A CLEAR SIGNAL March 2, 2018

Last week, the Chief Executive Officer (CEO) of Loblaw Cos Ltd. (Loblaw/Shoppers Drug Mart, Zehrs, Super Store, Fortinos, No Frills, etc.) while addressing financial analysts, made the following statement:

“We face exceptional external headwinds in 2018 ranging from higher minimum wages in some provinces, to the effects of generic drug reforms.”

The Chief Financial Officer (CFO) later went on to state that … “to put the $250 M generic drug pinch into perspective, it compares with $70 M to $80 M in annual drug reform costs over the past three years”.

He also stated that higher minimum wages will cost Loblaw $190 M this year alone.

These statements from the CEO and CFO resemble the sound of those big bells ringing through the village foreboding something really important is about to happen

These are big numbers.  Half a billion dollars to the bottom line in this year alone.

The problem for CEOs is that their job is not to make excuses; it’s to find solutions.  Shareholders are not going to respond with…’well that’s OK, nothing we can do about it.  We’ll just take the hit.’  Shareholders will vote with their feet and take their money elsewhere if these funds are not recovered and recovered fast.

A rough estimate of the market share of Big Pharmacy Retail (BPR), which Loblaw companies have in Canada today, might be close to 40%, give or take.  My best guess.

This makes the CEO of Loblaw Cos. one of the most important pharmacy leaders in Canada today, and he probably doesn’t even know he is.  He needs to recover half a billion dollars, which was yanked out of under his feet by government, through two possible ways.  He must increase top line revenues in any way he can, which means selling more stuff, any stuff.  Secondly he must cut costs.

And all this before we calculate in Jeff Bezos and Amazon, who is out to eat the grocery and drug industries’ lunch.

Automation comes to mind.  Look for even more self-serve checkouts.  More ScriptPro Robotic Prescription Dispensing or other types of human replacement technologies.  More central filling stations.  In other words, more ways of taking relatively high priced human resources out of the equation.

In many ways, BPR and governments share a common perspective.  When they look at ‘drug costs’, in other words what insiders describe as AAC (actual acquisition cost…meaning the real cost of the drug to pharmacy), plus a mark-up (a retail concept), plus the dispensing fee (meaning counting the pills on the little blue tray and putting the pills in the little vials, from their perspective)…when both BPR and governments add up these three components, they see one thing: drug costs.

There is a very important, not so subtle message here.  The pharmacist bit is considered a cost, not a service.  Pharmacist compensation is totally integrated into the cost of drugs.  As drug costs go down (which is good for the public) so does pharmacist compensation, and this process is just beginning.  National Pharmacare is coming up with the objective of universal coverage (a most worthy goal) and more so, lowering the cost of drugs.

When pharmacists have to create a ’Pharmacist Awareness Month’ (a whole month?), …when pharmacists have to constantly preach out how they are ‘medication experts’ and ‘therapeutic appropriateness experts’ …and how they are the ‘most trusted’ practitioners in the healthcare system, …and still the value of a pharmacist is relegated to a cost component within drug costs, we know there’s a problem.

But the problem is eventually manageable for BPR and for governments.  These corporations (Amazon, Loblaw, Walmart, Costco, Sobeys etc.) are massive, with hundreds of thousands of employees and experts who will find ways to survive and thrive in a viciously competitive environment.   Pharmacy remains an opportunity for growth and profit for BPR, and a big opportunity area for massive cost savings for governments at all levels.

The problem, with an uncertain outcome, is for the profession of pharmacy which continues to flounder, and to attempt to create a value proposition outside the cost of drugs.

Some things for sure:  flu shots, and meds reviews, and counselling with constantly reduced technical help, while professional fee discounting, are not going to cut it.  Yet this is where all the effort by associations and other bureaucrats appears to be concentrated.  Increased ‘scope of practice’?

Once again, what is academia’s role in informing pharmacy students of the future which lays before them?

10 thoughts on “A CLEAR SIGNAL March 2, 2018

  1. Hi Bill!

    It’s my understanding from reading the Finance Minister’s statement(s) about National PharmaScare, that in fact it won’t be universal. He drew a distinction between a “national drug strategy” and a “national drug plan” and said they are two different beasts. I believe he intends to not apply it to everyone; in fact, those who have bitten the bullet over the years and are paying premiums for private drug plans will be, from initial comments, exempted from coverage on any “national plan.”

