Pharmacies - Price competition - Why is there none?

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locum-motion said:
What's happening there, Gearoid...
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Many thanks for the length, detail and informational nature of this post.

The situation is indeed a lot more complex that I or the rest of Joe Public would have realised.

It doesn't get over the issue that we are paying far more than our European neighbours for pharmaceutical products.

We need consumers to apply pressure, whether political or otherwise, to hopefully improve matters. Thus my opening this thread.
 

Thank you. I'll address some of your other queries sometime when I'm feeling energetic enough. In the meantime - and as Gearoid says above - please remember that the situation IS alot more complex than you might realise. In the coming days/weeks, you're going to hear more and more about the minister's cuts in Govt payments to pharmacists. When you hear that, please don't just think "Ah, sure, those guys have been ripping everyone off for years! It's about time." Instead, please go and talk to your local pharmacist. Ask him/her to explain how pharmacists are paid, how they will be paid in the future, and what the changes mean to the services that he/she will provide in the future. You'll find the pharmacist willing to talk to you, and very open and honest. And you might get a big shock about a profession that everyone thinks of as a license to print money. I had more disposable income as a barman 20 years ago than I do now. I had more disposable income during my Pre-Registration year (13 years ago) than I do now. (Pre-registration is like a year of work experience between when you get your degree and become a qualified pharmacist). And I certainly wouldn't let my nephews/nieces choose pharmacy as a career.
Thank you for listening to my rant.
 
Thanks again to the pharmacists for helping to bring some light to this discussion. Can any of you suggest how the pharmacists can help to get better value for money from the drug companies, who are a big part of the problem? In many other industries, the retailers play a key role in 'keeping manners' on the manufacturers / distributors.
 
samanthajane said:
My daughter had to go to the doctor last week, doctor was 60 euro and the medicine was 33 euro.
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This is something that baffles me:
Why do we always hear complaints about the €33, but never about the €60?

Don't forget, please, that out of the €33 you paid the pharmacist, s/he had to buy the medicine in in the first place!
Depending on what the item was, that would have been either:
approx €20, or
approx €16.50 + VAT @ 21.5% = approx €20.

So, therefore, the pharmacist made a gross profit of about €13...
(SamanthaJane: If you wish to tell me - via PM if neccessary - what the item and quantity was, I'll check and post up the exact cost price here, and tell you the exact profit made!)

So, why don't we hear complaints about the €60? After all, the 'cost price' of a sheet of headed notepaper and some ink is probably €0.001. The GP's 'gross profit' is €59.999!

And before anyone reminds me about the other costs involved, please remember:

1. that they all come after gross profit, not before, and

2. that;
a. Both the doctor and the pharmacy have rent/lease/mortgage to pay on their premises.
b. Both employ staff.
c. Both have electricity bills/insurance etc to pay.
 
gearoid said:
I don't claim to be especially knowledgeable, just a particularly sinical consumer given the past antics of your professional organisations e.g limiting numbers of students, preventing foreign pharmacists entering market etc. etc..
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Hi Gearoid,
I promised readers of this thread a few days ago that I'd get back to you again about some more of the questions raised, so I was re-reading most of the posts, and your quote above really jumped out at me as something that badly needs clarification.

What "professional organisations" are you referring to? If we're talking about the profession of pharmacy, there are basically two that you maybe referring to; The Pharmaceutical Society of Ireland (PSI) and The Irish Pharmacy Union (IPU).
The PSI is the body that regulates pharmacy.
The IPU is the body that represents Community Pharmacists.

My understanding of what you're trying to say above is that the representatives of the alleged pharmacists' cartel are responsible for restricting entry to the profession via limiting of academic places and restrictions placed upon the practice of foreign pharmacists.

