Let pharmacies discount any medicine they want to
by Peter Breadon, Thomas Shortridge
Your supermarket can discount bread. Your servo can discount petrol. But strict rules stop your pharmacy discounting most medicines.
The government sets caps on how much Australians pay for a Pharmaceutical Benefits Scheme (PBS) prescription: $25, or $7.70 if you have a concession card. Every medicine has a set price. If the price is below your cap, you pay the whole cost and the pharmacy can offer you a discount. But most scripts cost more. For these, you pay up to your cap, the government covers the rest, and discounts are basically banned.
It wasn’t always this way. In 2015, the government gave pharmacies the option to discount more medicines, but only by $1 per script. No pharmacy was forced to do it, they were just given a choice. Even so, the backlash from pharmacy owners was fierce.
After sustained lobbying from the Pharmacy Guild, the lobby group for pharmacy owners, the government agreed to phase out the discounts. If you don’t have a concession card, the discounts are already gone. If you do have a concession card, they will be gone by 2029.
Technically, pharmacies can still offer discounts on PBS medicines with a set price between $25 and $51. But when they do, they give up any government subsidy they would have received – so it’s no surprise that those discounts are rare.
All these rules mean one thing: patients are missing out on real savings.
Pharmacies are willing to compete on price when they are allowed to. For prescriptions where you pay less than the cap amount, there are no limits on discounting. For these medicines, pharmacies on average knock $3 off the price for every single prescription. That’s about a 16 per cent discount across the board.
New Grattan Institute analysis shows that if pharmacies were allowed to discount PBS medicines by up to $5, patients might save more than $130 million per year. Most relief would go to people with concession cards. For a pensioner on five regular medicines per month, those discounts could add up to hundreds of dollars a year.
Missing out on savings is bad, but it gets worse. While discounts are mostly banned, extra fees are not.
Pharmacies can charge patients who don’t have a concession card an extra fee of nearly $3 per script on most medicines. This charge is for no particular service and is entirely at the pharmacist’s discretion. We don’t even know how often this fee is charged.
And if those patients want their spending recorded so it counts towards their annual caps, pharmacies can charge another $1.54 just for writing this down. These charges are on top of the roughly $14 pharmacies already get for dispensing a script.
This lopsided arrangement – extra fees allowed but discounts restricted – is no accident. It’s the product of a system that benefits pharmacy owners at the expense of patients. And the problem goes beyond discounting.
Unique protections stop new pharmacies opening near existing ones. No other health service enjoys this kind of protection from other businesses – a GP can open a clinic near another GP, but a pharmacist cannot open a pharmacy near another pharmacy.
Why does that matter? It means existing pharmacies are protected from competition, so they have less reason to offer lower prices, better service, or longer opening hours.
These rules that put business owners before patients happen because pharmacy policy isn’t made like other health policy – pharmacy owners help write the rules.
Every five years, pharmacy regulations and fees are set through closed-door deals between the government and the Pharmacy Guild. There’s no one else in the room, no requirement for evidence or data, no independent umpire, and next-to-no public scrutiny. And the Guild is also a large political donor to both major parties, donating more than any other healthcare organisation.
The fix is straightforward: let pharmacies discount any medicine they want to.
And end the special deals. Australia should do what we do for other kinds of healthcare and what some other countries do for pharmacies. We should have an independent body set the prices. But if the government won’t commit to that, we should at least have patients and employee pharmacists around the negotiating table, not just business owners.
Pharmacists are among Australia’s most trusted health professionals. They deserve to be paid well for the critical work they do. The problem is that the rules have been tilted in favour of pharmacy owners for too long.
It’s time to rebalance the scales and get patients a better deal.