The Financial Difficulties Of The Insolvency Firms Are Becoming Increasingly Familiar With The Restructuring And Regeneration Of Local Pharmacies

1333 WordsOct 15, 20156 Pages
Insolvency firms are becoming increasingly familiar with the restructuring and regeneration of local pharmacies due to the increased financial pressures in the changing landscape of the industry. There are approximately 4,022 pharmacies in Australia that inject $16.2 billion worth of revenue into the economy each year (IBIS World, 2015). Despite this, a combination of lowering prices and intensifying competitive pressures has resulted in an increasing number of bankruptcies in the industry, a notable example being the Pulse Pharmacy Group (IBIS World, 2015). In 2012, Guild President Kos Sclavos reported that 120 pharmacies had gone bankrupt in the past year and a further 300 were in ‘financial distress’ (Daniels, A 2012). Whilst this…show more content…
Competition has also increased for the residual revenue streams, as there has been a growth in non-registered pharmacies that sell cosmetics, beauty products and other general retail products. These stores would not be subject to the strict ownership and location rules placed on official pharmacies and as such may benefit from more convenient store positioning. Figure 1: Revenue Growth Figure 2: Main Revenue Drivers (IBIS World, 2015) (IBIS World, 2015) 1. PHARMACEUTICALS BENEFITS SCHEME (PBS) The pricing structure of prescription drugs is regulated through the Pharmaceuticals Benefit Scheme (PBS). The Pharmaceuticals Benefits Scheme (PBS) was introduced by the Commonwealth Government in 1950 with the aim to lower the cost of drugs to the Australian Public (IBIS World, 2015). This scheme governs 80% of prescription machine and as such has reshaped the pharmacy industry as 62% of revenue comes from these products (KordaMentha 2015). The government establishes an Approved Price to Pharmacists that they will reimburse to pharmacies, however the pharmacies themselves can negotiate lower purchasing costs from drug suppliers so that the profit margin is increased as displayed in Figure 3 (KordaMentha, 2015). Pharmainfocus reported that in instances chemists are earning 50% profit margins due to negotiations with manufacturers, whilst still
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