Pharmacy report 2015 shows rise in wages and drop in gross profit margins

Pharmacy report 2015 shows rise in wages and drop in gross profit margins

It has been a challenging time for many pharmacies over the last few years and the latest Moore Stephens Markhams pharmacy survey shows that it’s not over yet. The 2015 report reveals a fall in gross profit margins that appears to be a result of several factors.

Atul Mehta, Director, Moore Stephens Markhams Pharmacy business unit spokesperson says, “Two of these factors impacting the fall in gross profit margins include the number or pharmacies dispensing more high cost medicines than during the previous year. This increases revenue and reduces gross profit percentage by nature.

“The second potential impact is that retail sales continue to comprise less of a pharmacy’s total revenue and as these are usually relatively high mark-up items, this also reduces the gross profit percentage.”

The last 12 months has also seen wages rise and if the trend continues over a period of time, the viability of a number of businesses will come into question. Mr Mehta says, “This trend is perhaps one of the most worrying, as it is the patients who will lose out if there are fewer qualified staff members employed.”

Significantly, the report also shows that the overall net profit percentage has decreased from 8.5 percent of total revenue to 6.6 percent.

The national chartered accountancy and advisory network, Moore Stephens Markhams works with over 120 of New Zealand’s community pharmacies. For the first time this year, the survey was opened to those businesses that are not clients of the national group. The data captured represents over 100 pharmacies and represents a diverse cross-section of New Zealand’s community pharmacies.

These trends are warning signs for pharmacies across New Zealand. Mr Mehta suggests that pharmacies diligently approach strategic planning to look closely at areas that have the ability to grow their businesses and their profitability, to ensure ongoing sustainability.

Read the media release on Scoop here.