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?