For 26 years, I have been a Chartered Accountant and advising community pharmacy owners, and I can't imagine doing anything else! Thirteen years ago, I founded Peak Strategies with a sole focus on community pharmacy, and it has been my passion ever since. I prepare almost 100 business valuations each year for pharmacies across Australia, and I have never been more concerned than I am now. The challenges facing community pharmacies are greater than ever before, and it breaks my heart to see their livelihoods threatened.
Let me start by painting a picture of the unsung heroes of the healthcare industry - the community pharmacists. You know the ones - the friendly faces that greet you when you visit to fill your prescriptions, get your vaccinations, or seek advice and guidance on your health concerns. What you may not know is that these community pharmacies are often mum and dad businesses, owned by licensed pharmacists who are restricted on how many they can own. They pour their hearts and souls into their work, working long hours, shouldering a mountain of debt, and even putting their homes on the line to keep their doors open.
Why do they do it? Because they know how crucial their services are to community health. Without community pharmacies, many people would be unable to access affordable medications, and the public's health would suffer as a result.
Now, imagine being one of these community pharmacists and being hit with devastating news - a government budget initiative that will wipe $170,000 off your profitability, potentially reducing the value of your business by a whopping $1 million. It's a tough pill to swallow, to say the least. These pharmacists are already working tirelessly to keep their businesses afloat, and this kind of blow could be the final nail in the coffin.
This is the reality facing pharmacy owners across Australia, with the proposed 60 Day Dispensing rules.
It's important that we recognise the critical role that community pharmacies play in our healthcare system and support them in any way we can. The next time you visit your local pharmacy, take a moment to appreciate the hard work and dedication that goes into keeping it running. And if you hear of any initiatives that could hurt these small businesses, speak up and make your voice heard.
Therefore, it is with much sadness and concern that I write today with many thoughts on my mind with this announcement. I think of the pharmacy owners who are wondering if they will still have a business by the end of this year! Then I think of the staff they employ wondering if they will still have a job. I think of the conversations I have had over the years with pharmacists heading into ownership, particularly regarding risk areas. One of the risks I have pointed out, is the community pharmacy industry is a heavily regulated industry, and accordingly any decision on a government level is going to impact your business. I would not have thought that a decision of this magnitude will be dumped on pharmacy with very little notice, nor consultation.
Let's delve into the potential impact this decision is likely to have on community pharmacy businesses. The Pharmacy Guild of Australia has conducted a financial analysis on the profitability of these businesses, and the estimated hit is a staggering $170,000 per annum.
To put that into perspective, imagine running a business and waking up to the news that overnight you're losing $170,000 in profitability. The magnitude of this financial impact, coupled with the lack of warning and time for business owners and the industry to respond, is going to have serious consequences.
Let's take a closer look at some of the issues that are likely to arise because of this decision.
· A reduction in profitability of this size will clearly reduce the value of the pharmacy. Approximately $1m could be wiped of the values of pharmacies across Australia.
· Some pharmacies will now be operating in a loss position.
· Unfortunately for some pharmacies, this is going to force the closure of the business, with the owner left with unserviceable debt and potentially losing their house, with their patients also losing out, and staff losing their jobs.
· How will the banks respond when $1m in the value of the business is lost with a $170,000 reduction in profitability? Many will now not be compliant with the Lending Valuation Ratios and some struggling to meet loan repayment serviceability.
· Owners will be going into survival mode and as a result, staff redundancies are inevitable. Many pharmacists, dispense technicians and pharmacy assistants will lose their jobs.
· Many pharmacy owners will now have to work long stressful days and long weeks to cover reduced staffing numbers to save costs.
· Owners will have to review their opening hours to find more cost savings.
· Stock wastage will be significant and a greater cost to the business at a time when medication shortages will be a chronic problem.
· The timing of this decision also coincides with pharmacies dealing with significant interest rate increases, high inflation, and high wage costs, putting further pressure on profitability.
· My mind also goes to those pharmacists who have recently taken a huge risk and bought into a pharmacy business over recent years. Their debt is high, and more than likely their family home is used as part security for the debt. They now are faced with the prospects of losing significant money on their investment and meeting the ongoing loan repayments with substantially less cashflow.
· The valuations we do in our business are now on hold. There is no way we can determine the value of a pharmacy now.
· Many pharmacies that were listed for sale, are now unable to sell their business.
· Many pharmacies that are currently under contract for sale, are now in jeopardy.
The financial implications for community pharmacy are enormous, and potentially catastrophic. I really feel for pharmacy owners now having to deal with this substantial threat to the viability of their business.
Dear community pharmacy owners, I want you to know that you're not alone during these difficult times. The team at Peak Strategies and I are here to support you in any way we can, so please don't hesitate to reach out if you need financial guidance or just someone to talk to.
In addition, I strongly encourage you to stay connected with your local Pharmacy Guild branch. They have valuable resources and guidance to help you navigate this uncertain time. Remember, we are all in this together, and we will come out of this stronger. So, let's lean on each other for support and guidance, and together we'll weather this storm.
To prevent the devastating consequences that would result from the government's approval of 60-day dispensing, it's crucial to raise awareness among the Australian public. That's why we've created visuals on our social media platforms, which you can easily share with your network to spread the word. Encourage your team, family, and friends to join in and amplify the message. The more we raise our voices, the greater the impact we can make. Click the buttons below to access the visuals and help us get the word out.