The head of a leading pharmacy chain has warned the sector would fracture if it were deregulated, as proposed in the federal government’s recent Commission of Audit report.
The head of a leading pharmacy chain has warned the sector would fracture if it were deregulated, as proposed in the federal government’s recent Commission of Audit report.
Pharmacy 777 managing director Kim Brotherson said opening the industry to competition, including from the Coles and Woolworths supermarket duopoly, would lead to poorer customer service.
“Pharmacies will have to close; there will be ultimately less choice and the industry will be dictated by corporate policy (of Coles and Woolworths),” Mr Brotherson told Business News.
Proposals to deregulate the pharmacy sector go back more than a decade, but were revived by the commission’s report, headed by former Business Council of Australia chair Tony Shepherd.
The report recommended axing ownership laws, which are administered by the state governments and restrict pharmacy ownership to qualified pharmacists, as well as location rules, which fall under federal policy and determine where the outlets can operate.
Deregulation would create greater competition, more access and choice for consumers, and drive down prices, according to the report.
However, pharmacists are concerned that the sector, once deregulated, would be dominated by Coles and Woolworths, much like what has occurred in the liquor and fuel industries, and existing pharmacies would be forced out of business.
Mr Brotherson said if pharmacy ended up in the hands of the supermarket chains, they would likely use their buying power and price tactics to drive pharmacists out of business.
He was also sceptical of the quality of service the chains might offer and couldn’t see how deregulation would add value for consumers.
“The pharmacist’s role is more than just dispensing medications, and that’s what is sometimes overlooked,” Mr Brotherson told Business News.
“A lot of the time, the pharmacist plays a really important role, almost like a concierge, to connect (consumers) into other health professionals because we are easily accessible and it doesn’t cost to see a pharmacist.”
Greg Turnbull, a spokesperson for the Pharmacy Guild of Australia, which represents community pharmacists, said Coles and Woolworths would cherry-pick the most profitable parts of the pharmacy offering and ignore other less lucrative services.
He said the current pharmacy model added value to the community as it offered additional services such as blood pressure checks, methadone treatment, home deliveries and diabetes blood sugar measurements, among other offering.
“Those are the kinds of things that pharmacies do that actually add value to a community and are, in part, subsidised by the sale of prescriptions medicines.”
Mr Turnbull said about 80 per cent of the prescriptions issued under the federal government’s Pharmaceutical Benefits Scheme were capped at the same price, regardless of where they were purchased.
The concern for pharmacists such as Mr Brotherson, however, is the use of predatory pricing for other products offered outside the PBS, as well as those PBS products that are cheaper than the capped price.
Mr Brotherson said deregulation wouldn’t lead to quality use of medicines if supermarkets were to significantly discount prices, such as buy-one get-one free offers, for paracetamol, cold and flu medicine or other items.
Mr Turnbull also defended the government’s location laws, which regulate where pharmacies can open and has been criticised in the past as being anti-competitive.
Effectively, the laws stop a pharmacy from opening near another outlet; potentially protecting pharmacists that might be offering sub-standard services, critics claim.
Mr Turnbull said the regulations, despite appearing to insulate pharmacists, were implemented to protect consumers.
“Without the location rules, there would not be pharmacies evenly distributed around the country,” he said.
He said pharmacies would cluster in some areas and disappear from others, such as regional locations, if location rules were to be abolished.
“The location rules will ensure there is a pharmacy nearby and we think that is good regulation,” Mr Turnbull said.
He said the laws were also in the government’s interests as they ensured regional areas had access to medicines. Without this, the government would have to establish its own pharmacies in regional area.
The Pharmacy Guild is responsible for negotiating with the federal government over the Australian Community Pharmacy Agreement, which sets mark-up prices for medicines, dispensing fees and other remuneration under the PBS, every five years.
The most recent agreement is due to expire in June 2015, and there is likely to be a renewed push for deregulation in the wake of the recommendations from the Commission of Audit.
Mr Brotherson said he had been preparing in the event of such an occurrence.
“I think we are well positioned to deal with the uncertainty of the future,” he said.
“If you are expecting free kicks, or you are expecting the government to give you handouts, as all Australian are finding, that’s going to be a very challenging and I don’t think pharmacy is any exception.”
Business News sought comment from representative organisations of Coles and Woolworths but did not receive a response prior to press deadline.