    That makes it more of a “non-universal plan” and I’m not sure that flys in terms of the Canada Health Act and “equal access for all” — unless, of course, since it is a Trudeau government full of doublespeak/broken promises, they’re going to claim that everyone has “access” — just not coverage.

    Your thoughts?

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  2. Interesting distinction which I did not catch until you astutely point it out. Governments have many ways of claiming credit for things while delivering half of what they promise. I guess my more arching point is that so called drug costs are a big fat target, and efforts to reduce these costs will be relentless. While pharmacists’ compensation (and ergo value) is tied to drug costs, it’s a race to the bottom.

    Either through innovation another approach is found, or at least until then, brilliant young minds should avoid going into the profession of pharmacy. Guys like you and me Kim are not the casualties of this war. As with all wars, the casualties are the brightest and the best.

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  3. “The problem, with an uncertain outcome, is for the profession of pharmacy which continues to flounder, and to attempt to create a value proposition outside the cost of drugs.” Truth!

    Thanks for another provocative blog, Bill. And, “Happy Pharmacist Awareness Month”! 🙂

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  4. No matter which way you want to cut it , pharmacy as a profession we know it today is game over.
    We ( speaking of Ontario ) are our worst enemies and only have ourselves to blame
    1😡, the college allowed pharmacy charters ie non pharmacists could buy a charter and open as many pharmacies as they wanted, thus allowing the situation we have today. College mandate is to protect the public- how does this fit that mandate?
    2😱 Pharmacies started to waive their “professional fee, and discount their service. Stupid or what.
    3 😳We allowed corporate pharmacy to increase they supply of pharmacists by allowing an abundance of IP and building a new school
    4🤔Being corporate slaves by allowing quotas systems , 3 med checks a day no matter if they made no therapeutic nor professional sense , just fill that demand
    5😰We allowed without a peep , government to run over us, not a peep. Because we view each other as COMPETITORS, rather then fellow professionals .

    I have to say , that after 35 plus yrs as a Sdm associate I want from proud to ashamed
    After 35 plus us as a pharmacist I went from proud to I am a widget in a clog which I have zero control
    I truly feel for new grads who have been sold a bill of goods that will greatly disappoint!

    This is not sour grapes or anything like it, I do not see a future for the ancient practice of pharmacy. Soon a md will produce a rx and input on web. The rx will be filled by machine and dispensed in a vending machine in a food store or delivered .

    We-pharmacists – allowed our college and ourselves to be where were are today . We coukd have if we were as smart as the medical profession be in control of our destiny , but we did not 💤

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    • David,

      Yup. You summed it up nicely. Unfortunately I don’t see much light at the end of this tunnel. I am often criticized for making summary comments like yours describing such negativity as not being very productive. In fact, I write these blogs to expose the hypocrisy among those organizations which perpetuate the lie that pharmacy has become. They do this to preserve their self interest in the status quo…regulatory bodies, pharmacy associations, and worst of all academia. I don’t know how those deans and professors sleep at night knowing that those fresh faced pharmacy students are like sheep being led to the slaughter. I hope some of these undergrads read some of the comments and the word spreads. Maybe this is the best contribution we can make now.

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      • If anything the undergrads won’t benefit. Sure the smart ones will leave but that simply leaves the not-as-qualified filling in the pharmacy students spots. In fact you’ll have the same number of pharmacists graduating but terrible quality regardless. I firmly believe that there are certain aspects you can teach and some you can’t.

        If you message gets across we will have IPG quality pharmacists that are home grown…. this doesn’t benefit the profession. At all.

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  5. Jon,

    To what degree have “top quality” pharmacists made a difference. When pharmacists barely use 5% of the knowledge they have acquired in university, I am not sure I understand the distinction.

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    • I mean PharmDs won’t benefit from the current situation. Arguably it’s about value. If top notch, cream of the crop, hospital pharmacist level trained in the community pharmacy that have such a high level of performance EXIST in pharmacy then the profession’s decline may be halted.

      To what degree do “top quality” pharmacists make a difference? That is the question especially when we are trying to shift from ‘volume’ to ‘value’

      Value is less likely to come from IPGs. Value is less likely to come from PharmDs as a whole too since the universities are taking anyone and everyone to fill in the spots.

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  6. Again, Mr. Brown, you are a Seer and you have your finger on the pulse.
    I too think the profession of pharmacy is fast becoming a dinosaur.

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