Bankwest Future of Business: Focus on Pharmacy - 2019 release
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Bankwest Future of Business: Focus on Pharmacy 2019 release
Contents Key insights 4 Industry overview 5 What’s driving 6 industry growth? Spotlight on Australia 7 Spotlight on Western 8 Australia What does the future hold? 9 What challenges does 10 the industry face? Where do the 11 opportunities lie? Forecasted industry growth 12
Key insights
Foreword
Understanding factors impacting your industry, public healthcare costs and increase the level
and how other businesses in your industry are of services available to the public by expanding
performing, can be a great gauge for how your into more formal roles as healthcare providers.
business is tracking. Establishing themselves as local healthcare centres
and focusing on preventive and primary care will
The Bankwest Future of Business: Focus on
empower pharmacists to treat patients earlier,
Pharmacy Services Report is designed to give you a
relieving pressure on hospitals and other public
snapshot of the current and expected future state of
healthcare services.
your industry, which could help you plan and spark
ideas. The report covers Australia’s retail pharmacy Western Australian pharmacies performed
sector, summarising trends based on statistics from relatively well in 2018. In October 2018, turnover
IBIS World, the Australian Bureau of Statistics and growth returned to positive territory for the first
other reputable sources. time in 18 months with a record turnover month
of retailing revenue reaching $153.9 million.2
Despite a challenging year, the outlook for the
However, substantial deflationary pressures exist
pharmaceutical industry in Australia is positive.
due to intense competition in the market, from both
Revenue is forecast to grow by 5.1% over the next five
discount pharmacies and supermarkets providing
years, reaching $40.1 billion by 2024.1 Pharmaceutical
cheap generic medicines.
retailers are expected to grow substantially, adding
a further 300 establishments during the same The national pharmaceutical industry is expected
period. An ageing population and an increasingly to continue growing, driven by innovation, evolving
health-conscious society is driving demand for consumer preferences, changing demographics, and
pharmaceutical goods and services. diversification into formal healthcare roles.
Australians are seeking more sophistication and
involvement from their healthcare services. At
the same time, healthcare expenditure is growing
exponentially. Pharmacies are poised to reduce
IBIS 2018
1
ABS 8501
2
4
Industry overview Pharmaceutical retailing
Pharmaceutical revenue remained subdued in the year to June 2018, however the back end of the year Pharmacies are focusing on increasing
showed promising signs of growth in the sector. Pharmaceutical retailers’ revenue fell by 1.4% relative to revenue through general retail sales, as
the previous year, to below $16 billion, as competition remains fierce. However, ABS estimates show that opposed to prescription medicines sales.
annual pharmacy retailing revenue rose by 3.3% in the year to October 2018. A typical pharmacy derives approximately
21% of its revenue from general retail.3
Australian pharmaceutical overview by sub-industry, June 2018 Discount pharmacies are among the
strongest performers in the sector, deriving
approximately two thirds of their revenue
Pharmaceutical
Pharmaceutical from general retail sales.4
Pharmacies product Total
wholesaling
manufacturing
Pharmacy revenue,
Revenue $15.9 bn $13.8 bn $8.5 bn $38.2 bn year ending June 2018
Employees 64,000 12,778 13,081 89,859
Establishments 5,715 1,640 782 8,137 16%
Source: IBIS 2018
63% 21%
In the five years to June 2018, pharmacy retailing revenue was driven by:*
30.6% increase in Pharmaceutical Benefits Scheme (PBS) revenue
Source: IBIS 2018
Prescription medicines
10.8% decline in real prices
General retail
Scheduled non-prescription
medicines
6.0% increase in establishments
*In the five years to June 2018 IBIS 2018
3
Pharmacy Guild of Australia (July 2017)
4
5
What’s driving industry growth?
Lower PBS revenue of 3.0% in the year to June 2018 across Australia was a major contributor to sector
performance. However, retail purchases from other retail goods, such as cosmetics and toiletries, continue
to drive growth. In the year to October 2018, revenue in pharmaceutical, cosmetics and toiletry goods
grew by 3.3%.
Australian pharmaceutical, cosmetics and toiletries goods retailing, 2013 - 2018
$18,000
$17,500
$17,000
$16,500
Millions ($)
$16,000
$15,500
$15,000
$14,500
$14,000
$13,500
2013 2014 2015 2016 2017 2018
As we live longer, we are more
Source: ABS 8501
committed to maintaining
our stock of health. Increased
health conscientiousness will Other factors driving industry growth
provide a basis for long term
stability and growth in the
3.3% increase in
pharmaceuticals sector. Technologies such New product lines
Australia’s 65 and
as automated tailored to local
over population in
dispensing systems demographics
year to June 2018
6
Spotlight on Australia Pharmaceutical exports
double
Revenue increased across the pharmaceutical retail sector in the year to October 2018. Victoria experienced
the largest growth with annual turnover increasing by 11.7%.5 A weak Australian dollar in 2018 saw exports of
medical and pharmaceutical products double
across Australia in 2018.
