Daniel Shull, CEO Asterfarm (Dr. Max Serbia): Pharmacy in Serbia is an Underutilized Resource

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Pharmacy could offer relief to hospitals by providing more basic health care testing and service

Czech Pharmacy chain Dr. Max is currently operating in Serbia within 10 legal entities holding 133 pharmacies which are providing outstanding healthcare and value to customers and patients in Serbia. The company is a member of AmCham. We have talked with Daniel Shull, CEO Asterfarm (Dr. Max Serbia), about the company’s future plans.
Are you satisfied with your current business in Serbia?

— I don’t want to avoid your question, but I cannot really give a straight answer. I have almost 20 years of experience in pharmacy and have been in senior management or had indirect responsibility for pharmacy chains in 14 different countries. Despite thinking that I had seen it all, I am continually surprised by some of the challenges we encounter in the Serbian market and some of the rules which make doing business in Serbia, in pharmacy in particular, unnecessarily complicated. One example of many is that the city of Belgrade wants us and every other business to act as the ticket controller for the public transport  company. Why should Dr.Max or any other business have to hire an extra accountant to control where our employees spend their money? It is the responsibility of the transport company to ensure that their customers buy tickets and not the job of private business. Another issue is the extremely high cost of gaining competition authority approval. We have about 5% of the Serbian pharmacy market, and yet we need to apply with the competition authority for each acquisition we make. The cost is around Euro 25,000. This basically makes it impossible for us to buy single pharmacies or even most small groups, as Euro 25,000 in extra costs up front on a typical small acquisition basically eliminates any discounted ROI. I could understand an admin fee of say Euro 500, but such a high cost is simply not economically justified nor reasonable. We are constantly contacted by small groups or individual pharmacists wishing to sell their business, but due to this ridiculous cost for the competition approval, it is simply not economically feasible for us. It hurts Dr.Max and it hurts the local business people wishing to capitalize on their hard work. Such rules are not conducive to business in Serbia and discour age foreign investment. Reducing this fee would I believe, lead to a real boom in investment in this and potentially other sectors. Has the chamber ever addressed this high cost with the authorities? On the business side, one concern is the high number of pharmacies in Serbia, which as a ratio to population is very high internationally. This ratio is difficult for me to understand, as profit margins in Serbian pharmacy are well below that in most other countries, and the many extremely small pharmacies on the market cannot be profitable if they are being run in a compliant manner. That said, our business in Serbia is growing well and we are improving dramatically our service offering to our patients and customers. Our operating performance is also improving at a rapid pace. However, Dr. Max still sees great potential to improve both our own financial performance and how we contribute to supporting the healthcare of Serbia’s citizens.

 

You were the first to launch buyer cards with various benefits and discounts, as stimulation for new and old customers. How does this economic plan look from the current perspective to you?

— The old system provided good value to customers and was a success for us, but is not a tool to drive real customer loyalty nor to support patient health care. Our sister companies in the Czech Republic and Slovakia have a state of the art Customer Loyalty program that has won various awards. It is based around both commercial and health service offerings and allows us to customized the offering to patients and customers based upon their healthcare needs and interests. We will be examining how to adopt and launch this program in Serbia.

 

What are good and the bad sides of the Serbian market from the perspective of a foreign company in Serbia?

— Serbia has great untapped potential in its people. I am extremely pleased with the quality of our employees. They are motivated, dedicated and learn quickly. We are working hard to provide them  with a good work environment, professional education and career opportunity, but we regularly lose good people, often the best, to emigration. To me it extremely sad that so many talented young people feel that they need to leave Serbia to have a prosperous future. This is unfortunately due to the legal and business environment, which is simply still much less conducive to wealth creation and personal economic stability than in many other countries. As an example, there are several laws and regulations which honestly do not make sense from a business perspective nor from a healthcare perspective and simply complicate our ability to provide quality health care in an efficient and affordable manner. I truly wish the government was more open to utilizing the potential of pharmacy to provide basic health care services. Serbia could really look to markets such as the UK or Ireland for inspiration in this area. If pharmacists were allowed to administer blood glucose testing and other easy and readily available testing, this would reduce waiting times in clinics and hospitals freeing up doctors to spend more time with their patients and ensuring that a greater number of undetected cases of diabetes were discovered at an earlier stage. Another area would be providing a pharmacist with training to provide flu vaccines. Pharmacy could provide relief to the crowded clinics by offering such front line, basic healthcare services. Dr. Max is willing to invest in the necessary training and facilities to provide such services, we just need the legal ability to provide them. We are willing to discuss this opportunity at any time with the authorities. I also truly believe that by offering such expanded professional opportunities to our pharmacists, who are extremely motivated health care professionals, Serbia would be in a better position to keep these professionals in the country instead of losing them to Norway, Canada or Germany. On another note, I am extremely pleased with the service level and the cooperation of several of our key local suppliers and partners. One strong local supplier, in particular, has really come through for us and we are rewarding this with a significantly increased level of business with them. Regarding concerns, I am not confident that there is consistent enforcement of regulation in the industry. I would thus encourage the authorities to continue to improve enforcement of regulation and to ensure that this enforcement is done in a consistent manner for all pharmacies and pharmacy chains. This does not always seem to be done in an equal manner towards all businesses, and I would really hope that we see a continued improvement in levels and consistency of enforcement.

Do you plan a new acquisition or public-private partnership in Serbia?

— Yes. We will continue to expand primarily by aquisition. Our targets will primarily be private chains. We have looked at a couple of the public-private partnerships, but the structure of these proposed packages tends to be too complicated and the expected injection of captal simply too high, especially if the requirement from the municipality is that we take on the entire communal chain. If the municipalities were able to spin off the pharmacies in good locations, we would be happy to reconsider this option, but we cannot afford to invest capital into a chain of say 10 good and 20 poor pharmacies.

 

Are pharmaceuticals in the Serbian market of good quality?

— The vast majority of pharmaceuticals sold on the Serbian market are produced in the same factories and under the same conditions of pharmaceuticals sold in the EU. The only difference is the packaging. The Serbian government has itself a strict licencing program and thus the quality of the registered prescription medicines is very high. Unfortunately, some innovative treatments are not yet approved for sale or reimbursement in Serbia, but this is due to financial considerations. Thus the medicines which are available are of very high quality but in a number of categories, the most recent generation of medicine is not yet available to Serbian patients.
AMERICAN IN SERBIA

As an American, how did you end up leading the subsidiary of a Czech Pharmacy chain in Serbia?

— This is indeed a good question! I never would have expected to land in Serbia, but life always brings us suprising opportunities, and I am one who tends to see the positive in unexpected chances. To answer your question specifically, I came to Europe due to my German wife. I was studying at San Diego State University where I met wife who was also studying in San Diego as a Fulbright Scholar. I returned with her to Germany in 1994 and have spent my adult life in Europe, mostly in Germany. The majority of my career was spent with Celesio (now McKesson) in various Finance and Commercial roles, both in the Corporate offices and in Celesio’s Irish subsidiary. I left Celesio in 2014 and spent a couple of really intense and interesting years at Amazon. The Dr.Max Group CEO, Leonardo Ferrandino, a former colleague at Celesio, gave me a call in 2016 to see if i would be interested in considering leading the Group Procurement for Dr.Max. As I really love the pharmacy branch, I quickly agreed and spent two years as Head of Group Procurement for Dr.Max. In October of last year, Leonardo asked me if I would be interested in a new challenge in Serbia, and being one who enjoys new challenges, I accepted.

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