BUSINESS OPINION: It is refreshing to know that even in these difficult times there is still one group in society that is prepared to put service before self. With the clergy and politicians on the back foot like never before it gladdens the heart to see pharmacists showing the sort of moral leadership that the State so sorely needs.
Yes, the industrious men and women of the Irish Pharmaceutical Union are taking to the streets in protest over the Government's heinous plan to deregulate the industry. Last week they voted by three to one to take unspecified industrial action over the decision by Mr Micheál Martin to revoke the regulations restricting the number of chemist shops.
The more cynical amongst you might be thinking that the IPU is only up in arms in order to protect the status quo which has proved so lucrative for many of its members. For shame! You should know by now that what really concerns the IPU is that revoking the regulations "could seriously undermine the nature and future viability of the community pharmacy services throughout the country".
For the uninitiated the community pharmacy service is shorthand for the regime that has 'pertained since 1996 under which anyone wanting to open a pharmacy that handles medical card prescriptions has to get the permission of the health board. Before granting permission the health board has to take into account the impact on other pharmacies and whether the new shop is justified on public health grounds. The net effect has been to protect the sector from competition, but the IPU argues it has ensured that pharmacies remain locally owned and part of the fabric of the community.
It is only fair to IPU that this column should illustrate the perilous knife edge on which the community pharmacy service is perched. Let us pick six pharmacies at random across the Republic and look at the last set of accounts that they lodged with the Companies Office in Dublin. This should well illustrate the sort of hand-to-mouth existence eked out by the members of the IPU in order to provide the CPS.
First we travel to Douglas in Cork, the home of C O'Sullivan Chemists (Cork) Ltd. Pharmacies, like all small businesses, are not required to lodge a profit and loss account with the Companies Office but they do furnish a balance sheet and other information related to profitability. The balance sheet gives a figure for the profits retained in the business during the year. Generally speaking, the difference in this figure between subsequent years is the profit after tax and other expenses have been discharged. The figure for corporation tax - if it is shown - also gives a clue as to profits. The rate in 2000 was 24 per cent and in 2001 20 per cent.
O'Sullivan's accounts to April 2001 show that retained profits for the year were £314,000 and that a corresponding corporation tax charge of £73,000 was incurred. Next we go to Barty Sullivans the Chemist Ltd in Mallow, Co Cork. This small business saw its retained profits in the year to March 2001 grow by £84,000 to £209,414 and it incur a corporation tax bill of some £22,000. Good news for its owners who also own another pharmacy in the town.
Pickings seem a little thinner in Limerick where Ferguson Chemists Ltd on O'Connell Street's retained profits were up by £55,000 in the year to April 2000, the most recent year for which accounts results are available.
In Drogheda the picture is equally bleak. Herlihy (Chemists) Ltd only managed to boost their retained profits by £60,000 to £320,000 in the year to December 2000, and its two director shareholders had to scrape by on a combined remuneration of £130,000 between them.
SPARE a thought also for Sam McCauley Chemists (Carlow) Ltd which actually saw its retained profit fall - implying that it lost money - from £150,000 to £120,000 over the 12 months to August 2000. We can only hope that Mr McCauley had better luck at the eight other chemist shops in the South and East that bear his name.
In Dublin Patrick Sweeney (Chemists) Ltd in Rathmines saw their retained profits increase from £202,927 to £294,140 in the year to February 2001.
It would appear from this snapshot that the average chemist shop clears a profit of between £50,000 and £100,000 a year, once all the bills have been paid. It's not what you would call super-normal profit, but its not indicative of a fiercely competitive sector operating on razor thin margins either. In fact it looks like there is plenty of fat that could be trimmed with the introduction of a little competition.
These figures may be of interest to the 300,000 souls who have signed the petition supporting the pharmacists presented by the IPU to the Minister last week. They should also bear in mind that Gehe, the German pharmacy group last year agreed to buy the Unicare chain of 29 pharmacies for €152.4 million or €5.26 million a shop. Gehe subsequently tried to pull out of the deal after the deregulation of the sector was announced and the matter is currently before the courts. It appears pretty clear that Gehe has figured out that the removal of the restrictions on opening pharmacies will significantly reduce the profitability of the business and thus its value.
The IPU is as entitled as any other representative body to organise industrial action to protect its members' interests, but it must take the public for fools if it really expects us to believe that it is embarking on a crusade for our benefit. The reality is that the IPU is engaged in a last-ditch effort to protect a regulatory regime that protected the inefficient amongst its membership and severely limited competition. The status quo may have put a friendly local face behind the counter at your chemist shop but it has not delivered cheaper drugs, which on balance is what most people want.
