The blame game: Part 2


hourglass and coins - MA expresses PBS cuts concerns

“As an employer I am embarrassed at the low wages I have to pay my pharmacists,” owner tells King Review panel

Over the past few months, AJP has covered in detail the dissatisfaction that employee pharmacists are expressing regarding their wage rates (see here and here).

While many of our readers responded by placing the blame squarely in the hands of the Pharmacy Guild of Australia and its owner members, we decided to hear owners’ side of the story: why do they think remuneration for employee pharmacists is so low? And what can be done to solve the pharmacy wage crisis?

Many owners told us that price disclosure is pushing down remuneration, consequently limiting their ability to pay staff a decent wage, and this message has been echoed in several submissions by pharmacy owners to the King Review.

“As owners we want to pay pharmacists more,” owner Mario Barone told AJP. “At the end of the day we’re all pharmacists. But the government keeps pushing down our remuneration through price disclosure, and that gets passed on to the pharmacists and other staff.”

Jacquie Tsimbinos, pharmacist and owner of Terry White City East in South Australia, agrees with Barone.

“Pharmacy owners cannot accommodate paying more to pharmacists because they are already struggling to make ends meet each month,” she wrote in her submission to the review panel.

“The government needs to step up and take responsibility for pharmacist wages. More and more young pharmacists are leaving the profession because they feel they have no future which is very sad.”

Mark Browne from Amcal Max in Gympie in Queensland says the financial model in pharmacy is flawed.

“The current financial remuneration is pathetic. While the governments make short-sighted gestures to penny pinch, it is the innovation and the patients who miss out, for political gain. Retail pharmacy is hurting with 1000 pharmacies not earning wages.

“As an employer I am embarrassed at the low wages I have to pay my pharmacists as health professionals. However, when shop assistants earn almost as much as pharmacists there is seriously something wrong,” says Browne.

Victorian rural pharmacy owner Paresh Kerai explains that his business is reliant on the government for a steady income stream.

“The dispensing income is currently what keeps my pharmacy viable. If this is lowered and not supplemented by other means then the viability of my pharmacy is at serious risk.

He says increased and aggressive price disclosure and reductions have brought down PBS expenditure significantly.

“My concerns are not just about protecting my personal bottom line but more so to make sure my pharmacy continues to operate for years to come… Unfortunately running a pharmacy has costs and if I am just breaking even, then how [am I] to continue living?”

Some employers have even had to reduce staff numbers to keep going.

“With PBS reform and price disclosure, this has negatively impacted on pharmacy,” says Raquel Tassone, owner for Mt Claremont Pharmacy in Western Australia.

“Prescription numbers have fallen and turnover has dropped significantly to the point that staff reductions have had to be made,” says Tassone, who calls on the government to fund additional services that are provided by pharmacies like hers.

“Moving forward to the 7CPA, more needs to be done on ensuring the livelihood of pharmacy for the future so that all Australians are able to continue to access pharmacies,” she says.

Pharmacy owner Craig Clark has the same concerns.

“We have three pharmacists on all week. The sudden decrease in income has made us look at all aspects of the business including many of the free services, the seven days a week opening, the staffing levels, and rent,” he says.

“We all understand the pharmacists wage is low compared to other professions. If you keep cutting pharmacy remuneration there is no way we can increase our pharmacists wages that work in our stores.”

See The Blame Game: Part 1

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27 Comments

  1. LeavingIndustry
    20/09/2016

    Although I agree with this, and it’s nice to hear some owners care, even before price disclosure there was nothing helping pharmacists get a better wage, and there were no wage increases.
    It’s just now there is a reason for owners to blame it on.
    I’m happy to be corrected on this.

    • Jarrod McMaugh
      20/09/2016

      You could always discuss that with APESMA.

      For years they allowed pharmacist wages to languish.

      Only two types of bodies can make representations for changes to awards – trade unions and employer representatives.

      If APESMA were effective, they would have applied for the award to increase in the 90s and 2000s when wages were above award, rather than sitting on their hands and doing nothing until it was too late and the employment market had driven wages down to the award rate.

      A name change doesn’t excuse PPA from their lack of effectiveness when they were APESMA.

