Retail pharmacy trade is set for a period of growth – but not without challenges, a new report has found
Bankwest’s Industry Overview Report on the pharmaceutical retailing industry, published as part of its Business Insights series, shows that overall retail trade is expected to grow at an average rate or 14.8% from 2015-6 to 2021-2.
This would see trade grow from its current $161.5 billion to $185.4 billion.
Pharmaceutical retailing revenue is forecast to grow by 3.9% over the next five years, to reach $16.4 in 2020-1.
The report shows that the landscape of the pharmaceutical retailing industry is set for a period of growth, with Australia’s ageing population and positive attitude to health and well-being assisting this growth.
However, it also sets out the challenges facing the industry in the next five years, which include intensifying competitive pressures, falling prices due to price disclosure and ongoing discounting tactics and the passing patent cliff.
Bankwest Executive General Manager, Business Banking Sinead Taylor says the report identifies important drivers behind the industry’s predicted growth.
“It’s pleasing to see the relative health of the pharmaceutical retail industry, but what’s especially useful is that a report like this is able to chart the drivers as well as the challenges facing the industry,” she says.
The pharmaceutical retail industry has seen recent entrants from not only well established pharmaceutical retailers, but wholesalers driving owned distribution models, and mainstream supermarkets and other large retailers offering non pharmacy medicines and health products.
This increased competition means diversification will be crucial to survival—the number of establishments Australia-wide has increased 11% since 2007 to 2016, suggesting competition in the already well-established industry has become more fierce.
Also driving the industry are:
- Industry reform. While the AHI has provided some relief from price disclosure and funds were allocated for professional services, “Savings measures continue with PBS reforms into split formularies (Formulary 1 single brand medicines and Formulary 2 multiple brand medicines) to foster greater transparency in pricing but this will also place downward pressure on pharmaceutical retail industry revenue. To this end, PBS introduced a 5% reduction to F1 drugs in April 2016”.
- The ageing population. Consumers aged over 50 are a key market, set to grow: in 2015-6 an estimated 8 million Australians will be aged 50 and older, up 2.3% on the previous year.
- An increase in real household disposable income. This has increased for the 12 months to January 2016 by 0.3%.
- Wholesalers: the majority of supplier terms for retail pharmacy are under 30 days, and retail pharmacy has largely adapted with the formation of buying groups along with short trading terms with favourable discounts, the report states
Ms Taylor says the report shows a change in employment patterns in the industry.
“Employment per establishment rates has declined in part due to the growing number of discount pharmacies, which tend to employ fewer people than traditional full service rivals,” she says.
“However, it’s predicted this figure will remain stable over the next five years as service based pharmacies retain market share.”