Medical and pharmaceutical products in the
year to October 2018…
NT
102.0% in exports
1.5
-10.5%
QLD
3.0
11.7% in imports7
WA
0.2% Source: ABS 5368
3.4
0.2%
SA
3.3 NSW
4.8% 3.4
ACT
0.8% Prescription sales comprise
2.1 63.0% of a typical pharmacy’s
VIC 5.3% retail revenues.8 Uncertainty
Pharmaceutical 2.9 regarding health policy is reducing
Pharmacies per
10,000 people
turnover increase TAS capital investment throughout
11.7%
(Year to October 2018)6
3.5
the industry. Changes to the
Source: ABS 8501 Pharmaceutical Benefits Scheme
-11.1% and shifting government policy has
Rising competition from both pharmaceutical retailers and grocery retailers has caused the price of the potential to create uncertainty
pharmaceutical goods to fall well behind changes in CPI, benefiting the end customer. In the five years to in the market and dampen
September 2018, the real price of pharmaceutical goods fell 10.8% compared to other goods.7 investors’ confidence.
5
ABS 8501
6
Sector refers to Pharmaceutical, cosmetic and toiletries retailers
7
7
ABS 6401 IBIS 2018
8
Spotlight on Western Australia
WA’s pharmacy sector showed promising signs in the year to October 2018, with annual pharmaceutical
retailing revenue growth entering positive territory for the first time in 18 months. The month of October
2018 was particularly strong for pharmacies, with retailing revenue reaching $153.9 million, the second
highest ever recorded.
WA pharmacy summary and historical growth, 2013 - 2018*
1 year 5 year
WA 2018
change change
No. of community pharmacies 623 2.0% 10.5%
Employees 18,242 13.4% 19.9%
Annual turnover ($m) $1,777.0 0.2% 9.1%
Source: ABS 8501, Department of Health 2018, ABS 6291
*Latest figures used
In line with the national trend, Perth pharmaceutical prices have not kept up with price rises in the city. In real
terms, pharmaceutical goods are 8.8% cheaper in Perth compared to five years ago.
Perth price changes (CPI), 2013 - 2018
Perth Pharmaceutical CPI Perth CPI
Western Australia has the 115.0
lowest pharmaceutical benefits
110.0
government cost of all states at
just $4329 per capita, more than 105.0
$35 less than the national average.
100.0
95.0
90.0
2013 2014 2015 2016 2017 2018
Department of Health 2018
9
8 Source: ABS 6401
What does the future hold?
In the 10 years to 2017, government expenditure on healthcare increased by 57.2%. At current rates, without
change, healthcare expenditure will reach $219 billion by 2023.10 To manage future growth in expenditure,
a greater focus on preventative care, illness management, and the integration of pharmacies into a more
comprehensive primary care model will be required.
Australian healthcare spending, 2007 - 2017
240,000
220,000
200,000
Millions ($)
180,000
160,000
140,000
120,000
100,000
2007 2009 2011 2013 2015 2017 2019 2021 2023
Source: Australian Institute of Health and Welfare 2018
More than half of healthcare expenditure (59.7%) occurs over the age of 55. Anticipating consumer demands
across age and other demographic factors is critical to the efficient delivery of healthcare goods and services.11
Health spending over life
Under 19
5.2%
19 to 34 Technological change and the
8.0% 16.2% rise of e-health services will
59.7% 40.3% 35 to 44
enable pharmacists to provide
45 to 54 health services on demand.
10.9%
Over 55
Source: Kaiser Family Foundation 2017
AIHW 2018
10
Peterson-Kaiser 2017
11
9Policy change What challenges does the
industry face?
The pharmacy industry is highly regulated,
so reform of government policy has a
considerable impact on the industry.
Intense competition between traditional and discount pharmacies, as well as supermarkets, will continue to
drive pharmaceutical product prices lower, constraining profit margins. This trend will be exacerbated by the
availability of generic and bio-similar products. The number of pharmacies operating in Australia grew by
6.0% in the five years to 2018.13 Pharmacy establishment numbers are expected to continue increasing in the
Changes to the
next five years.
Pharmaceutical Benefits
Scheme (PBS) are
Pharmacy revenue ($) per establishment actual & forecast, 2010 - 2024
particularly important,
given 63.0% of pharmacy
revenues are derived $5,600,000
from prescription sales12 $5,400,000
$5,200,000
$5,000,000
$4,800,000
Possible future changes
$4,600,000
in Federal and State
governments will likely $4,400,000
bring policy change $4,200,000
$4,000,000
2010 2012 2014 2016 2018 2020 2022 2024
Source: IBIS 2018
Policy changes increase
the risks of investing in
the industry
The number of employees per establishment in the pharmaceutical industry is falling, reflecting a
shift towards more sophisticated production which employs greater use of technological resources.14
To stay competitive the pharmaceutical industry requires investment into new technologies such as
e-health products, electronic prescriptions, and automations in production.
