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Tesco takes on the pharmacists
[Posted: Thu 03/11/2011 by Niall Hunter, Editor www.irishhealth.com]
Let the drug wars begin.
The supermarket giant Tesco is set to undercut considerably the prices charged by high street pharmacists and pharmacy multiples for prescription drugs to private patients.
Tesco has just opened pharmacies in its Naas, Co Kildare and Balbriggan Co. Dublin branches and is due to open further in-store pharmacies over the next year.
The chain is charging a much lower retail mark-up on prescription drugs than most other pharmacies. It will charge a mark-up of 20% and a dispensing fee of €3.50 per item.
This is the mark-up level recommended by the HSE but ignored by many pharmacists.
The coming to Ireland of the supermarket pharmacy has put the spotlight again on the cost of prescription medicines here and, in particular, the high margins charged by pharmacists on drug dispensing to private patients.
The State, at a time of economic crisis, has managed to make considerable savings in subsidised State scheme drug costs in recent years through cuts in manufacturer and pharmacy prices.
However, while the cost to the taxpayer of providing a medicine to a patient in a State scheme has fallen, the humble private patient not availing of a subsidised scheme is still paying through the nose in many cases for prescription drugs.
And often at a price that is many multiples of what it might be in the UK or other European countries.
Both the HSE, the Department of Health and the Consumers' Association have criticised pharmacists for the mark-ups they charge on drugs dispensed to private patients.
However, pharmacists argue that they have recently had major cuts in their payments under State schemes imposed by the current and previous Government and, essentially that they have to make their money somewhere.
Therefore, many pharmacists appear to be cross-subsidising State scheme dispensing through higher margins charged on their private patients.
Meanwhile health consumers are patiently waiting for evidence that drug prices are finally going to come down to realistic levels. There have been false dawns before.
Early last year, an agreement between drug manufacturers and the Government led to cuts in the ex-manufacturer cost of hundreds of prescription drugs which had come off-patent
However, due to the level of mark-ups still charged on these drugs by many pharmacists, price reductions for private patients were less than anticipated.
An irishhealth.com readers' survey late last year showed that 76% of those who responded said they had not noticed any reductions in the price of drug being charged in pharmacies.
And things haven't got any better as the recession has dragged on and more and more people are having to think twice about paying for primary healthcare.
A recent report by the Irish Independent indicated that many pharmacists are currently charging huge mark-ups on private prescription drugs - between 73% and 354%.
Tesco's promise to sell the cholesterol-lowering drug Lipitor at €17 less for a month's supply than the Boots rate gives us some insight in the margin levels many pharmacists currently enjoy.
The Irish Pharmacy Union (IPU) in its defence, has said its members are operating on wafer-thin margins, and their payments for dispensing drugs under State schemes, including the medical card scheme, have been cut by 40% over the past two years.
The IPU says no mark-up is now payable to pharmacists for medical card, as opposed to private dispensing.
It is now concerned about what impact the advent of pharmacies in Tesco stores will have on independent high street pharmacists.
Pharmacist earnings have proved to be a sore point between IPU members and Government in recent years.
Pharmacists and then Health Minister Mary Harney had an 11-day stand off in 2009 over planned payment reductions for State drug schemes, with some pharmacists temporarily boycotting these schemes.
The Minister was seen as the winner in that dispute and payment cuts went ahead. Mary Harney's successor, James Reilly implemented further payment cuts to pharmacists under State schemes earlier this year.
The HSE has made substantial savings for the taxpayer in drug costs for State schemes through manufacturer and pharmacy price reductions in recent years. It is aiming to save over €400 million this year in drug costs on State schemes.
in 2009, Mary Harney said pharmacists, who had generally being doing quite nicely under State schemes, would have to make major financial adjustments. This indeed is what practically everyone providing a service has been doing in recent years.
The plight of pharmacists hasn't been helped by the fact, that , like many other businesses, some took out huge 'hindsight-free' loans to expand before the economic bubble burst.
The Government is continuing its efforts to reduce the cost of drugs, but there is clearly a long way to go before we remove the 'rip-off Ireland' tag from this particular commerical activity.
Next year, Health Minister James Reilly plans to bring in a new scheme which will increase the level of lower-cost generic prescribing on State schemes. But such a measure will not necessarily deal with pharmacy mark-up levels.
However, the advent of 'Tablets from Tesco' will shine an intense spotlight on the issue of pharmacist profiteering when it comes to providing drugs for private patients.
Pharmacists are justified in pointing to the economic difficulties they are in and that they have to try to make a living like everyone else. Whether this justifies some of the mark-ups is debatable.
Equally, pharmacists are right to point to their level of skill as health professionals and the invaluable health advice they can offer customers. However, it has to be asked - is any service, however valuable, worth the sometimes very high mark-ups?
It remains to be seen whether we will now get true competition in the pharmacy sector. Consumers will also be keeping a close eye on whether Tesco keeps to its lower drug price pledge in the longer term.
Overall however, the prospect of, subject to the proper controls of course, getting penicillin with your processed peas, or diazepam with your Daz, has its attractions.
Whether in the longer term the move by Tesco into pharmacy leads to a wiping out of competition and the losses of hundreds of jobs in small Irish-owned and operated businesses and a 'de-skilling' of the entire pharmacy sector must also be factored in to any reaction to this move. As has been so often seen with major multiples, the promise of lower prices can lead directly to fewer and worse jobs, less genuine choice for customers and lower standards of service. Tesco is already an immensely powerful organisation; how it chooses to flex its muscles in this area will be closely watched.
|John Williams Posted: 13/11/2011 17:46|
I must say this article is pretty biased. It continually harps on about the big profits pharmacists are making. I know a number of pharmacies and the mark-up in all of them is 20% and I am told that this is the norm countrywide. Pharmacists have told me that they know of no pharmacy where it is 50% so I don't know where you got mark-ups of 73% to 354%. The last is laughable and quoting it in an article on medicines prices points up the unreliability of the rest of the 'facts' in this piece. Rather than being a cheerleader for the Tesco giant which repatriates €200 million profit to its British headquarters anually from its Irish retailing outlets a medicine website should be querying the level of service that it will give to Irish patients. In its last set of accounts Tesco reports a 7.2% NET profit. Many pharmacists would be delighted with that net profit. So where does Tesco generate such a lucrative net profit? It does so by having a large gross profit and this comes about by good buying and high prices. There is no way that Lipitor will be €17 (what strength?) cheaper than other pharmacies. If Tesco tries to bring in cheap unauthorised medicines from the Far East I presume that the Irish Medicines Board will treat it the same as everybody else and ban the importation until it applies for and gets a product authorisation number. Its is disappointing that Irishhealth.com joins the doctor, dentist, pharmacist and consultant bashing brigade for short-term populism.
|buzz Posted: 14/11/2011 16:38|
Agreed. This move is likely to have a big impact on small pharmacies who can't buy in bulk and pass on savings etc. A more sensible move would be to try to promote generics rather than brand names, whose efficacy is the same but cost is lower.
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