COMMUNITY pharmacy needs to consider structural solutions to the challenges of accessing equity capital or risk deregulation, pharmacy owners were told at the Medici Capital/Attain Business Brokers Pharmacy Dinner in Sydney on Wed.
Issues surrounding accessing capital featured prominently throughout the evening, with Medici Capital Managing Director, Frank Sirianni, warning future generations of pharmacists may not be in a position to buy incumbent pharmacy owners out if the issue of access to equity capital was not addressed.
"We really now need to start to think about long-term capital issues, because one of the problems now is it's not debt capital that's the problem in pharmacy, it's equity capital," he said.
"And I think we're going to need to think about how do we involve passing equity in this pharmacy landscape, because the next generation of pharmacists may not be willing to borrow heavily [or] take a risk.
"We probably need to start thinking about structural solutions to that problem, because otherwise we're going to have an explosion in the pharmacy ownership risk landscape."
Sirianni warned that challenges in accessing ownership could create an appetite for deregulation of the ownership rules and pave the way for US-style groups to dominate the Australian pharmacy sector.
"What caused deregulation in most of the market was never the economists," he said.
"It was always the pharmacists.
"In the US, in Canada, deregulation occurred because pharmacists wanted it.
"[So] we need to get that equity solution, otherwise we're going to get to a situation in the market where we won't have the buyers in the landscape that can afford to take John Bronger out, or John Loveridge out or any of the other owners in the room, because there just won't be that equity capital sitting there."
Giving an overview of the pharmacy market in Australia, Sirianni added that workforce costs were rising within the sector, fuelled by a burgeoning workforce shortage, as pharmacy graduates pursue alternative careers.
"We're starting to see a lot of pharmacists have to employ staff at above award wages," he said.
"That's something we're going to need to factor into our thinking; certainly it's something we need to address in terms of how we attract and retain talent within pharmacy.
However, he added there were signs that landlords had become "a little more realistic" as a result of the decline in the broader retail sector, and the broader macro economic environment.
"The reality is we're starting to see some evidence of pharmacy having a reduced occupancy cost level."
The above article was sent to subscribers in Pharmacy Daily's issue from 25 Oct 19
To see the full newsletter, see the embedded issue below or CLICK HERE to download Pharmacy Daily from 25 Oct 19
