One hundred years on, her grandson, Daragh Connolly, also a pharmacist like his grandmother and father before, believes like many in the sector, that Irish pharmacies are at another great inflection point.

Driven by digital technology and market dynamics, and accelerated by Covid, change is coming.

Connolly has just jointly led the merger of Totalhealth Pharmacy and Haven Pharmacy, the two largest groupings of independent, locally Irish-owned pharmacies. 

The merger brings many advantages of increasing scale to both groups but it was also driven by a need to defend against potential domination of the market by big international players. Hundreds of other independent pharmacy owners who must fight that battle alone are increasingly struggling to keep pace with the changes that are sweeping the sector.

“When it came to the crunch back in 1919 with the Spanish flu there were no GPs so it was the pharmacist, or the chemist as they were then known, who was the cornerstone of care in communities — just as it has been 100 years later with Covid,” says Connolly. “Pharmacies have kept their doors open right through. The pharmacy is still the front door of the healthcare system just as it was for my grandmother’s generation.”

But exactly where the sector goes next, no one is quite certain.

In the autumn, with Covid raging, Uniphar, one of the big two suppliers of the sector in Ireland, bought the largest family-owned pharmacy chain, Hickey’s. That was followed by the arrival in December of Chemist Warehouse, which bills itself as Australia’s cheapest online pharmacy, and which chose to open its first European store in Blanchardstown.

That might suggest a sector in rude good health but the ruddy glow is only skin deep. The Irish market remains highly fragmented with the bulk of owners accounting for just one or two outlets. Consolidation has long been predicted but pharmacy numbers have stayed static at just below 1,900.

There is, however, a hidden reality well-acknowledged by most in the trade: hundreds of the pharmacies in Irish towns may have loyal customer bases but they are not economically viable. And if these heretofore loyal customers begin to go online as they have in other sectors, the long-predicted consolidation will be swift.

But for his part, Connolly does not believe that technology is about to wipe away the traditional pharmacy.

“The digitisation of community pharmacy is a natural progression of the interaction pharmacists have with the people they serve. It’s no different from the 1920s when my grandmother got one of the first telephones into a pharmacy in Ireland,” he says.

“But I don’t think we’ll wake up one morning and all interactions between community pharmacists and the people they serve will be online. A lot of patients are going to continue to want that face-to-face interaction.” 

Not everyone sees it the same way.

Shane O’Sullivan’s family also has a long history in the business. He sees a different future for the industry to the one Connolly sees. Now in his early thirties, O’Sullivan has spent the decade since he qualified looking at ways of disrupting the model that has become standard in the industry.

After studying pharmacy in UCC he began working in various retail pharmacies around Cork where the pharmacist was not always central to the operation.

“If you walk into a lot of pharmacies now you’ve got to walk through an awful lot of fake tan, beauty products and non-medical stuff to find the pharmacist.

“My great grandfather was an old-fashioned chemist. Back then if you went into his place you opened the door and he was standing right there.”

O’Sullivan saw the traditional route of opening or taking over a one-person operation as a dead end.

“I think there’s definitely quite a lot of unviable pharmacies. You can join a symbol group to get marketing and cheaper drugs but you still have to find new patients. If your business isn’t viable, and you have no way of getting new patients, how is your situation going to improve?”

So in January 2014 he launched Healthwave, which charged customers a €25 fee to allow them avail of lower medicine prices.

“We were getting queries from all over the country. So we were set up very differently from the start, with staff on headsets taking orders. The website became the shop window and we launched the first nationwide delivery medicine service.”

That was all in place before Covid but the pandemic changed everything for O’Sullivan’s company after an overnight change that suddenly allowed doctors to send electronic prescriptions directly to pharmacies.

It has invested half a million euro in the past 18 months in robotics and other systems to allow it to run deliveries efficiently.

“We definitely have been seen as disruptive. But it has been interesting to watch everyone following suit a couple of years later,” says O’Sullivan.

Doubters like Connolly argue that online pharmacy services like Healthwave tend to cherrypick “uncomplicated patients” and tend to operate within particular niches such as erectile dysfunction or contraception.

But O’Sullivan says that while this is helping to drive initial adoption of the digital model in the sector, at Healthwave he has developed a delivery service that will meet all but the most immediate prescription needs.

“There’s room for both models. We launched an online Viagra consultation service in January and we’ve had 2,500 patients sign up in three months. People don’t want to go into pharmacies to talk face to face about that kind of stuff.”

It is a model O’Sullivan intends to expand: “It has validated for us the idea that people will pay pharmacies for their expertise. We can build on that. It’s a brand new revenue stream on top of prescription medicines.”

“If you look at the US, where digital is the big thing now in pharmacy, you can see that it starts out in things like Viagra, hair loss, contraception but there is a lot of investment going into those operations and they are becoming full digital pharmacies. And that’s what’s coming down the tracks in Europe and we want to be a part of that.” 

About a third of the market is accounted for by the big international groupings as well as the newly merged Totalhealth and Haven.

The rest of Ireland’s 1,800 or so pharmacies — perhaps 1,200 in all — are standalone sole trader owned local pharmacies. Estimates vary but many believe at least a third of those may be effectively unviable.

They may pay a decent living to a single pharmacist established in a particular area but the model is coming under attack.

“The bedrock of what these pharmacists offer is the human interaction and the knowledge over a lifetime of their patient,” says Daragh Connolly.  But one pharmacist trying to run the business and fill prescriptions may lack the financial and human resources to be “nimble and agile”, he says.

“How do they continue being relevant to their communities? What, for example, is their ability to offer an online service or interact remotely? And what happens when the owner wants to retire? Who’s going to buy that pharmacy? It may not be an attractive proposition for a young pharmacist. But the question then arises, what happens to healthcare provision in that community when it closes?”