      • Consultant Pharmacist
        20/09/2016

        The ultimate elephant in the room is that people are paying too much for Pharmacies and there could be a lot more viable ones operating.

        The solution to this is to increase the number of Pharmacies and minimise barriers to entry.

        • Jarrod McMaugh
          21/09/2016

          I purchased a pharmacy 6 months ago (on the dot – 6 month anniversary!)

          The majority of the cost of this business was in the cost of the stock and fixtures/fittings.

          Very little of it was for goodwill.

          So I would challenge the assertion that people are paying too much for pharmacies. If the cost of the pharmacy represents fairly closely the value of the stock within it, then how can the cost be reduced? Just get free stuff when you take over? That’d be nice!

          • PharmOwner
            21/09/2016

            Hi Jarrod, I purchased a pharmacy 18 months ago, almost on the dot. There was a very significant goodwill component back then. What I found however, was the trading figures put forward by the vendor were not even close to accurate. As a result, the “real” earning capacity of the business is such that I work upwards of 68 hours per week for very little return and have little choice but to put the pharmacy on the market and accept that I’ll lose most of the equity I’ve put in. I simply cannot afford to take the vendor to court because he’s in a much better financial position to defend himself and would crush me. Even though I’ve grown customer numbers and am dispensing more scripts than when I took over, other issues such as price disclosure and the $1 co-pay discount mean that I’m not making any more profit and certainly nothing like the EBIT that was put forward in the pharmacy profile package. To say that I am angry, disappointed and disillusioned with the vendor, my accountant and the industry in general is an understatement. I see no future in community pharmacy. If you’ve managed to pick up a business for the cost of stock and fixtures and fittings, well done to you, but that is not everyone’s experience. I would like to see some mechanism other than legal action which would make vendors/brokers more accountable and reduce the likelihood of other young buyers from getting burnt

          • william so
            22/09/2016

            What about Due Diligence? Did you check before you buy? I am very sorry that you got burned, your broker and accountant had obviously let you down this time. Have you managed to sale the business? Or may be you should consider taking on a partner to have some capital injections. The reputable pharmacy brokers usually have some connections/clients willing to do that. My advice to you is do go and talk to some brokers.

          • PharmOwner
            23/09/2016

            Yes, due diligence was conducted but when you have a vendor who was putting through scripts he held on file for people who never came to collect them, the dispensing figures, PBS statements and bank statements looked good. It was only when I started running the business honestly that the true business performance came to light. The business is not performing well enough for a partner to be interested, and after my experience I would not trust a partner anyway

          • Jarrod McMaugh
            23/09/2016

            Can you send me an email?

          • PharmOwner
            18/10/2016

            Sure Jarrod, what’s your email address?

          • Jarrod McMaugh
            09/12/2016

            wow, just got notified of this… I’m guessing it say in moderation for a while.

            I would expect that if I put my email address in, it will be blocked…..

            Try googling me, as a guide, my email is my first and last name (no dots or dashes etc) at my pharmacy group – capitalchemist with the australian web extension com au

          • william so
            24/09/2016

            Not all partner is bad, I can understand but I think you best to try to save the business rather than “cut your loss”. May be even talk to Pharmacy Guild, now that you qualify as a member, it’s your right to seek their helps.
            Unless of course, you got something else planned.

          • Bob
            21/09/2016

            Must be out in the boonies where no one in their right mind would want to practice if goodwill wasn’t a large component.

          • The Cynic
            21/09/2016

            It doesn’t matter whether you call it ‘goodwill’, sellers premium, future promise or opportunity. There is almost no business which sells itself for the cost of stock and fixtures only. To give the impression that pharmacy businesses, hair salons or any other sort of business change hands for the cost of the hardware and stock therein is plainly false. We are often scolded for assuming that the rare occurrence constitutes proof that ‘they are all at it’. We are frequently talked down to by some who set themselves up as exemplars in their field.

          • Jarrod McMaugh
            22/09/2016

            I didn’t say “the cost of stock and fixtures only”

            I said ” close to…”

          • Big pharma
            22/09/2016

            More vague word play. The reason for your post was to indicate you payed next to nothing for good will. Maybe a dam metaphor would clear things up?

          • william so
            24/09/2016

            For the sake of Jarrod and the other pharmacists out there.