Here are the facts:
For many years, there was only one School of Pharmacy (SoP) in Ireland (The Republic, that is). This was in Trinity College, and had 50 places per annum. The number of places was detemined by many factors, not least of which was the size of the building used, which was not actually owned by TCD but by the PSI. Other factors would have been under the control of TCD, the Dept of Education, the Dept of Finance, and many other bodies, but in no way whatsoever controlled by the IPU or any pharmacists. For many years, the IPU campaigned to have the number of places increased.
Since the late 80's, there has been free movement of professionals throughout the EEC/EU. Anyone who registered as a pharmacist in any EEC/EU country could come here (or go to any other EEC/EU country) and register and practice as a pharmacist. They didn't even have to satisfy any language requirements. In the main, three large groups of people made use of this facility; Spaniards, Poles, and Irish people including myself why went to Great Britain to study in the various SoP's there. There were of couse occasional others who didn't fit into any of these three categories. In addition, there were two other possible routes for registration: Pharmacists registered in Aus or NZ could do a 1 month pre-registration period and an exam and then register, and finally pharmacists from elsewhere could present their credentials and the PSI would decide how much study/pre-reg they would have to do before registering. I know one Canadian who registered this way; he was asked to do 4th year in TCD and then a pre-reg year same as the rest. These four possible routes for registering were laid down in law. There are not and never have been any restrictions placed on the practice of Irish, Australian, New Zealand or 'other country' pharmacists. However, until last year, EEC/EU graduates like myself were not recognised as pharmacists in pharmacies less than 3 years old. Therefore if I had opened a new pharmacy, I would have had to employ someone else in it for the first three years. This restriction was laid down in European law as part of the original free-movement laws. It was challenged many times in Irish and European courts, with the support of the IPU. All challenges failed. However, it was finally removed whan the Pharmacy Act 2007 was commenced last year. The IPU had been actively campaigning for a new Pharmacy Act since before I qualified (The old ones dated back to 1875!)
A number of years ago, TCD SoP moved into a new building on the main campus in the city centre, and increased to 70 places per annum. The building they used to use, at 18 Shrewesbury Road, is now the HQ of the PSI.
Within the next couple of years after that, both the Royal College of Surgeons in Ireland in Dublin and UCC in Cork started SoP's, and they now account for 105 graduates per annum between them.
All of these new places were welcomed by the IPU, which awards prizes to the top students in each of the three SoP's.

So, please, don't accuse our representatives of restrictive "antics".
 
And finally... (unless someone comes back with more questions!!)

The answer to the original question, which was:
"Pharmacies - Price competition - Why is there none?"

There is price competition between pharmacies in most sections of the business. Let's say the business breaks down into four main sections:
1. Prescriptions for which the Govt pays.
2. Private prescriptions, for which the patient pays.
3. Over the counter medicines.
4. Sundries, such as shampoo, razor blades and all the rest.

I'm going to look at each of these, but not in order coz I'll get the brief ones out of the way first.

4. There is considerable price competition between pharmacies on this type of item. It is easily verifiable. Just go into 5 different pharmacies and look for, I dunno, a bottle of Radox or something. Let me know how you get on.

1. No price competition whatsoever. The Govt decides how much they're going to pay, and they pay all pharmacies the same amount. It is these payments that Mary Harney's just announced drastic cuts to, amounting to, on average, 36% of the gross profit for this activity. Gross profit is made up of: fees, allowances, mark-ups and discounts received. For every € that a pharmacist used to get for this activity, they'll now get €0.64. Other sectors of society are being ask to give up 8%. We're having 36% imposed upon us.