Accountant Stuart Fitzgerald of Fitzgerald Power, which publishes the Pharmacy Pulse report each quarter, has predicted consolidation for some time and believes an inflection point may be approaching, with at least 200 pharmacies unsustainable.

“There’s a large cohort that are not really economically sustainable and are struggling for viability,” he says.

“The statistics consistently show between 10 and 15 closures every year but there’s always more new ones opening. So the actual total number always seems to increase.”

The trend is evident in the most recent Pharmacy Pulse report, published last week. 

“There were four openings and three closures in the first quarter. Ireland is a deregulated market so effectively someone can open a pharmacy anywhere they want.

“You get greenfield pharmacies opening up in a location where they feel there is a market opportunity and ultimately it dilutes the market for all players. So pharmacy in Ireland is a very, very competitive space and the number of pharmacies is extremely high on a per capita basis.”

Fitzgerald agrees that the time may be coming where his predictions of consolidation start to become a reality: “Banks and other lenders are more cautious about providing finance to start-up greenfield pharmacies. That has to have an impact on the number of total openings that you see over the next number of years.

“I think consolidation will undoubtedly be a feature of the market over the next number of years. I do expect the large players in the market to continue to grow their footprint and I also expect you may see more international players like Chemists Warehouse coming into the Irish market.”

And yet Fitzgerald readily admits that, despite the growing competitive pressure, and despite the experience of other industries when exposed to the full onslaught of online competition, there is no certainty that Irish people will turn away from their traditional local community pharmacy.

“It’s an unusual market because of the care element. The person behind the counter that interacts with the patient is the most important part of the business. Obviously, the large operators and the multinationals deliver excellent care as well. But if the owner operator is standing behind the counter that’s definitely a unique selling point that’s very difficult for anyone else to compete with.”

Bank of Ireland head of Health and Life Sciences, Hilary Coates, agrees that the sector needs some fundamental changes and that 1,900 pharmacies is likely too many.

“Our population is ageing so the number of drugs that are being dispensed will only rise. But the big challenge in this sector is that each pharmacy is quite unique and it is hard to compare apples with apples.”

For example, she says, some pharmacies are very dependent on dispensing prescription drugs, 80pc of which are paid for by the State.

“So any cut in that system is going to knock them off completely. Some of them have moved heavily into retail. That’s fine if you’re in an area with heavy footfall but discretionary spend has gone down and so has footfall on many high streets.” 

A portion of pharmacies are run as a lifestyle business, where the owner is happy to work and live in a small town and isn’t driven by making a lot of money. “But now everything has got more complex — the ordering, computerisation, there’s lots of change happening. A lot of those types of people will probably be looking to exit,” says Coates.

And these exits will likely not necessarily provide for the cosy retirement they might once have. Pharmacies were previously sold based on turnover, says Coates, and there was a time when a pharmacy would sell for two or three times its turnover. That now roughly equates to about 20 times earnings (Ebitda): “And yet they’re only selling for four and a half to five times Ebitda now. So the market has changed. It has diminished and the work has been harder.

“And it remains to be seen”, she says, “if there is a large-scale exit of owner operators from the market, whether the Competition Authority is going to allow the two main distributors to buy up all the pharmacies.” 

That could leave Uniphar and United Drug in a commanding position: “Unless you can run a very good retail business, alongside the practice of a community pharmacy, it’s very, very hard to make the figures add up.” says Daragh Connolly.

“By coming together, our members in Totalhealth and Haven can continue to be more relevant. Consider things like app development or tele-pharmacy — as part of a bigger group, they are things I can achieve as a community pharmacist in Dungarvan alongside other independent and autonomous pharmacists. I don’t have to be beholden to a particular wholesaler and it gives me better security into my future.”

For Irish Pharmacy Union (IPU) secretary general Darragh O’Loughlin, some of the answers to the challenges in the sector lie in a recasting of the relationship with the Government and HSE via a new, long-promised updated contract for the provision of services for which the State pays.

O’Loughlin believes there is huge scope to widen the contract in a way that frees pharmacists to take on and be paid for many services other than drug dispensing.

It could, he says, allow pharmacists focus more on their roles as clinicians and less reliant on selling non-healthcare items to stay afloat.

“Our health system is in a lot of ways archaic. It fails to recognise the value not just of pharmacists but of all healthcare professions other than doctors and nurses. We need ‘task shifting’, in other words getting professionals other than doctors doing things,” says O’Loughlin.

“In Ireland, pharmacists are not permitted to do more than half of what they’re trained to do,” he says. With Irish people visiting their pharmacy on average 19 times per year, there are huge opportunities for screening for chronic ailments like diabetes or high blood pressure, he says.

“In Canada, you don’t need to see your doctor for repeat prescriptions every six months, your pharmacist can extend or renew or modify your prescription according to how well you’re doing with the medication.”

But one long-time player in the sector spoken to by the Sunday Independent believes that there has been too much hope and emphasis placed by the sector on the idea of a new government contract. 

“Pharmacists have been deluding themselves about a new contract for a long time but there is much that can be achieved outside of that. They need to just get on with things and solve their own problems,” said the source.

For now, the industry is waiting to see if the Government follows through on its promise to utilise the pharmacy network to administer Covid vaccinations. The sector argues vociferously that it has vast experience administering the flu jab and can transform the vaccination programme.

Government, for its part, has stayed silent in recent weeks, leaving the sector guessing. Pharmacists know that if they are left out in the cold on Covid vaccines as supply improves in the weeks to come, it will say much about where politicians and administrators see their place in the fast-changing world of healthcare provision.

Sunday Independent