A pharmacy may seem like a simple business but an enormous logistical operation goes on behind the scenes to make that basic transaction possible. Even after all the research and development, testing, regulatory processes and the manufacturing that goes into a new drug, it still has to get from the manufacturer to the dispensary . . . often under very specific conditions . . . at the right time and in precise quantities and dosages.

The invisible link in this long chain is the drug wholesaler, which give manufacturers a route to market and provides scale and access to product for retailers.

"When you walk into the pharmacy, everything you see in the dispensary behind the counter we would supply, " says Gary Collins, managing director of Cahill May Roberts, the Irish wholesale arm of German pharmagiant Celesio. "It's a unique business in the sense that we manage the product life from the moment we source it into the country right through to the pharmacist."

"We're probably the only business where if we don't deliver on time, someone will be sick or die . . . except the emergency services, " he says. Although the statement sounds dramatic, Collins utters it with businesslike dispassion . . . before letting out a self-deprecating laugh.

He understands CMR is not on the frontlines of healthcare, but he is at some pains to point out the critical position of his business in a field where, after all, lives really are at stake. In a system that has patients waiting months for diagnoses, let alone days in casualty without a bed, CMR has the potential to deliver to every pharmacy in the country twice-a-day from its locations in Dublin, Cork and Sligo.

"Basically, we're a just-in-time business, " Collins says. "If you put through an order at nine or ten in the morning, I can have it to you right before lunchtime; if you send it before two, I'll have it before five in the evening."

"It" could be any of the 12,000 presciption drugs, over the counter medicines, health supplements or beauty products CMR delivers to 1,100 pharmacies and nearly 200 hospitals and clinics.

Getting these products from A to B is a big, sophisticated, expensive and low-margin business, Collins says. The automated warehousing system alone . . . with robotic retrieval and multiple human and computerised checks and balances . . . makes sourcing a box of pills look like a Rube Goldberg amusement park to the unitiated.

It's also a highly regulated business, though, which puts it at the mercy of the state . . . the monopoly buyer responsible for about nearly 90% of Ireland's 1.8bn pharmaceuticals market.

With the Government having negotiated a 20% reduction in the price of off-patent medicines in March 2007 . . . to deliver, it has to be said, better value to the taxpayer who ultimately pays the bill . . . CMR is under more pressure than normal lately. While Collins says he's not opposed to regulation per se, he doesn't seem exactly confident that the Health Service Executive understands everything it needs to about what CMR does . . . and can do.

"People have to understand: we provide a sophisticated service in a controlled, safe, regulated way, " he says. "There is an economic reality and we want the HSE to understand that decisions outside the business have effects on the business."

He's reluctant to say much more on the topic, since CMR and the HSE are "in conversations".

"There's a relative understanding of what we do, but they're dealing with many facets of the health service, and we're not a simple business, " he says. "We want to give them a sense of what we do, because if they squeeze us too much, it will impact quality and service levels."

The bottom line can't be ignored, either. For every welcome price cut in the cost of medicines to the consumer, CMR has to build more volume, new business lines or eke out greater efficiencies to meet its growth targets.

For a business that is aiming for up to 10% growth this year to 700m in revenue . . . a rate twice the European average . . . that's a tall order.

"The reduction means the price into us is 20% less and we have to find ways of making it up, " he says. "It reduces our overall profit in a very low margin business."

Yet CMR's contribution to its parent's profits hasn't been too shabby. As recently as 2005, the business grew by 25%, and market share is still strong. Its prewholesale arm, Movianto, has a 36% share and number one position in Ireland, having won a Sanofi Aventis contract away from rival United Drug as well as scoring another win with Wyeth.

CMR also has a 38% share of the high turnover hospital business.

But in a changing regulatory environment where not only is the government seeking to reduce drug prices, but the pharmacy sector is simultaneously expanding and consolidating. Collins expects the number of outlets to continue to increase from about 1,500 today to a plateau of up to 1,800 in three years. These changes on the retail end have opened up the sort of value-adding opportunities that could help relieve some of the pressure on the regulatory end.

With so many new pharmacies coming into the market, Collins has set up Focus Finance, an end-to-end consultancy for owner-operators.

"We'll look at area they're going to go into, the demographics, the type of biz they'll have, what they should work at in terms of prescriptions, where there are growing areas with new houses, families with children. We do a risk assessment, look at the competition, and how they're going to grow the business.

Then we get into profit and loss and cashflows, " Collins says.

The idea is to get young pharmacists who are qualified but inexperienced to get off on the right foot . . . and to build a close relationship with CMR, which also provides bridging finance for them.

CMR has also developed a buyers' association called Connect which, apart from helping its customers get better deals and drive costs down by buying collectively, again deepens the relationship with CMR.

"Certain customers give us their primary business, " Collins says. "It's more about having a close relationship with those top customers . . . it's the 80/20 rule. We try to help them improve their business, which puts volume through our business and ultimately helps our bottom line."

And in the spirit of the government's value for money drive, CMR has started what it calls Alchemy: a procurement service for the 2,000 unlicensed products that doctors can prescribe in Ireland, but manufacturers find too expensive to administer here because of low volumes. CMR sources them abroad and brings them either into the retail or hospital marketplace.

It's an example of the sort of added value, efficient service Collins believes CMR could provide to the HSE, which is the other side of the conversations about regulation.

"We have the people, we have the technology . . . we could work together to help deliver better value."

CV
GARY COLLINS
Age: 40
Family: married to Jenny with two young children; originally from Co Kildare and now lives in Glencullen, Co Wicklow
Career: Appointed managing director of CMR in 2004 having worked with the company for eight years as marketing director; previously worked with Tesco and Golden Pages Education: Clongowes Wood; studied economics and politics in UCD
Hobbies: Runs triathlon charity Sporting Proud; enjoys rugby, golf and skiing