AMA analysis of recommendations relating to pharmacy location and ownership laws
There have been dozens of reviews, reports and recommendations over almost 25 years calling for sensible reform to Australia’s archaic and anticompetitive pharmacy regulations. These rules limit competition and access to medicines. The key points of many of these reviews are included in our submission to the Inquiry into promoting economic dynamism, competition and business formation. We have also prepared this table to highlight some of the key recommendations successive governments have ignored.
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National Competition Policy Review of Pharmacy (Wilkinson Review) |
1999 |
Location The review It recommended removing restrictions on how many pharmacies a pharmacist can own. It recommended that location controls be replaced by a restriction on the total number of pharmacies and proposed the introduction of an alternative remuneration system to pharmacists for dispensing PBS drugs. The location rules are “an anti-competitive layer of regulation and government intrusion on the community pharmacy industry and market.” “These regulations restrict free and effective competition in the community pharmacy industry. The Review concludes that it cannot be shown conclusively that the current restrictions are entirely in the public interest. It also suggests that there may be more “competition-friendly” mechanisms, particularly in terms of an efficiency-linked PBS remuneration structure for pharmacies, that could also substitute for the existing new pharmacy approval measures to keep the overall number of pharmacies to a level consistent with community need.” |
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Productivity Commission |
1999 |
Ownership Opposes the ownership restrictions: “the case for ownership restrictions seems much less compelling than the case for licensing requirements” The argument that ownership restrictions ensure access for rural and remote areas is disingenuous: “If a particular [regional] centre is not attractive to a supermarket or chain pharmacy then, subject to the usual commercial viability requirements, there is no reason why an existing independent supplier could not continue in business.” Ownership restriction also increases costs: “Accordingly, the main impact of the ownership restrictions on the price/cost of pharmacy services is likely to be to inflate the cost base.” Location The submission argues that location restrictions undermine competition, which is compounded by the ownership restrictions, and increase the scope for monopoly pricing of non-PBS medicines. It also increases the upfront cost of establishing pharmacies, keeping potential new entrants out. They keep out pharmacies even where there is unmet need. Discounting medicines The submission identifies the restriction on discounting as a major obstacle to competition; “the prohibition is a significant impediment to competition in the single most important segment of the pharmacy market. In effect, it prevents more efficient pharmacies from competing for business by lowering their dispensing fees and passing the savings on to customers.” “If discounting was permitted, the patient contribution specified for subsidised PBS prescriptions would become a maximum payment.” |
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Productivity Commission |
2005 |
Ownership and Location The 2005 review notes that “The failure to act on recommendations by a national independent review of pharmacy to relax ownership and other anti-competitive restrictions” is an example of a problematic legislative review process. The review also noted that Australia’s pharmacy ownership and location rules are much stricter than pharmacy regulations in other countries and in comparison to the rest of the health sector. The example of Europe shows us that the increased competition from relaxing ownership and location rules of pharmacies benefits consumers. |
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2014 |
Ownership and Location “Allowing a wide range of new competitors to enter the market would provide greater access and choice for consumers and, over time, place greater downward pressure on pharmaceutical prices. This could involve non-pharmacists owning pharmacies and relaxing location rules allowing pharmacies to collocate in other retail outlets such as supermarkets.” |
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Productivity Commission Efficiency in Health, Productivity Commission Research Paper |
2015 |
Ownership and Location Strongly in favour of reforming regulation of community pharmacy: “Restrictions on retail pharmacy location and ownership are clearly more about protecting the vested interests of incumbent pharmacists than about promoting consumers’ interests and maximising benefits for society as a whole. These rules limit competition in the sector and can make it harder for some consumers to access pharmacy services. There is much to gain from removing these regulations while targeting safety and access objectives more directly.” The report also found that Australians pay significantly more for medicines than other comparable international examples. Figures from 2013 put Australia at paying $1.3 to $1.5 billion per year more than we could be paying, with Australians prices almost sixteen times higher than the UK, New Zealand and Ontario. |
