In spite of the pressure in Primorye there are such people who open new chemists and look forward optimistically. Alexander Monastyirev, the president of “Monastyirev and Co” holding company and owner of “Alex Farm” drug stores network, tells “ZR” how it’s possible.
Drug stores have recently met the tax burden increasing, retail margin restrictions for vital and the most important medicine (VMIM), strengthening of the regulations of the pharmaceutical retailing in general (range restrictions, strengthening of control of narcotic drugs dispatch, intrapharmacy production requirement toughening and so on). According to the Ministry of Public Health and Social Development today’s list of VMIM includes 500 international generic names, and that’s about 2000 trade names and more than 5500 drug formulations.
Retailing started in our holding company in 2008. Originally this company was considered to be a wholesaler, which would provide drug stores and medical facilities with medicine, food supplements, diet food, medical equipment and other products for health. We didn’t do retailing for ethical reasons – we didn’t want to be on our clients’ way – but then we realized that there appeared so many drug stores that our ethical reasons became meaningless. These drug stores were opened by people who had nothing to do with pharmacy and had no medical education just to earn as much as possible.
In 2008 we introduced our new product to market – Online Drug Store plus Call Centre. This idea had come up long time before, I’d even offered it to our clients, but they’d preferred working in the same old way. So we decided to realize that idea ourselves. Customer got opportunity to make an order by the phone or online 24/7. The next day he can get it at any stores of our network or get it delivered. If you make a preorder by the phone or online you automatically get 10% discount. Besides that, we have a storage discount system for discount cards up to 10%. As a result a retailer can get up to 20% discount.
How popular did this system become?
Very popular. I’d like to put on record that to test this technology we deliberately opened the first drug store at non-profitable place from the perspective of customer traffic. And it worked! Today that store is situated in the building of “Varyag” factory, and it serves 17 thousand customers per month. In the spring 2011 in Nakhodka city we opened the second drug store, by the end of the year we opened the third one – again in Vladivostok city, but this time at the place easy to get to. Looking forward we are planning to open about 4 or 5 stores in Vladivostok city and extend the network in Primorsky region.
Which things do you think are the most significant in a drug store’s success?
To my mind it’s a chief. Chief must be a professional at what he does, be able to create an effectively working system. Everything’s important in the system – personnel policy, marketing tools, reasonably organized workflow. This rule works for any kind of business.
Strengthening of the regulations of the pharmaceutical market has led some drug stores to cutting down their expenses in order to survive. They’ve started saving on employees’ salaries, quality control. Somebody has cut down their range and outlets. What are you saving on?
First of all, properly organized logistics process helps us to save. We never tie up money on our shelves. The order is delivered every day and it’s sold immediately. So we save on keeping products. Second of all, we use contemporary computer technology, which saves us labor force (holding company includes its own IT-company). No less important that holding company has both bulk and retail flows. We get discount from the top distributors in the country thank to the volume of purchases. Because of high distribution we got an opportunity of selling the products at minimal extra charges. Finally, we save on profit. Since our holding company has several business areas, we don’t have a goal to sponge the retail area of maximal profit right here, right now. We are development-oriented.
We never save on the quality control because it’s essential component of drug store’s prestige. We also don’t save on personnel. When a chief says, “Crisis has come. We have to make redundant”, it’s wrong approach. We say, “When crisis comes, we must invest in our staff even more, because the personnel is the most valuable what company has.”
Does it mean that you don’t have any personnel problems?
We don’t have any problems with employee turnover, considering that company provides decent salary, social benefits, professional trainings, opportunity for career growth. However, we have problems with recruiting, because there aren’t so many qualified specialists on labor market, and sometimes it’s really hard to find ones.
What should be government regulation of the retail pharmaceutical market in your opinion?
Minimal. In my invincible belief, the best regulation of business is competition. As soon as government introduces a new tool of regulation, all the drug stores raise the price. They have to do this to repay advanced expenditures, but customer is the first to suffer. We’ve been trying to convey this message to the administration of our country via our professional association, but we haven’t got any reply so far. I’m pretty sure if the government didn’t interfere to pharmaceutical affairs, the medicine would be cheaper.
Each innovation leads to additional expenditures for company. For example, now drug stores are obliged to provide government with VMIM pricelists and lists of sales, but there must be someone who would make and send them, it means new labor force is required, and as a result all that impacts the price. If drug stores are deprived of rights to work by UTII, which is planned to happen in 2013, accounting expenditures will inevitably increase.
Regulation of price for the lowest rank of medicine (50 RUB), which are in VMIM list, makes some stores refuse that segment. Only think about it, maximal retail margin is set to be 38% of ex-works price. Say a drug store buys a medicine for 5 RUB each, which means a retail margin isn’t higher than 1,9 RUB. Pharmacist to sell that medicine spends about minute, which costs 4 RUB, as a result company suffers a loss. Besides that there are expenditures for the product delivery, a rent and so on. I think that extra price for such segment must be in rubles not in per cent, and the problem will be solved. Our government doesn’t seem to be willing to see into these details. To conclude, these regulations originally were made to fight excess profit in pharmaceutical business, but in reality there are only customers to suffer.
Do you think that with such approach some cheap medicine might start disappearing from drug stores?
If government doesn’t change its policy, it will definitely happen. And when drug stores stop selling, say, Cintramonum, which is not profitable at all, a patient will be left along with his headache and without his usual medicine. He’ll have to buy more expensive product.
Is it possible to predict how the pharmaceutical market is going to develop in the nearest future?
Some drug stores will shut down, some will open, but I don’t think there will be high redundant of them. Retailing business might lose non-professionals, but that’s even better for customers. And if the government creates less obstacles for having business, medicine might even become cheaper.
Alexander Monastyirev was born in Vladivostok city on the 6th of July 1971 in the family of submariner. In 1988 he finished legendary residential school №2 directed by N.N. Dubinin, People’s Teacher of USSR. In 1994 he graduated from the Medical University with Pediatric Physician Degree. During his studies he was working at the Regional Clinic Children’s Hospital, then he was a doctor at “Dinamo” sport club. In 1994 he started working as a manager at pharmaceutical company. In 1999 he opened his own bulk company, which was providing drug stores and hospitals of Primorsky region with medical products. A.V. Monastyirev is Tsarevich Dmitriy’s Medal awarded by Patriarch of Moscow Alexiy the Second for “Acts of Mercy”.