3. Over the counter medicines. There is price competition, but not a huge amount of it, for various reasons. Mainly, remember that medicines are not ordinary items of commerce. If I run a bike shop, I'm going to try to sell you the fanciest, shiniest bike I can, with lights and bells and a new helmet. If I'm selling you a medicine, I'm trying to sell you what will make you better and/or relieve your symptoms. There are ethics and laws involved. We only sell you 12 or 24 paracetamol tablets because that's what the law says, and in any case, as the package says "If symptoms persist, consult your doctor". If your headache hasn't gone after a day or two on paracetamol, there's something more serious wrong that needs to be checked out. We can't sell you a jumbo pack because a) it's illegal and b) it's unethical.
A packet of Solpadeine sells for the same price - give or take a few cent - in almost every pharmacy. Those words "give or take a few cent" are very important. We all buy them off one of the same three wholesalers, or perhaps through the manufacturer's sales rep, for the same invoice price. We all want to make a profit when we sell it, and most of us have approx the same percentage in mind. Differences arise because:
a) different pharmacies get different amounts of discounts from the wholesaler depending on the size of their account.
b) the pharmacy may decide to pass all, none or some of this discount on to the customer.
c) some may decide to aim for a slightly higher or lower percentage profit depending on the affluence or otherwise of their location.
d) some may decide to round the price up or down a few cent for convenience's sake.

Either way, look around for the price differences. They might not be very big, but they are there. (Somebody gave the example of a huge difference in Zirtek liquid. I don't have any price lists in front of me, so can't look up either of the prices, but it was a massive difference. Are you sure the two bottles were the same size?)

Incidentally, the pharmacist is perfectly entitled to make as large a profit as s/he thinks they can get away with on these items. A pharmacist is the only person in any kind of shop that I can think of who will actually turn down a sale and sell you nothing if they think that that's what's best for you. Why not make a profit when they do sell something?

2. Private Prescriptions. Now, this is the tricky one, and the bit that I suspect most readers are interested in. In alot of cases, there's not much price competition here. The reason, however, isn't the cosy cartel one might imagine. It has more to do with history, and believe it or not the amount the Govt pays for the prescriptions too. Let me explain.

It has been explained before by me and by others that the invoice price for medicines is set by an agreement between that IPHA and the Govt. The invoice price is the same whether it's going to be dispensed on a private pescription or not.

The pharmacist only controls how much mark-up (a percentage) and fee (a flat amount) he puts on to it. In practice, most pharmacists chose to put on the same fee and mark-up that the Govt would put on if they were paying for the item through the Drugs Payment Scheme. The reason is this: once a family's prescription bill in a given calendar month passes €100.00, the Govt steps in and pays the rest (ie if your drugs bill is €150, you pay €100 and the Govt pays €50). In this scenario, the Govt has set the mark-up (currently 50%) and fee per item (currently, I think, €3.16) that they will use for calculating the payment.
Now, If a pharmacist has decided that they'll only charge 48% and €2.75, for example, sooner or later there'll be a customer whose bill cames to, say, €98.50, and the pharmacist will say to himself "Hang on, if I get that patient to use the DPS, it only costs him an extra €1.50, but I'll get an extra (say) €6.50".
On the other hand, what if another pharmacist who's a little greedier or in a richer area is using 52% and €3.50. Sooner or later, some customer is going to have a bill that, by the pharmacist's calculations, comes to €103.50. The patient however knows his rights, so he's going to (quite rightly) say "No, put it through on the DPS, and I'll give you €100.00" So the pharmacist with a red face has to explain that "Well, actually, if I were to put that through the DPS, it would actually only be €97.50!".
Either of these situations would involve a lot of messy and time-cunsuming paperwork to correct at the last minute. When a private prescription is dispensed, neither the patient nor the pharmacist knows how many more prescriptions they'll need to get before the month is out, and whether or not the patient will hit the magic €100.00 figure. So, to avoid either of the situations described above, many if not most pharmacies set their fee and mark-up level at the same as the DPS level, which is set by the Govt.

Thanks you for reading. I hope I've answered all your questions. Before I go, though, allow me a couple of minutes to speak to all of those who said to themselves "50% mark-up?!? That's outrageous!!". Go on, admit it, some of you thought that, didn't you?