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Competition Policy Review Final Report (Harper Review) |
2015 |
Ownership and Location This report again recommends that the next community pharmacy agreement not include the ownership and location rules. This report also notes that the rules may be impeding access to services provided by pharmacists other than dispensing at a community pharmacy. “The Panel considers that current restrictions on ownership and location of pharmacies are not needed to ensure the quality of advice and care provided to patients. Such restrictions limit the ability of consumers to choose where to obtain pharmacy products and services, and the ability of providers to meet consumers’ preferences. The Panel considers that the pharmacy ownership and location rules should be removed in the long-term interests of consumers. They should be replaced with regulations to ensure access to medicines and quality of advice regarding their use that do not unduly restrict competition.” (p. 190) |
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Review of Pharmacy Remuneration and Regulation (King Review) |
2017 |
Ownership “The Australian Government should remove any restrictions on the ability of an Aboriginal Health Service to own and operate a pharmacy located at that Aboriginal Health Service. To ensure viability this should be trialled across specific jurisdictions in urban, rural and remote locations, to understand any inadvertent impacts of the removal of restrictions.” Machine Dispensing “The Australian Government should trial the use of machine dispensing in a small number of relevant secure locations in communities that are not currently served by a community pharmacy. Such machine dispensing must be appropriately supervised and should allow real-time remote interaction with a pharmacist. The range of PBS medicines available through machine dispensing should be limited based on an assessment of risk.” |
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Productivity Commission |
2017 |
Raised significant concerns with retail pharmacies as healthcare settings “As one party put it to the Commission in this inquiry, the availability of unproven and sometimes harmful medical products and confectionary at the front of the pharmacy is not reconcilable with an evidence based clinical function at the back. An Australian Government review into various natural remedies — widely available in pharmacies — suggests that most had no strong evidence of benefits to users.” Machine Dispensing “The Australian Government should move away from community pharmacy as the vehicle for dispensing medicines to a model that anticipates automatic dispensing in a majority of locations, supervised by a suitably qualified person. In clinical settings, pharmacists should play a new remunerated collaborative role with other primary health professionals where there is evidence of the cost effectiveness of this approach.” |
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2018 |
2 Months’ Dispensing The Pharmaceutical Benefits Advisory Committee (PBAC) made the recommendation in August 2018: “Based on an assessment of clinical safety and ongoing cost-effectiveness, the PBAC recommended that 143 medicines (348 PBS items) were acceptable for listing with increased maximum dispensed quantities (approximately 60 days or two months’ supply per dispensing).“ List of medicines: https://www.pbs.gov.au/info/industry/listing/elements/pbac-meetings/pbac-outcomes/recommendations-made-pbac-august-2018 |
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Productivity Commission 5-year Productivity Inquiry: A competitive, dynamic and sustainable future Interim report |
2021 |
Ownership and Location The interim report notes that the arguments in favour of retaining ownership and location rules have failed. Access has not been guaranteed, Four major retail chains now own around three quarters of retail pharmacies, and there are now fewer pharmacies per head of population than there were when the rules were introduced. “As such, current regulations that have the stated aim of reducing market concentration are likely to instead reduce competition and establish local monopolies, with little countervailing benefit. These impediments to competition are purely due to the regulatory framework and could be changed by governments immediately.” |
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Productivity Commission |
2023 |
Ownership and Location “Regulations on location and ownership of Australia’s pharmacies have reduced competition in local markets — there are now fewer pharmacies per head of population than when the regulations were introduced — and have facilitated the establishment of local monopolies — four pharmacy operators control 73% of the market share (through franchising and the like). Australian governments should follow the lead of the United Kingdom and the United States where pharmacy colocation — for example, pharmacies located in supermarkets — is allowed.” |
AMA Future of Dispensing Discussion Paper discusses these reviews and other options for reform to how we dispense medicines in Australia: https://www.ama.com.au/sites/default/files/2021-10/Future%20of%20Dispensing%20Discussion%20Paper.pdf