Stepping up the Pharmacy Game in Australia: How is the market booming with more footfalls and organic expansion?

Over the study period of 2015–20, Australia's retail pharmacy market had modest growth. The increase in the Australian pharmacy retail market has been aided by factors such as the rise in chemists, the proportion of an aging population, the number of healthcare issues, per capita healthcare spending, the number of insured patients, the PBS Scheme, etc. New South Wales, Victoria, and Queensland states have the highest customer traffic and the largest average basket sizes. The expansion of pharmacies in terms of the number of stores, services, and home drug delivery to patients throughout the nation all contributed to the market's growth.
In this edition, we’ll dig into all the supporting factors that have helped and will further support the growth of the Australia Pharmacy retail industry in the future.

1. Australia Retail Pharmacy is in its growing stage & has evolved over the years from Small Independent Pharmacies to Franchise & Banner Groups in Australia

• PBS was introduced in 1945
• Phase in 1960s was dominated by the presence of Independent Community Pharmacies located majorly in small suburban Shopping centers & street corners
• Owners in these pharmacies were the pharmacists
• Limited range of Medicines, Complementary & Health Products
• Franchises started evolving in 1980s wherein big pharmacy chains started operating under Banner Groups like Sigma.

I: EMERGING PHASE <2000s

Phase driven by Introduction of Independent Community Pharmacies & Formation of Banner Groups to capture significant Market Share

• Phase from year 2000 witnessed significant growth in Discount Pharmacies
• Pharmacies started focusing on providing wide portfolio of services and medication along with other health, beauty and Toiletries as complementary products at stores
• On July 1 2011, Government of Australia introduced the telehealth initiatives in the country
• Pharmacy Chains during this period focused on establishing more number of Outlets in the country and launching pharmacy applications for Home Delivery Solutions.

II: GROWING PHASE 2000-2025

Australia Retail Pharmacy is in its growing stage (Revenue CAGR of 6.9% during 2015-2020) driven by Virtual Consultations & Online Deliveries

• Pharmacies will not only offer medicines, but will also extend their offer to include various types of products and services such as cosmetics and online consultations along with 24/7 service to further compete over long term.
• Pharmacies will focus on partnerships with Tele consultation Companies to enhance service portfolio
• Bigger Pharmacies will acquire Small pharmacies in order to expand in different regions in the country.
• Drug sales via online platform will be facilitated in more regulated and convenient way

III: MATURITY PHASE >2025

Retail Pharmacy Market in Australia will be driven by Innovations in Healthcare Service Packages and adoption of telemedicine services through their apps among Australians

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2. Preference of Australians & No. of Prescriptions dispensed by Age Groups wherein >50% of medicines were dispensed for >65 Years of Population are the current Key Market Trends

Key Trends Observed in the Australia Pharmacy Retail Market

• 65%¹ of patients in Australia prefer use of one pharmacy for everything or at least one category of product/ service in 2020E. However, 33% of patients were driven by convenience of the location.
• Community pharmacies provide a national network of National Diabetes Services Scheme access points for the ~1.5 Mn² Australians with diabetes who have registered with the NDSS.
• 7 Community Pharmacy Agreements have been negotiated between the Government and the Guild, underpinning pharmacies and the PBS over 30 years as on 2020.
• Community-pharmacist led medication adherence interventions have improved adherence rates by 9.3% and reduced health system costs by $1.9 bn³.
• Pharmacists are one of the most trusted professions along with nurses and doctors. Public opinion surveys have shown that 84% of adults trust the advice they receive from pharmacists in 2019. However, it reached to ~75% during 2020 as a result of COVID Pandemic.
• Fundamental changes to the PBS, such as the shift towards mandatory price disclosure, have significantly influenced the industry over the past decade.
• Community pharmacies are the most frequently accessed and most accessible health destination, with >462 mn⁴ individual patient visits annually and the vast majority of pharmacies open after-hours, including weekends.

Total Prescriptions dispensed* by Age Groups in Australia in Mn, 2020E

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3. Further, E-Health Services along with Consolidation of Pharmacy chain brands into Banner Groups is a Growing Trend in Australia

Rising E-Health Services

• Federal Government of Australia announced expansion of Medicare i.e. subsidized telehealth services for all people in the country
• Pharmacies partnering with Tele consultation companies to enhance their service portfolio, thereby increasing number of prescriptions and Medication demand at their stores.
• >4.3 Mn3 health and medical services have been delivered to a total of >3 Mn patients through the telehealth items introduced by the Australian Government for the COVID-19 pandemic

Rising Per Capita Health Expenditure

• Per Capita Health Expenditure in the country is continuously increasing over the years, i.e. from $7,290 in 2014 to $7,772 in 2019.
• Major proportion of healthcare spending in Australia goes in purchasing Nutrition Health Supplements, Healthcare services, Toiletries, Hair & Skin Care and other personal care products.
• People in Australia spent a total of $185 billion during 2017-18 on Health Goods and Services.

Growing Ageing Population

• Elderly Population (65 Years or more) made up a significant proportion of Australia’s population in 2017, i.e. over 1 in 7² people were aged 65 and over.
• In past 20 years, the proportion of the population aged 65 years and over increased from 12.3%² in 1999 to 15.9% in 2019 in Australia. Thus, increased health consciousness & number of prescriptions as well as a steady demand of health and wellness products.
• Number of people aged 65 years and over increased by >125K people in 2019 i.e. 3.2% growth.

Consolidation of Pharmacies to Banner Groups

• Banner/ franchise model is the preferred model of Australian pharmacies as they are demonstrating better financial performance along with a significant Market share.
• Financial performance of Banner/Franchise pharmacies is stronger than Independents regardless of stores owned.
• Sigma Healthcare Limited, Australia Pharmaceutical Industries (API), EBOS Group Ltd. are some Famous Banner Groups in Australia generating gross profit of 33% or above, higher than Independent Pharmacies.

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4. Accessing different policies & dimensions in the Australia Pharmacy Retail Market will strength the Industry and will enable it to grow in the coming years

Strengths

• Value Added Services: Brand Presence on Mobile Applications with Different VAS like E-Consultations and Health Care services have encouraged more customers at the pharmacy outlets
• Focus on variety & sophistication of health services wherein one is establishing themselves as preventative & primary healthcare providers.
• Automated Systems: Technological changes such as Automated Dispensing Systems in Pharmacy outlets has improved their inventories & process and resulted in entertaining of larger set of customers.

Weaknesses

• Lower Profit Margins: Intense competition between traditional and discount pharmacies, as well as supermarket stores will drive pharmaceutical product prices lower thereby constraining profit margins.
• Huge Investment Required: Pharmacies in the country require huge investment into new technologies such as e-health products, electronic prescriptions, and PIS to stay competitive
• Rising Competition among Banner Groups: Banner Groups continuously acquire pharmacy chains to enhance their presence and Market Share in the country.

Opportunities

• Diversification of Service Portfolio: Providing a variety of services such as Vaccinations, Regular Health Checks, Bowel Cancer, etc. will provide an edge to Pharmacy chains
• Scope of Negotiation: Negotiation of an agreement every 5 years between the Australian Government and the Pharmacy Guild will provide new directions & larger scope of opportunities.
• Future Technological Improvements: New apps to be considered wherein consumers can pre-pay or manage prescriptions as the industry may move towards electronic prescriptions

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