The supermarket scare is a sideshow in the pharmacy fight

That makes supermarkets a great distraction from pharmacy reforms that would ensure the sector works for patients, not just for owners.

A Grattan Institute report we released this week calls for many changes to cut pharmacy costs for patients and taxpayers. But the one recommendation about allowing pharmacies in supermarkets has dominated the pushback.

Today, complex rules restrict where pharmacies can be set up, and who can own them. We called for those rules to be scrapped. When other countries did the same two decades ago, it resulted in more pharmacies, longer opening hours and, in several cases, lower prices.

But those reforms would let supermarkets own and run pharmacies. Since supermarkets are perfect supervillains, much of the debate has focused on them.

It’s been called “absurd” for pharmacy services to be offered in supermarkets, and an “Americanisation” of our system. That’s a stretch for something that’s routine in the UK, the US, Canada and New Zealand.

International evidence suggests patients trust supermarket pharmacies and get good services from them. When supermarkets can compete in other countries, they don’t dominate the market.

Any risks to quality or competition can be managed. Quality should be measured independently and reported publicly – currently, the only major program is run by the Pharmacy Guild, and the results are never published. And the competition watchdog, the Australian Competition and Consumer Commission, should keep supermarkets under extra scrutiny.

If you’re still worried, there’s a halfway option: scrap the location rules and open up ownership, but not for supermarkets. That way, an independent pharmacy can operate inside a supermarket, without the supermarket saying how it’s run. That’s what New Zealand does.

With the right policies in place, there’s no good reason you shouldn’t be able to pick up your scripts and sausages under the same roof.

However you feel about supermarkets – and the odds are you hate them – don’t let that distract you from much more important pharmacy reforms.

The supermarket scaremongers have been silent on the real scandal: not who might own pharmacies in the future, but who owns pharmacy policy today – and what it’s costing you.

The federal government spends billions of dollars each year on community pharmacy services. The rules are negotiated directly with the guild, the lobby group representing pharmacy owners. Business owners are represented at the negotiating table, but patients and pharmacists aren’t.

There is almost no public evidence to justify decisions. That means it’s impossible to know if the amount the pharmacy gets paid for dispensing a script – usually at least $14 – is the right amount.

That’s not how it’s done for other kinds of healthcare, or for other government-funded services. In fact, it looks like it’s unique globally. We couldn’t find any other country with a process as unrepresentative and opaque as Australia’s.

The result is that pharmacy policy in Australia works for vested interests, but not the public interest.

The thicket of rules that restrict discounting might be the best example.

For some medicines, discounts are banned outright. For others, pharmacies can technically discount, but only if they give up all their government funding for that script. As a result, discounting is blocked or discouraged for most scripts. Pharmacy owners win by not having to compete on price, and patients pay more.

And things are getting worse instead of better. An optional $1 discount was introduced a decade ago, but it’s being phased out.

The policy saved patients tens of millions of dollars a year. Most of the relief went to concession card holders. But by 2029, pharmacies won’t be able to offer a concession patient any discount on any PBS medicine.

As discounts are diminishing, an unjustified surcharge lives on. Non-concession patients who pay less than the maximum of $25 for a script can be hit with a surcharge of up to $2.80 for no reason at all.

Lots of people love their local pharmacy and everyone seems to hate the big supermarkets. That’s why this scare campaign resonates.

But the real threat is the system we already have, where funding is settled behind closed doors, discounts are being phased out, and surcharges no one can justify are retained.

Demand for healthcare keeps rising, and government health spending is rising even faster. No part of the system should be immune from evidence and scrutiny, least of all one where the people who profit from the rules help write them.