The latest price cuts on the Pharmaceutical Benefits Scheme (PBS) have had a slightly greater impact than expected on Sigma Pharmaceuticals.
The drugs distributor and pharmacies support services provider’s banners include Amcal Max, Amcal and Guardian.
Sigma chief executive Mark Hooper said that in Sigma’s current fiscal year, the first three months of the company’s operations, from February 1, had been in line with its expectations.
The negative effects of the PBS price cuts in April were partly compensated for by Sigma cutting its costs and implementing tighter trading terms with pharmacists.
“Whilst the government PBS price disclosure implemented in April had a slightly bigger impact than initially expected, this was largely offset by a continued focus on costs and adjusting customer trading terms,” Mr Hooper told shareholders at the company’s annual general meeting in Melbourne on Wednesday.
Mr Hooper said the federal government’s six-monthly PBS reforms were now a constant overlay on the pharmaceuticals industry.
He said that in Sigma’s fiscal year ended January 31, 2014, PBS reforms had wiped around $100 million from its sales revenue.
Under price disclosure, the government requires the pharmaceuticals industry to provide information relating to sales of PBS medicines.
This information is then used to determine the price which the government will pay for them.
Price disclosure progressively reduces the price of PBS medicines.
Mr Hooper said that in the year ahead, Sigma would invest in improving its distribution operations in Brisbane and Sydney.
Also, Sigma would continue to roll out a professional services program to differentiate the pharmacies under its banners from others.
These services included in-store hearing tests, a kidney health program to be launched later this month, and a “Be Good to Yourself” pilot program with health insurer nib.
Furthermore, Sigma had launched more than 100 private and exclusive label products in the group’s pharmacy network, with another 200 products in the pipeline.
Sigma chairman Brian Jamieson took a swipe at the National Commission of Audit which released its report last Thursday.
He said the commission had made a raft of recommendations relating to the PBS without consulting broadly with industry.
“The recommendations appear to be driven by key assumptions that government PBS is growing at a rate that requires additional corrective measures,” Mr Jamieson said.
“This appears to contradict the government’s own 2013/14 mid-year economic and fiscal outlook, which listed the PBS as the largest single downward revision across the entire Commonwealth Budget.”
Shares in Sigma were steady at 72 cents at 1453 AEST.
