Price disclosure pressure
September 23, 2013
A University of NSW academic
has confirmed that the accelerated
price disclosure regime will have
a “significant impact on the
pharmacy bottom line,” with the
biggest hit occurring 13-18 months
after the introduction of the new
processes.
Dr Michael Ortiz, who’s a
pharmacy graduate and Associate
Professor (conjoint) at the UNSW’s
St Vincents Clinical School, has
provided PD with preliminary
calculations which show, based on
a pharmacy purchasing $1m worth
of generic medicines annually at an
average discount of 25%, that this
will hit the bottom line by around
$15,000 per month (or a total of
$75,000) during the 13-18 month
period following the change.
The current regime uses 12
months of data to generate price
reductions six months later once
a year, while the new process will
use six months of data to generate
price reductions six months later,
“and theoretically they could do so
twice a year,” Ortiz said.
“However the reality is that the
timing means there is only likely
to be one price reduction a year
with the 6 month accelerated price
disclosure,” he added.
After the $75,000 hit there will
also then be additional negative
impacts on the bottom line of
$45,000 and $28,000 over the next
two years, Ortiz said.
And that’s not all - if a pharmacy
is unable to exhaust all affected
generic stock before the price
reductions take effect this will also
see the stock devalued - by as much
as $10,000 for even just two weeks
of generic inventory.
“The impact of the new
accelerated price disclosure is not
trivial,” he said.
“This will make life particularly
difficult for some pharmacies
already struggling with lower
margins, as well as having a
negative impact on cash flows”.
Ortiz noted that this hit was in
addition to the already significant
savings to the government from the
current price disclosure regime.
“Pharmacists will need to plan
for lower cash flow with the
new accelerated price disclosure
process, as well as better manage
their inventory in the month before
price cuts are implemented,” the
Associate Professor concluded.
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