Here's couple of thoughts for you:

1. When you go into a clothes shop, the mark-ups are routinely 100 or even 200%. What they buy in for €10, they sell for €20 or even €30. When the sale comes around and they reduce it to half price, then they are getting the same margin as pharmacists are on private or DPS prescriptions!

2. Calculated as a % of the invoice value, 74% of all drugs that the Govt pays for are on the GMS, and attract no mark-up whatsoever, just the flat fee. Only 26% of it gets the 50% mark up. Half of 26% is 13%. So for every €100 we pay our wholesalers, we get reimbursed €113 plus the fees (which are nice, but not huge).

There is also a discount from the wholesaler. If you have dilligently read the whole thread, you'll know that the wholesaler's margin is 15% (so, of that €100 I mentioned above, €85 goes to the manufacturer and €15 to the wholesaler.) In practice, the wholesaler gives part of this €15 back to the pharmacist in discounts. This discount has developed over time due to changes in business practices:
-these days the order is entered into the computer by pharmacy staff and transmitted electronically, so the wholesaler employs less telesales personnel;
-most pharmacies pay their bills by direct debit at months end, instead of the old practice of 60- or even 90-days credit, so there's no credit control staff needed;
-pharmacies commit to buying a certain % of their goods from one company, that sort of thing.
Discounts are a normal part of any business; that money belongs to the pharmacies who have earned it! And, to be brutally honest, the GMS scheme with its flat-fee remuneration model would have collapsed years ago without the discount. It is quite simply not financially viable on the flat fee only without that couple of percent profit that comes from the discounts.

On Thursday June 18th, the cuts that some of you mentioned above were announced. I'm not going to re-hash them all here, but I will say this: the Govt is trying to grab 6.5% of that discount from us by reducing the wholesaler mark-up to 10%, as well as reducing the 50% (which is really only 13%) mark-up down to 20% (which therefore becomes 5.2%).
In future, for that €100 worth of drugs I mentioned, the pharmacy will get reimbursed:
{85 (ex-factory gate price) + 8.50 (10% wholesaler mark-up)} + 4.86 (20% of 26% of 93.50) = 98.36 plus the fees.
Now admittedly, the fees are going to go up, but not by anywhere near enough to even begin to compensate for this loss. Remember, for the same amount of drugs, with an invoice price of €100, we used to get €113 plus a fee, we'll now get €98.36 plus a fee. And out of that, we have to pay the wholesaler €100 (less the discount, of course).

The fees, by the way, are going from €3.60 (GMS) and €3.16 (DPS) to a sliding scale of 5.00, 4.50 and 3.50; the more you dispense, the less you'll get paid for it!

I'm not going to reproduce all the calculations here, but these cuts overall amount to 36% of gross profit on dispensing business to the average pharmacy.

Please, if you rely on pharmacies at all, ever, or if anyone in your family does, please pay a visit to your local pharmacy. Talk to the pharmacist. Ask him or her to tell you the impact of these cuts. Ask them to tell you, for a few sample prescriptions, how much the drugs cost to buy in, how much they used to be paid, how much they'll be paid in the future. And if you still think we're all a bunch of greedy sods when you've done that, come back and let me know.
 
THanks for the detailed response, Locum. I'd have to challenge you and say that the attributes of the market for OTC products really doesn't seem that different to many other retail markets. Most other retailers face similar restrictions, but there does appear to be much more variety of prices in those markets.

I think much of frustration of customers comes from a feeling that the pharmacist is part of the problem, not part of the solution. Is the pharmacist doing everything possible to get better value for the consumer. For example, why aren't pharmacists pushing 'pill splitting' (as they do in the US) as one simple way to get better VFM.
 
My daughter is on a regular monthly prescription for Respiridone. It costs about €29. Her doctor suggested to me recently that I should ask for the generic version as it would be a good bit cheaper. Delighted I did so-the cost was €27.50!!!!

Can a pharmacist explain that to me? I was hoping for a decent saving.
 

