Government reviews of pharmacy services have previously highlighted that there are insufficient differentiations between pharmacy offerings, and that the whole of pharmacy was essentially homogeneous.
That is the view from an external and non-pharmacist perspective, which is valid, because that may represent how the bulk of consumers see pharmacists, and could be one of the major reasons that there has been a gradual erosion of all major pharmacy markets to supermarket environments.
There are seven recognisable components to achieve differentiation, and an attempt is made here to lift the veil off each component.

With the events of the last week in October conspiring to alter the face of pharmacy. it is high time that there was experimentation in different models of pharmacy.
Homogeneity is seen by government as being non-competitive, and because of this, a higher cost to government in subsidising health programs through pharmacy environments. Attempts to create a differentiation between pharmacies have been written into the Guild/Government agreement, but competing agendas have combined to prevent an active differentiation from occurring.

For example, one wing of government sees pharmacy services as being an orderly system totally under their control, and as being a planned service. This is a bureaucratic approach, not very creative and as a result is seen as very bland.
As it is not driven by pharmacists and open market forces, there is no differentiation.
The process of PBS approval numbers ensures that the lid is kept tightly on the number and location of pharmacies, which has the effect of reducing overall competition between pharmacies.

Another wing of government simply wants all market controls over pharmacy to disappear, and that includes protectionist items such as ownership and location rules. If this were to happen rapidly, it would cause most existing pharmacists to sell out to major retailers or relocate to an isolated pocket of population, or simply walk away from their business. Community pharmacy in its current state is not financially fit enough to defend itself, because it has been sheltered from many marketplace attacks, and has forgotten how to fight in an open battlefield.
While the survival rate of independent pharmacists would be small, it would still be there and provide a platform to openly compete. The system in the US seems to indicate that the market would split evenly between open ownership and pharmacist ownership.
Whether this would be the case in Australia is problematical because of the huge market shares of total retail business held by Coles and Woolworths and the fact that many pharmacists have walked away from straight retail activities in favour of building up dispensing and cognitive services.

This does not mean that pharmacists do not compete.
They compete with each other, which generally means they compete on service only.
Consumer basic motivation is price and convenience, with quality of service encouraging repeat sales, which means that if an organisation such as Woolworths buys into pharmacy, the associated pharmacist will be located in a convenience setting and there will be strong encouragement (directives?) to compete on price.

While pharmacists may think that there is an intrinsic protection within their professional services, this assumption should be properly thought through. Professional services can be commoditised, as was proven when GP's were corporatised into medical centres. Those that went into medical centres became better off financially and in terms of lifestyle. Those practising in the traditional manner outside of the medical centre found themselves marginalised and left with a lot of low profit activity.
Their income and lifestyle depleted sharply.
Therefore, those pharmacists who think their backstop will be medication reviews etc. I would not be relying on these services to underpin your future.

So what are the elements of pharmacy that can cause differentiation, and lead to a multifaceted offering?

Well, the first of these is ownership.
Australia has experienced open ownership at different times, and some of us are old enough to remember how those pharmacies operated.
There were Soul Pattinson corporate chain pharmacies, Hallam chain pharmacies and a host of other pharmacies owned by individuals who had never been registered pharmacists.

Generally, the corporates conducted themselves ethically, while a large proportion of non-pharmacist independent operators did not.
In South Africa currently where there is open ownership, pharmacists there are reporting deteriorating standards in professional attitudes and in workplace conditions.
There are consistent reports from UK and US pharmacists that their professional obligations are continually being ignored or overruled by chainstore managers.
It would therefore seem that the high standards that pharmacists set themselves are not necessarily sustainable in an open ownership environment.

There is no doubt that the Australian model of pharmacy is regarded as a best practice model and is the envy of most other western countries. The big question is whether it is a sustainable model, because standards elevate costs to the consumer and the consumer represents votes.
It is my personal belief that the standards that pharmacists create are an essential component of the professional life of a pharmacist, and are recognised by consumers. In departing from those standards, a pharmacist would find it difficult to practice; the profession would then only attract lower calibre people and at that stage there would be little to blur the line between open ownership and pharmacist ownership.
The trick will be to find the economic balance between high professional standards inherent in pharmacist ownership compared to the lower or alternate standards created with non-pharmacist ownership.
Consumers should be educated as to the difference, and herein lies a publicity campaign for official pharmacy.
And for the record, I am unashamedly in support of total pharmacist ownership of pharmacies, with exceptions occurring only in special circumstances.

The second form of differentiation is by location.

Location is generally determined by population density and where other businesses congregate in shopping strips or shopping centres. It is generally a function of market movement and development, but in these days of regulated pharmacy location by approval number, there is an imbalance.
Locations which should include pharmacies (such as medical centres) do not, and sometimes small communities suffer because the criteria for establishing a new pharmacy are not met. Generally, established locations are well serviced, but even these do not take account of shifting populations or other demographic changes.
But for the health planner, having a logical grouping of pharmacies as part of a health distribution network makes a lot of sense. Also this model depends on having a strong pharmacy at the appropriate points of distribution, and in recent years, rural/remote populations have been disadvantaged through population shifts (often to well-serviced urban areas), also because of the financial stresses placed on the rural/remote pharmacist as droughts kick in and demographics change sharply (customers are unable to pay).

Some recognition is finally being made by government and many support schemes are beginning to flourish, designed to end intellectual isolation and address some of the special needs of these groups.
The market-oriented deregulated model could never successfully reach into this type of rural/isolated environment and while some balance is being built back in through government funded schemes managed by the Pharmacy Guild of Australia (PGA), a lot more work needs to be done in this regard.

The third method of differentiation is by physical size.

