The collapse of the two Queensland pharmacies this week has prompted warnings of more failures to come as PBS reforms and high rents bite.
The Terry White and Priceline pharmacies — owned by the same in Rockhampton operator -- are now being operated under administration.
The exact causes of the failures are not clear, but PBS reforms and high rents, coupled with a downturn in the local economy, likely contributed, says administer Andrew Schwartz
“My understanding is there is a lot of stress within the industry and there’s likely to be further failures, unfortunately.”
Mark Churchill , managing director of Allfin Financial Services, says pharmacists who bought at the top of the market a few years ago are under the greatest pressure .
“We’ve seen a lot of covenant breaches among people who bought in the last two to three years at the height of the market [when pharmacies had] high gross profits.”
Pharmacists suffered a “double-whammy” with the latest PBS reforms that came in so quickly there was no time to renegotiate fixed costs such as rent, he says.
Mr Churchill advises all pharmacists to seek professional advice even if their numbers look good, as a lag in reporting could hide the true impact on profit and loss.
However, Jack Brown, a director with pharmacy brokers and consultants AP Group, says pharmacy is still a “good business to be in”.
Pharmacists who have built on their strengths in retail and professional services and have customer loyalty through strategies such as scripts on file do well.
Mr Brown says prices for pharmacies have generally remained steady due to the high number of pharmacists entering the market.
“Profits are down a little and therefore more people are going to market but the demand for buying those pharmacies is still very, very high.”
The Pharmacy Guild says it is concerned about the financial stress on many pharmacies.
“There are often many unique factors in any pharmacy closure, but the common denominator is a tough trading environment exacerbated by years of reduced PBS revenues,” a spokesperson says.
Priceline declined to comment on the reasons why its franchisee went into administration.
Terry White Chemists didn’t comment on the administration, with a spokesperson saying the store is now open for business and this has been communicated to customers.