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Community Pharmacy and 6CPA – Are You Fighting Back?

Posted on December 5, 2016
by Michael Grew in Accounting Blogs, Business Advisory Blogs, BUSINESS Blogs, INDUSTRY Blogs & Pharmacies
The changes to Pharmacy introduced by the recent Commonwealth Government’s 6th Community Pharmacy Agreement (6CPA) are now starting to have a significant impact on the net profitability of almost all community pharmacies.

The key changes include;

  • Total cuts to Pharmaceutical Benefits Scheme (PBS) funding of more than $6.6 billion
  • The continuation of Price-Disclosure cuts
  • A reduction in CSO funding to pharmacy wholesalers
  • An increase in high-value, low-margin medications
  • Optional $1 discount on PBS patient co-contributions

These factors, when considered together, are placing significant demands and challenges on the traditional Pharmacy business models. The new remuneration package introduced with the 6CPA only partially offsets the negative impact of those factors listed above. We expect to see a reduction in GP % across most pharmacies in the 2017 financial year of almost 2%.

You don’t have to be a rocket scientist to realise that the Commonwealth Government has taken significant steps to arrest the growth in PBS spending, and, with the ageing Australian population, there is no doubt that Community Pharmacy is in a vulnerable position. That pressure will only increase as individual patients will be forced to pay an increasingly higher portion of the cost of medications from their own pocket.

So how is your pharmacy going to respond?

The first step is to gain a better understanding of your existing business, and to start getting inside the minds of your customer/patients.

On average across our basket of pharmacy clients, the ratio of customer/patients to prescriptions dispensed sits very close to 1:1. Overwhelmingly, patients go to community pharmacies for medication and professional advice from the pharmacist, not from the sales assistant.

Why then do most pharmacists hide themselves away in the dispensary?

We conducted a recent study of three pharmacies in the one strip within a Sydney suburb, which revealed that of the 10 pharmacists employed across the three shops on a Friday morning, only one was counselling patients, whilst the other nine were dispensing!

As the Australian public are being asked to pay more for medications and pharmacy advice, those pharmacies which offer a forward-dispensing service, where the pharmacist actually greets and counsels each patient, will prosper. The fact is that providing this service can actually significantly reduce your pharmacy’s total wages cost.

A lack of response to the 6CPA changes will clearly result in your pharmacy making significantly less profit.

It is imperative to firstly understand your business, and then to implement the required changes to help deliver the kind of expert, friendly service that your pharmacy patients will increasingly demand as they are forced to pay more for those services from their own pockets.

So that we can help you keep ahead of the changes to community pharmacy, contact BLG Business Advisers today online or call (02) 4229 2211.

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