That's a decent percentage decrease. The reason it's not more is probably because the maker of the branded product is charging a reasonable price for a product that they invented and spent a lot of money developing.
 
Fatphrog said:
That's a decent percentage decrease. The reason it's not more is probably because the maker of the branded product is charging a reasonable price for a product that they invented and spent a lot of money developing.
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Why would the pharmacist not have given her the cheaper generic drug in the first place?
 
Complainer said:
Why would the pharmacist not have given her the cheaper generic drug in the first place?
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Good question. The generic version only comes out when the drug is out of patent. At that stage generics manufacturers such as Merc start to make the cheap versions and many of the big players just drop the product completely (depending on what they have in the development pipeline).
AFAIK pharmacists are required to offer the generic first (if no brand name if specified) but if a doctor specifies the branded product then it can be given.

The reason that Mary Harney cut the payment to pharmacies was to force them to get from lower prices the wholesalers. In practice this is happening as the wholesalers are giving better discounts. My mother in law is a pharmacist, running a pharmacy for the owner. The profits they make are astounding but cosmetics are just as lucrative as drugs.
 


This question has been asked and answered.
I've explained above precisely how the prices (both invoice price and selling price) are reached.
It should be obvious that if there was a bigger difference between the invoice price for the generic product and the proriaetary product, then there'd be a bigger saving for the consumer.
 
Complainer said:
Why would the pharmacist not have given her the cheaper generic drug in the first place?
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Name of ingredient = risperidone.
Name of proprietary Product = Risperdal (Registered trade mark)

If prescription says Risperdal, then Risperdal must be dispensed. This is the law.
If prescription says risperidone, then pharmacist can dispense any brand of risperidone (generic or proprietary) that they happen to have on the shelf.
Pharmacists have been asking for the legal right to make generic substitutions for years. Continually refused by the Govt.
Hmmm, I wonder why. Maybe it has something to do with all those factories in Ringaskiddy and elsewhere!

Has anyone taken my advice yet about talking to their local pharmacist? Let me know how you get on, if you do.
 
Purple said:
At that stage generics manufacturers such as Merc start to make the cheap versions and many of the big players just drop the product completely (depending on what they have in the development pipeline).
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Merck (not Merc) isn't a generics manufacturer.
Merck Sharpe & Dohme is one of the big boys, along with the likes of Pfizer, Schering Plough etc.
The main generics manufacturers in the Irish marketplace are Clonmel Laboratories, Gerard Laboratories and Pinewood Laboratories.

Otherwise, not a bad answer, Purple. You're putting the cart before the horse a little. See my answer to the same question.
 

Examples, please?
 
Locum-Motion, Thanks for the very detailed responses.

Just thought the following was relevant. For the full detail go to the website.

From the Competition Authority report findings published today at http://www.tca.ie

• It is customary for pharmacies to charge a 50% mark-up on all
private prescription medicines. Every pharmacy knows that to
deviate from this will encourage prices to fall. In the case of DPS
patients, this is underpinned by a State guarantee of
reimbursement of that degree of mark-up. Furthermore, it has
been suggested that ROI pharmacies rarely stray from the
recommended retail price (RRP) for non-prescription medicines;

6.21 Cheaper generic prescription drugs are used more frequently and ownbrand
pharmaceuticals are more commonly available in the UK.

6.22 It has been suggested that, compared to the UK, independent ROI
pharmacies rarely deviate from the recommended retail price (RRP) for
non-prescription medicines.

Concluding Comment

6.45 However, the State also has the aim of ensuring that healthcare
delivery is efficient and cost-effective. The 50% mark-up paid to
pharmacies for medicines dispensed under the DPS and LTI schemes is
among the highest in the EU. While pharmacies, like all retailers in the
ROI, face higher costs of doing business here, a 50% mark-up is not
justifiable. This is especially true when one considers the substantial
discounts pharmacies receive from wholesalers. It is perhaps not
surprising that the ROI has so many pharmacies compared to its small
population.
 

