THE EVENTUAL DECLINE OF BIG PHARMACY RETAIL (BPR)

As this is the 50th blog I have written for the Canadian Healthcare Network, I thought long & hard on the subject.  Sometimes accused of dwelling on the negative, here is my attempt on focusing on the more positive, at least positive from my perspective.  (BTW…I always thought I was being realistic, not negative).

In the September issue of The Economist Magazine, there was a great article entitled, “Death and Transfiguration.  The golden age of the Western corporation may be coming to an end”.   I read this piece and wondered how this applied to Canadian companies and more specifically to BPR?

My conclusion is that it does apply, and perhaps even more so and with greater rapidity to BPR.

The premise of The Economist piece is that corporate empires, including members of BPR, comprehend every corner of the earth.  They battle each other with legions of highly capable managers.  They keep politicians in line with promises of investments or consulting opportunities.  They sit on mountains of cash which gives them great power.  (Apple alone currently sits on $200 billion in liquid cash).

Corporate profits have tripled from 1980 to 2013.  After tax profits of US firms are at their highest level as a share of national income since 1929.  It can be assumed large Canadian firms of all kinds generally are not far behind.

The challenges which appear now is that there are twice as many players as in the past, and that the competition is fiercer than ever.  At the same time, the political environment is becoming more hostile to “corporate greed”.  Witness the recent assault on pharmacy funding by the MOHLTC.  As long as BPR shows higher and higher profits, and professional fees continue to be waived, governments will consider Pharmacy as a deep well it can return to over & over again for more cash.

Most vulnerable are big firms that are in labour and capital-intensive industries like BPR.  Capital may be cheap right now, but a heavy dependence on labour and the imperative to constantly keep the costs of labour down has its drawbacks and eventual decline.  The cult of quarterly earnings together with a focus on short term strategies is approaching a success horizon.

The evidence that BPR will likely be affected by all these global factors, even more so than The Economist suggests, is BPR”s heavy dependence on labour as a component of its value proposition.  This is especially so when it comes to the pharmacist labour component.   It may not seem apparent right now, but the supply of pharmacists does have a limiting factor.  If it were not for the recent huge influx of IPGs & unfortunate over graduation of pharmacists by Canadian academia, the situation would be far different than it is today.  BPR will never be able to manufacture its own army of pharmacists.  Although “never” is a big word.

Compound this reality with the fact that there is a great deal of unrest and dissatisfaction among employee pharmacists of BPR.  (See recent blogs by Ken Burns & Brandon Tenebaum).  Concurrently pharmacists are becoming even more highly qualified as the Pharm D’s begin to spill out in droves.   Pharmacists are demanding the right to exercise more cognitive services while downloading the mechanical aspects of drug delivery to technicians… thus widening labour costs, not shrinking them,  at least from a retail perspective.  At the same time, not a single BPR unit can open its doors without a graduate licensed pharmacist being present.

Cracks are beginning to form in the massive hull of the ship BPR.   Some have cracked already…witness the recent Target debacle.   Other players are now struggling to increase market share and profits, which they are mandated to do.  It’s a zero sum game out there compounded by internet shopping relentlessly takes a bigger chunk of the pie.

Perhaps the leverage which employee pharmacists are hoping for, and demanding, will simply come through time.  Little solace for the present pharmacist population, but maybe good news for future generations of pharmacists.

 

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