IBIS 2018
12
IBIS 2018
13
10 IBIS 2018
14Where do the opportunities lie? Other opportunities
An ageing population will create stability in the sector. Reflecting the growing proportion of older Australians, E-health technologies such as
real healthcare expenditure in Australia is rising, growing by 9.5% annually from 2007 to 2017.15 There is wearables will enable pharmacists
an opportunity to better employ pharmacy resources as local health centres, with more formal roles as to more effectively deliver
preventative and chronic healthcare managers. In 2018, pharmacies were permitted to administer influenza preventative healthcare services.
vaccinations. Both the number of cases and deaths fell drastically compared to the previous the year. Electronic script exchange and PBS
claiming will facilitate more efficient
Influenza deaths and cases, Australia 2017 - 2018 and higher quality service.
300,000 1,200
1,137 Increasingly health conscious
250,000
250,000 1,000 consumers will demand a greater
Influenza Deaths
Influenza Cases
variety and sophistication of
200,000 800
2017 health services. Pharmacies should
150,000 600 establish themselves as preventative
and primary healthcare providers to
100,000 400 2018 capitalise on this trend.
52,000
50,000 200
73
0 0
Source: Australian Journal of Pharmacy 2018
Australia’s ageing population is also driving growth with an expected increase in the proportion of Australians
with chronic disease likely to drive demand for pharmacy services. Over the last 10 years, chronic disease
rates in Australia have risen by 5.0 percentage points to 47.2%, driving demand for prescriptions and other
non-prescription products.
Proportion of Australians 18 years and over with chronic disease, 2008 vs 2018
30% 27.0%
25.7%
25%
20.2%
20%
16.5% 2008
15%
10%
2018
5%
0%
1 chronic disease 2 or more chronic diseases
Source: ABS 4634
11
15
AIHW 2018Forecasted industry growth
An ageing population, the potential to play a greater role in primary health care and developments in
technology will facilitate growth in the pharmaceuticals industry. In the next five years, revenue is expected to
rise by 5.1%, reaching $40.1 billion by 2024. Employment is also forecast to grow by 3.1% during the period.16
Pharmaceutical industry employment and revenues, 2010 - 2024
Employees (LHS) Forecast Revenue (RHS) Forecast
95,000 $43,000
Revenue (millions)
$41,000
Employees
93,000
$39,000
91,000
$37,000
89,000 $35,000
2010 2012 2014 2016 2018 2020 2022 2024
Source: IBIS 2018
Competition within the industry is expected to continue increasing, with 8,500 establishments forecast by
2024. Demand for skilled labour will see increases in the average wage, however growing uptake of labour-
saving technologies, such as electronic scripts, is expected to constrain wage growth to some extent.
Pharmaceutical industry establishment numbers and wages, 2010 - 2024
Each year 300 million Australians Establishments (LHS) Forecast Average Wage (RHS) Forecast
visit their local pharmacies. The
8,600 $60,000
industry has existing infrastructure,
trained professionals and extensive $58,000
Establishments
coverage. These factors uniquely 8,200
$56,000
Wages
position pharmacies to alleviate
$54,000
stresses on the healthcare system 7,800
by engaging in regular preventive $52,000
medicine and primary care. 7,400 $50,000
2010 2012 2014 2016 2018 2020 2022 2024
Source: IBIS 2018
12 16
IBIS 2018Sources
Australia Government Department of Health (January Australian Bureau of Statistics (January 2019), 5368.0 Richardson A. “Pharmaceutical Product
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statistics/expenditure-prescriptions/expenditure- ausstats/abs@.nsf/mf/5368.0
prescriptions-twelve-months-to-30-june-2018 Richardson A. “Pharmaceuticals Wholesaling in
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DetailsPage/8501.0Oct%202018?OpenDocument pharmacy-helped-in-this-years-flu-season/ at https://www.guild.org.au/__data/assets/pdf_
file/0033/38787/PGoA-Submission-in-response-to-
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8165.0 - Counts of Australian Businesses, including “Call to expand vaccinations in WA”. Available
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at http://www.abs.gov.au/AUSSTATS/abs@.nsf/ vaccinations-in-wa/
DetailsPage/8165.0Jun%202013%20to%20Jun%20
2017?OpenDocument Peterson-Kaiser Health System Tracker (December
2017), “How do health expenditures vary across
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“Population Projections, Australia, 2017-2066”. healthsystemtracker.org/chart-collection/health-
Available at http://stat.data.abs.gov.au/Index. expenditures-vary-across-population/#item-start
aspx?DatasetCode=POP_PROJ_2011We understand that Business Banking is about more than just financial solutions. We provide banking solutions to many of Australia’s leading businesses, including those in the pharmacy industry. Whether you require straightforward banking or a more customised solution, our team of experienced banking specialists can help. Speak to one of our Bankwest Business Banking Specialists today on 13 7000.
The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report.
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