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The Conversation

  • Written by Greg Kyle, Professor of Pharmacy, Queensland University of Technology

Every day, more discount pharmacy stores and chains are opening and assaulting health-care consumers with the “we are cheaper” message. But is price the best way to achieve positive health-care outcomes?

Community pharmacists are the only Australian health-care professionals to practise in a retail environment. When a patient “buys” a medication, it is easy to see how they can think they are purchasing a commodity. This perception is further fuelled by the retail and price-promotion focus by many (if not most) pharmacies.

Multiple times each week, I receive a pharmacy sale catalogue in my mailbox. Yes, it has the vitamins and complementary medicines, the perfumes and general retail lines like soaps and so on, but it also contains an array of medicines that are promoted as cheaply priced.

There’s a tension between the three major players in this space: consumers, pharmacy owners, and the health system.

Consumers

From a consumer perspective, anything that reduces the cost of an item is good. Cost of living is increasing, and everyone is looking for the next bargain. Price can be a huge motivator in driving purchasing behaviour and just about every retail outlet knows this and uses it to attract customers.

Many discount chains have large amounts of signage dedicated to giving the perception they are the cheapest, and if not, they will beat any competitor. This can attract customers for specific products they are seeking – usually products for a specific need, or high use items.

Pharmacy owners

Pharmacy owners are in business, and they need to make a profit or their business will fail and close. The profit they extract from each sale provides all the business costs (rent, electricity, staff, wholesale cost of products) and also a return for the owner.

Therefore, the owner will try to maximise profit at every opportunity. This can be achieved by reducing costs or increasing selling prices of goods. This is true for any pharmacy owner, not just discounters. However, discount pharmacies generate the perception they are cheaper, so something has to give.

image Medicines shouldn’t be a commodity. Francisco Anzola/Flickr, CC BY

Some of the things targeted for cost reduction by pharmacies can be:

  • Staff: pharmacists cost more per hour than pharmacy assistants, so minimising pharmacists and using pharmacy assistants can increase profits. Getting pharmacy assistants to do some of the tasks usually left up to pharmacists, such as providing patient information and answering questions, can also cut costs.

  • “Non-billable” time: every time an employee is talking with a customer, that time has a cost (wages), but no direct return. If a product is sold, the hope is that the profit generated will reimburse the pharmacy for the time spent generating that sale. To address this, pharmacies can reduce the need for expensive staff to be involved in every purchase. Information is usually given with prescription and over-the-counter medicines. While private questions and information would be ideally shared in a private consulting room, this increases time per transaction. Whereas using a predominantly open segregated counter can reduce the questions asked and information sought – again reducing time.

  • Low-priced common items: consumers do not remember the price of every item, but they know the prices of things they buy commonly. Many discount pharmacies will determine these products and have their “top list” of 100, 150 or 200 items. These will be regarded as “loss leaders” and will be very competitively priced, whereas other products will have higher margins to subsidise the loss leader price reductions. If a consumer does happen to notice this, a price reduction on a single sale does not jeopardise the profit on the other sales made off that product.

Health system perspective

The health system aims to provide a high level of care for the most people possible at an affordable cost. Pharmacy owners will say the system doesn’t pay them enough to perform a variety of tasks. Consumers will say they pay too much out of pocket and the system should pay more. The system tries to maintain a balance between the two.

Discount pharmacies are driving down prices for a variety of non-prescription medicines and the government de-listed some medications it used to subsidise, saying their cost was the same or lower without a prescription. This makes price a factor and further leads to medicines having a perceived value in the consumer’s mind.

The health system deals with more than 200,000 hospital admissions each year (costing over A$1 billion), and at least half are preventable.

Medicines are the most cost effective and easiest to administer health intervention. Therefore the health system wants to ensure the Australian policy on quality use of medicines is followed to maximise the benefits for the patient and the budget, and minimise the harms.

Race to the bottom in price and quality

Our pharmacy system is built around a retail entity where the income is derived from selling a product, not advice. Today’s pharmacy retail model is becoming a “race to the bottom” on price.

Pharmacies that give advice when selling a product, and have appropriate staffing levels to maximise health-care outcomes, are becoming rare as consumers follow the price to the bottom.

The problem with such medication consumerism is it increases the risk of medicines-related harm. Consumers should always ask questions about their medicines regardless of the type of pharmacy where they buy them. If your pharmacist doesn’t answer your questions to your satisfaction – go to a pharmacy that will.

Authors: Greg Kyle, Professor of Pharmacy, Queensland University of Technology

Read more http://theconversation.com/discount-chemists-are-cheapening-the-quality-of-pharmacy-along-with-the-price-68744

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