Thanks, Gearoid. Yes, I had heard about that report, and it says precisely what one would expect from Mary Harney's lapdogs!

(By the way, please indicate whether the bold type is your emphasis or if it appeared in the original report. I believe that it is customary to do so.)

All of those who constantly mention the 50% (by that I mean: HSE, Competition Authority, Minister for Health and Children, Department of Health and Children etc.) always conveniently ignore the fact that we only get 50% on 26% of the stuff we dispense. The impression is always firmly left in the reader's mind that we get 50%, and a fee, on everything. As far as I'm concerned, the 50% is too high, but 0% on the other 76% is too low!

I stand over this assertion: the GMS would have collapsed years ago if it weren't for 2 things: The fact that getting 50% on the other schemes kind of makes up for it, and that whatever discount one gets from one's wholesaler allows a few percentage points of profit to be made.

Gearoid,
At this point, I believe that I have answered every question fully and honestly. Yet to almost every response I (and others) have made, you've tried to turn it around by throwing out quotes and/or statistics out of context etc. I now believe you to be a flamer. It's not outside the bounds of possibility that you are a HSE/DoHC plant. You apparently have made up your mind. You have conceded that my posts were detailed and comprehensive. Every fact I have put in is easily verifiable. Neither you nor anyone else has challenged me on the veracity of my posts. But yet you persist.
I am now going to contact the moderators of this site. I will ask them to review the posts hereon, and let me know if they agree to my assertion that the questions have been answered. If they do agree, I will ask them to lock the thread.
 
1. I included the link to the Competition Authority report in case others were unaware of it. Yes I bolded small parts of the summary but I gave the original link. I was unaware of any etiquette issue in doing so.

2. I thanked you for your posts. I was simply pointing out the considered judgements in the Competition Authority report that there is a lack of competition in the market. I agree with this assertion.

3. Some of your comments were less than fair. You say I'm a flamer but you use Maoist style insults such as "Mary Harney's lapdogs!". Read the report. It would come across as balanced and fair.

4. This is a discussion, not you providing facts and deciding that you have informed us of the correct position.


I now believe you to be a flamer. It's not outside the bounds of possibility that you are a HSE/DoHC plant.
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Show a bit of courtesy. Ask me whether I have a vested interest or not. I work in IT, and have no connection to the HSE. I am a taxpayer and a voter and above-all a consumer and I don't believe we should be funding guaranteed mark-ups in a semi-competitive pharmaceutical sector out of the public purse. I support the cuts by the Government. There are better ways to spend our money at a time of national crisis.

I am not a "flamer" as you put it. I disagree with your some of your arguments but I thanked you for your informational posts.
 

Thank you. Perhaps I overreacted a bit, because I was angry.
Maybe it's not the case, but it did seem to me last night that you weren't going to be satisifed no matter what I said. I have by now spent about 3-4 hours of my time typing up these answers, and just when I thought I'd finally covered everything you pulled out that report. It's very frustrating!
I didn't realise that it was Maoist to refer to somebody as Mary Harney's lapdogs; I'll have to remember that, it's a good one. I happen to think it's true, though. The CA is not acting independantly as it should; the very fact that that report was published just as pharmacies are about to have their payments slashed speaks volumes.
And, as I have stated before, the report is misleading in that it leaves any reader who doesn't already know different with the impression that we get 50% mark-up on everything.
If you get 50% mark-up on 26% of what you sell, then that's equivalent to a 13% mark-up overal. You won't see the CA, the HSE or the DoHC referring to that figure, as it doesn't suit their agenda to have the public realise that that's how much we get paid. It suits their agenda to have the public think we get paid 50% on everything.

Oh, and by the way, I think the word I actually meant to use was troll, not flamer.
 
Locum-motion,
I wish I had time to flame or troll. No harm done. I think a bit of bolshy behaviour and questioning by the consumer would be good for the country.
Gearoid
 
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