            I would like to point out that when you sell a business, the attention is on the new purchaser. Would the new comer be able to duplicate what the old owner is doing i.e. retain the same NET PROFIT in the business? If you think you can only do exactly the same then you pay for may be 5 years goodwill meaning in 5 years time, you should be break even from your initial investment, that’s also call a rate of return of 20%. If you can do better, then you prepare to pay a higher Goodwill (Your future Goodwill – not the one presented to you on P&L statement)

            However, we are talking about NET PROFIT not GROSS PROFIT which means you have to minus the wage of the person(s) who works in the business including often OWNER-MANAGER.
            This is when things are open to debate sometime. Should we set the owner wage to $60K?, $80K? $100K? Seriously the better the previous owner manager, the more time the previous owner manager spent in the pharmacy looking about his/her very loyal clients, unfortunately you’ll have to attribute a higher “wage” to this person, thus the lower the goodwill. Sometime in a strict mathematics sense, it puts it into negative value.
            Please take time to understand what I’ve said here. Ask your accountant if you don’t. It is vital before you make any purchase decisions.

            A work on the side, I notice in King’s Review that an “average t/o” and “average NP” of a community pharmacy is $2.8M & $107,000. (page 15, pdf version). If you are following my thoughts above, you’ll known how these two doesn’t adds up.
            I am sure the figures are based on facts, but there is no “average” pharmacy.

          • Michael Post
            21/09/2016

            Hi Jarrod. Goodwill is intangible and represents the ongoing profitability of the business . The goodwill figure will generally be 3-5 years nett profit. A business with a 200k nett profit will potentially cost 600k to 1 million dollars + stamp duty (now removed in NSW I believe) + fixtures/ fittings , stock at cost minus liabilities.

            Some pharmacies sell for 6+ times NP

          • william so
            22/09/2016

            Jarrod, you are game to purchase a “bomb”! Hope you can improve it, wish you every success.

          • Jarrod McMaugh
            22/09/2016

            G’Day William.

            It’s far from a bomb, and going quite well thanks

          • Consultant Pharmacist
            13/10/2016

            Was the Pharmacy in receivorship? Why did you need Capital from the group?

          • Jarrod McMaugh
            17/10/2016

            I don’t understand the second part of your question

          • Consultant Pharmacist
            17/10/2016

            You said the thing you liked about the group was it allowed you to have a controlling stake. Presumably you would have bought a Pharmacy outright if you didn’t need their capital?

          • Jarrod McMaugh
            17/10/2016

            2 things:

            1) I would always want a business partner – the ability to draw on their expertise is one of the most valuable things I have in my business life.

            2) by buying outright, are you referring to not having a loan at all? I wouldn’t do this even if I had 100% capital – it’s better to have financial backing, especially at the start, and for future consideration of expansion, etc.

        • worried
          21/09/2016

          this is rubbish I know Pharmacists who OWE no money on the pharmacy that are struggling…. the elephant in the room actually is that Pharmacists are paid by the government and yet expected to pay normal commercial rents and overheads

      • Owner
        21/09/2016

        Yes it would be interesting for the King review to examine whether APESMA/PPA has exercised its duty of care. I would love to know if they are just a puppet organisation….they certainly act this way.

  2. Tired employee pharmacist
    20/09/2016

    Why aren’t we getting paid for what we do – the dispensing fee per prescription is way too low – this if increased would negate the percentage mark up on prescriptions that we RELY ON – lets get it right – we dispense medications and counsel on their use – this is where we should be paid – not markups on what we pay for medications – the Guild did a good job on pushing this lower and lower over the years – and this is the end result

  3. David
    24/08/2017

    I am a member of the pharmacy guild and pay my pharmacist 42 bucks an hour full time and should be more for how helpful she is to the store. Raise the base general prescription rate to 15 bucks instead of a measly 5.30 that the warehouses are charging and either put the general safety net down to 60 scripts or negotiate with private health funds who rip off the public with rediculous monthly fees to help pay for scripts. This will help pharmacies pay better wages and help implement other services that are vital for the future of pharmacy. I am an independent store and care about my staff and my patients. Low and behold, we may even be able to pay the front shop girls more as well

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