated population takes effect. The most recent study also found that Irish people continue to enjoy shopping in large shopping centres, bucking an international trend where other nations appear to be returning to the main streets.
Interestingly, while millennials may be nurturing healthier life practices in the areas of diet and exercise, Larry Ryan outlined how they are spending more and more on grooming indulgences and as a symptom of the selfie generation, are “fundamentally more concerned with how they look as opposed to how they feel.”
Jason Bradshaw of chartered accountancy firm JPA BrensonLawlor also delved deeper into the detail on demogrpahic trends: the number of over 85’s is set to quadruple over the coming years, which will come as good news to those who are operating in areas with a high density of older people or in areas with a lot of nursing homes. There will also be an extra million people in the country by 2046, which will bring its own set of challenges, not least of all in terms of housing.
Profits and margins in pharmacy are steady but not ideal. The cost of renting is set to increase and this will continue to heap pressure on those who do not own their properties. Greenfield openings continue to be vulnerable and won’t turn over as much profit as established businesses and may continue to be unviable for some time. Overheads are naturally rising in line with inflation and costs are also increasing. While eighty percent is a good figure, Jason Bradshaw finds it ‘startling’ that twenty percent of pharmacies still do not operate a website.
One way to ensure a steady stream of revenue while things continue to settle down is to engage with the state by providing specific GP-led services like vaccinations, weight management services, blood pressure monitoring, cardiovascular risk assessment, cholesterol testing and blood glucose monitoring. Educational events around weight and cholesterol management seem to work particularly well.
“These can drive footfall, can drive turnover and can really make a difference to the bottom line. Offering these services has had a big impact on turnover over the years so if we can roll these out more it will help to cover our costs.”
Despite the warnings, Jason Bradshaw’s message to pharmacy owners was essentially a positive one.
“While some of this commentary is coming across as maybe negative, we certainly aren’t negative about the sector. Pharmacies are still very cashgenerative; debt is usually quite low so overall we are bullish about the sector so the message is: mind your balance sheet going forward and start thinking about maybe building up some cash reserves.”
Pharmacy owners can take comfort from the fact that while they are still in recovery, some of the worse effects of the recession are thankfully now behind us. Be positive but by all means remain vigilant.
