Ramsay CEO grilled, outlines corporate ownership benefits

Ramsay Pharmacy shopfront

Many independent pharmacies don’t have the resources to provide the same professional services a corporate could offer, says Ramsay’s CEO

Peter Giannopoulos, Chief Executive Officer of Ramsay Pharmacy, appeared before a panel at a Brisbane public hearing this week, as part of Queensland’s Inquiry into the establishment of a pharmacy council and transfer of pharmacy ownership.

Mr Giannopoulos told the panel that an aggregated corporate structure would help support pharmacy services in areas which may not be economically feasible for pharmacist owners.

“One of the catalysts for developing our franchise business was that there’s a distinct disconnect between the transition of care between hospital care, for example, within an acute setting of the hospital, and there’s a gap that occurs when patients are transferred during a hospital admission into the community,” he told the panel.

Part of this is as a result of technology, but part of it is also related to the need for a collaborative approach across patient continuums, he said.

“And that was primarily one of the reasons why we looked at franchise development as part of an area of opportunity to support our patients.”

He said that if ownership rules were lifted or relaxed, entities which were considered fit to own pharmacies could provide services in areas that would otherwise be prohibitive.

“The economies of scale as a corporate are such that we view a business as an aggregated business, so we’re able to support what would otherwise be marginal businesses,” Mr Giannopoulos said.

“I think we’re flawed in assuming that businesses, or pharmacies that are owned by pharmacists or corporates, if that was permitted, are not for profit.

“A pharmacist who owns their pharmacy wants it for profit. It needs to be a viable business for them to be sustainable.”

The relaxation of these laws would allow for businesses to be viewed as an “aggregated consolidated business – which means that we would be able to have what would be marginal operations in regional areas funded by other, more robust businesses in metro areas”.

“So we’d be able to provide services across our wider network. We operate 70 hospitals across Australia; many of those are in regional towns and regional locations,” he said.

“If ownership rules were lifted, we’d be able to provide services in needed locations within rural and regional towns.

Peter Giannopoulos speaks at the hearing.
Peter Giannopoulos speaks at the hearing.

“I would also see an investment in infrastructure and technology that’d support those patient journeys; I would also see the… more considered overlay, and probably the more diverse overlay, of processes that support clinical improvement and clinical outcomes.

“Independent pharmacists don’t have the capacity at the moment, given the erosion of margins, given the erosion of remunerations through strategies that are designed to create sustainability.

“That’s inadvertently impacted on pharmacists’ capacity; when we’re looking at pharmacists as individual business owners, not necessarily part of groups, it hampers their ability to reinvest in those businesses.

“So we’re finding that there’s independent pharmacists out there that have not made any active contributions or investments in their business for many, many years.

“That doesn’t lend itself to optimising improved community needs and meeting needs, and equally doesn’t lend itself to optimising patient outcomes as it relates to medications.”

Targeted therapies for chronic diseases, for example, require a greater level of clinical knowledge but “these pharmacists operate as silos,” Mr Giannopoulos said.

“They don’t necessarily have the resources to be able to tap in to optimise or improving their clinical knowledge.”


Ramsay under the spotlight

The panel asked Mr Giannopoulos a series of questions pertaining to Ramsay Pharmacy’s structure, particularly with regard to its oversight of branded stores.

He was asked if there were any aspects of the franchise arrangement that were “unusual or novel” compared with other franchising arrangements.

He told the panel that “The first thing is probably to dispel what’s been inaccurately communicated, and has been communicated since nine of our franchisees acquired, independently, the Malouf Group of pharmacies in Queensland”.

“Ramsay has not bought the Malouf group. Ramsay Health Care owns Ramsay Pharmacy, which is a franchisor, and it provides services to nine pharmacists who own 18 pharmacies that were part of the Malouf Group effectively.

“Ramsay as a corporate does not own, and can not own under the current regime, pharmacies.”

When asked about the fact that Ramsay’s support for relaxed ownership rules was a minority position – among the more than 200 submissions to the enquiry, only a few supported such a change – Mr Giannopoulos replied that “there’s very good lobby groups out there that are rallying the submissions, and the number of submissions to the enquiry”.

He said that Ramsay offers services to pharmacy on an opt-in basis and is also the lender of funds, “so that’s probably something that is not necessarily something that occurs routinely within the pharmacy landscape any more”.

This “absolutely” did not mean pharmacies were under pecuniary control of Ramsay, he said.

“It’s an arms-length funding arrangement.”

The panel questioned Mr Giannopoulos closely about arrangements such as product sourcing and staffing, and he explained that while Ramsay does offer these services, they are opt-in for pharmacy owners. Mr Giannopoulos undertook to provide the panel with documentation regarding these services.

He said that while the Queensland Department of Health had taken three months to approve the Malouf transactions, while checking that they complied with the current ownership rules, he was not aware of Ramsay having been the subject of an inquiry at any time.

Mr Giannopoulos also told the panel that Ramsay supported a “fit and proper” person or entity requirement for the ownership of pharmacies, which would exclude entities such as supermarkets which also sell products harmful to health.

“Tobacco and alcohol are in odds, direct odds, to optimising health outcomes of not only Queenslanders but nationally,” he said.

GPs should be excluded to retain the separation of the prescribing and dispensing processes; and Mr Giannopoulos also said Ramsay does not support pharmaceutical manufacturers owning pharmacies.

“They would be conflicted, they’d be incentivised by the provision of product, and their profits would be directly proportional to the sale of those products.”

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  1. David Lund

    Good accounting buddy. We all know that pharmacists aren’t the only ones benefiting from the arrangement. Ownership laws were intended to protect the public from business sharks so that they are the winners of health centered care, not the beneficiaries of your complicated business structure.

  2. Tim Hewitt

    So.. anyone can own a pharmacy, as long as it’s not anyone who would offer up too much competition for Ramsay!! (and what’s to stop any other corporate from anywhere in the world, good or bad, gobbling up wholesome pharmacy owning Ramsay one day??)..
    Public companies can be owned by anyone who buys a share….
    Also very generous of Mr G to offer to run unprofitable pharmacies in regional areas which would be propped up by profitable pharmacies elsewhere.. really??.. I’m sure Ramsay shareholders would hold a very different view.
    who is this guy trying to kid?…

  3. Sue C

    I think current franchise model encourages business innovation and competitiveness to make it attractive to individual owners to take up one banner group over the other. Look at the many oligopolies in our businesses today and what good are they for the consumer? Fewer choices, ridiculous prices. There should be more ground work made towards breaking oligopolies up instead of working to encouraging them to form.

  4. fiquet

    I can not but agree with Peter Giannopoulos on every point. It’s time to look at what benefits the patients, not just pharmacists’ need for turf protection.

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