Pharmacy owners enjoy unique protections
by Peter Breadon, Molly Chapman
Pharmacists are among the most trusted professionals in the country. But the Pharmacy Guild of Australia, which represents pharmacy owners, has used that trust to build something else: a reputation as one of Canberra’s most powerful lobby groups.
Decades of lobbying have won pharmacy owners a remarkable set of protections. It looks like it’s paying off. The guild’s own data suggests member profits have more than doubled in real terms over the past decade. This excludes Chemist Warehouse, but its rich valuation and surging sales suggest it’s not struggling either.
Among the unique windfalls pharmacy owners enjoy are protection from competition, prices based on opaque negotiations instead of cost, and blanket revenue guarantees.
Owning a pharmacy is good – if you can get one. Location rules dictate how close a new pharmacy can be to an existing one, and how far an existing one can move. Several European countries scrapped similar rules in the late-90s and early 2000s. The result was more pharmacies, longer opening hours, and, in several cases, lower prices.
Australia’s ownership rules offer a second layer of protection. Only a pharmacist can own a pharmacy in Australia, supposedly to stop corporate owners from prioritising profit over patient care.
We don’t apply this logic anywhere else in healthcare, and we still expect GPs, dentists, and other health professionals to deliver quality care. What actually protects patients is that clinicians are trained, registered, accredited, and professionally accountable, regardless of who owns the business. Pharmacists already carry that obligation.
Together, these location and ownership rules keep pharmacies in the hands of incumbents. With no threat of a rival opening next door, there’s no pressure to lower prices, improve services, or innovate.
There are risks to deregulation – a few large players could dominate the market and raise prices or cut quality. But safeguards can manage these risks. The ACCC should design appropriate competition safeguards, while independent reporting on quality and outcomes can help ensure services get better, not worse.
Pharmacy owners also enjoy unique protections when it comes to government income.
Pharmacies collect well over $3 billion a year in dispensing fees. The trouble is, these fees aren’t set by an independent body or benchmarked against actual costs. They’re negotiated behind closed doors, every five years, in a Community Pharmacy Agreement between the federal government and the Pharmacy Guild.
There is no public evidence to justify the numbers, and that’s no accident. The guild has blocked data collection, forcing the government to negotiate in the dark. No comprehensive costing study has been conducted since 1989.
As a result, we can’t tell if we’re paying too much, but it looks like we are.
Despite the advent of electronic scripts and automation, which reduce the cost of dispensing, the negotiated fee for dispensing each script is higher now than it was 20 years ago. And the guild’s refusal to support independent costing speaks volumes.
The fix is clear. Government funding shouldn’t be negotiated at all. Like for public hospitals and aged care, it should be determined by the Independent Health and Aged Care Pricing Authority, based on real cost data.
As if protectionism and arbitrary fees weren’t enough, total revenue provided to pharmacies under each five-year agreement is guaranteed. No other healthcare sector gets this certainty.
While it gives the government budget predictability too, the deal is skewed in favour of pharmacy owners. Any fall in dispensing volume below forecasts – no matter how small – triggers an increase in the fee for each script. But dispensing must grow by 10 per cent before the fee is decreased.
The same thing happened for 60-day dispensing, which allows a two-month rather than one-month supply of some medicines to be dispensed at once, saving the government and patients millions of dollars.
In 2023, the government stared down a guild scare campaign which claimed that 60-day dispensing would lead to mass pharmacy closures, medicine shortages, and even children overdosing on hoarded medicines.
The government pushed the change through, but promised pharmacies $2.1 billion in compensation.
Two years later, only half the forecast 60-day scripts materialised. Pharmacies lost far less revenue than expected, but they’re still pocketing the full amount of compensation.
Blanket funding guarantees serve the wrong policy goal. Government funding isn’t there to ensure every pharmacy maintains its revenue and stays open. It’s there to make sure all Australians can safely and affordably get their medicines.
Instead of compensating every pharmacy regardless of size, revenue, efficiency, or profit, the government should monitor pharmacy viability. Then it could support only pharmacies that are genuinely at risk, and when a closure would stop patients getting medicines and services.
The guild routinely argues that more competition and changes to funding will devastate the sector. Maybe pharmacies are that fragile. But if that’s true, the fix is fair pricing and targeted support, not opaque deals and protections that stifle productivity.
Australian patients and taxpayers deserve a better deal.