Generally it can be said that the larger the premises, the more that you sell.
Larger premises bring with them new management challenges as to how all the space is to be productive, and there is an optimum size for a given catchment, depending on competition and market mix. The pharmacy/supermarket battle is always characterised by a lopsided equation--the supermarket has more space, can negotiate a bulk rate for rental because of size requirements, and because of sheer physical size, makes for more visibility.
Pharmacy has mostly restrained itself from looking too much like a supermarket, and has generally kept itself small in size. Consequently, many pharmacies look congested and do not trade efficiently, with the result that supermarket competitors do it better and win market share.
Coupled with the fact that most independent pharmacists "want to personally do it all", they have never efficiently delegated management, and the end result is no time to supervise management--because they are the management!
This compounds into very tired proprietors losing the ability to make clear decisions and outthink their competitors.

The fourth method of differentiation is determined by the number of separate business units owned by the one proprietor. Most states in Australia limit ownership to three or four units.
Allowing businesses to develop into a chain operation means that there is continual growth, as new catchments are able to come on stream. With each new catchment comes new knowledge and marketing methods.
When pharmacists go down the path of multi-units they generally find they can cope well with two units, but the third and fourth units stretch resources fully. It is only if each unit is a very large business that it can sustain and absorb a central administration unit to control all the common functions and streamline overheads.
Generally speaking, it is estimated that it would take ten average business units to sustain one central administration unit, which is an impossibility under the various Pharmacy Acts that limit unit numbers.
The argument given for limiting unit numbers is that a pharmacist cannot personally supervise all professional responsibilities, past a certain number of units.
This is patently a nonsense, because a systemic approach to supervision from a central location will translate into a higher degree of supervision.
The advantage of having a chain operation is the visibility it gives, leading in to an eventual national identity under a disciplined control. Standards developed in one primary location are easily transported throughout the chain.
The primary block to this type of operation is the protectionist mentality of most of the pharmacists controlling the PGA. There is no doubt that the traditional model has served pharmacy well to this point in time, and in selected circumstances, can continue to do this. But by not allowing larger scale models to emerge because of protectionist thinking, is seriously disadvantaging the entire structure of pharmacy.
As Dan Da Silva, corporate strategist, has pointed out in his article, a Woolworths takeover of one of the major pharmacy wholesalers would seriously impede pharmacy's ability to develop a strategic direction, both offensively and defensively, because wholesalers control the manufacturing and the brands.
We need more than one national chain of retailers to deliver a pharmacist-owned version of health care.
Once having reached that stage we could confidently compete with Woolworths, and in fact, would probably welcome it.
We cannot do this under our self-imposed set of protectionist restrictions.

The fifth method of differentiation is by organisational structure.

This has been mentioned in a number of previous articles, but its importance has to be recognised,
Currently, pharmacists can operate as sole traders or partnerships. There are a smattering of other organisational structures, but these generally relate to Friendly Societies or grandfathered proprietary companies.
What is needed is an efficient capital structure for pharmacy, and this has to be company structure or any other variation that will satisfy needs.
Within a company you can issue shares for different purposes which can embrace and retain capital from active pharmacists, employee pharmacists, part-time pharmacists, retiring pharmacists and investor pharmacists.

No other structure can achieve these ends.
From a taxation point of view, companies offer a lot of advantages.
From a legal point of view, investment is separated from daily management decisions. o e.g. if you are a partner, and your partner errs in a professional transgression (say unlawful sale of s4 dugs as an example), you are jointly and severally responsible with your partner, even if you are not an active partner.
This is not a fair situation, and by separating investors from pharmacists/managers a fairer result is obtained.

Most importantly, a corporate structure is a continuing structure, has a corporate memory, and provides employment at different levels in different capacities (manager, director, board consultant, locum etc).
The more units involved, the lower the cost of administration.

The sixth method of differentiation is by marketing mix.

Essentially, this is determining the mix and balance of commercial goods and services compared to professional goods and services. How many specialty retail markets will be catered for, how will professional services be "value-added" and what level of cognitive services will be provided.
Will there be an Internet e-commerce component.
Matching the needs of the populations serviced with the skills contained within the organisation is the skill of marketing.
Isolated pharmacies may find they have to take a generalist approach and be all things for their customers/patients.
Pharmacies located in denser populations may have to take a more specialised approach due to the fact that competition in any category may mean that you have to look after niches, and build on each of these components.
Whatever the ultimate marketing decisions are, the final mix will determine the "flavour" of the organisation.

This leaves the seventh method of differentiation as fitout and colour scheme.

To wrap your market up into a presentation that will appeal to your market segment, you have to work back from the market mix decided upon. There is an amazing range of permutations and combinations that can be achieved with colour, fixtures fittings design and layout of departments.
It is this final "packaging" that imprints on your consumer's mind.
If you make it easy for them, they can even visualise the location of their needs, and this creates a comfort factor, even a "bonding".
Provided it is all delivered with price, convenience and service, you will always win through.

Each point of differentiation noted above is like a veil that has to be lifted.
Examination and enhancement of what is behind the veil will decide the measure of success.
The process is a learning one and there has to be constant adherence.
It may even prove to be an exciting experience to be able to live freely once more.
Woolworths and their ilk are so far ahead of pharmacy it is not funny, and we will have to play catch-up for many years to come--provided we get the opportunity.
Time is running out for pharmacists.
You need to empower your leaders and the leaders need to explain to the grass roots that the alternative of really competing with Woolworths will be more exciting than a pharmacy profession led by the nose by Woolworths.

It is only a small decision step to unleash the real power of pharmacy- allow corporate structures, allow chain entities, but retain absolute ownership by pharmacists. Everything else is basically in place.

It's really crunch time everybody!