Future pharmacy: A better deal for patients and taxpayers

by Peter Breadon, Mia Jessurun, Molly Chapman, Thomas Shortridge

12.07.2026 report

Summary

Each year, community pharmacies dispense millions of scripts, give millions of vaccinations, and offer expert advice to most Australians, costing the federal government and patients almost $4 billion a year.

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Pharmacy policy is too important to be controlled by a powerful lobby group. But the Pharmacy Guild of Australia, which represents most pharmacy owners, is calling the shots.

The Guild negotiates funding and policy directly with the federal government. Unlike almost any other country, Australia’s negotiations include no one else, and are based on almost no public evidence.

Bad governance has led to bad deals – unless you own a pharmacy. Profits have surged, while patients miss out on cheaper medicines and choices about where to get them, and taxpayers pay too much.

Dispensing fees are probably too high, and some payments aren’t justified at all. If the number of scripts falls below a predicted level, government has to pay up anyway, as if the predicted level was met.

Unique regulatory protections dictate who can own pharmacies and where they can be set up. For most scripts, discounts are being banned or discouraged by financial penalties. Meanwhile, a discretionary surcharge is allowed on many scripts. All these rules choke off competition that would improve choice, increase opening hours, and cut prices.

Skilled and trusted pharmacists should provide more types of care. But medicine checks and dose administration aids are poorly targeted or overpriced, prompting blunt caps on their growth. For new services, dozens of trials have been too weak to prove they are cost-effective, leaving the sector in a purgatory of fragmented state programs.

Pharmacy policy is a shakedown that needs a shakeup. Five reforms can get better value for patients and taxpayers.

First, no more backroom deals. Negotiations should be replaced by independent decisions, as happens for other types of healthcare.

If the federal government won’t do that, at a minimum patients and pharmacists should be at the table, and there should be clear public evidence to justify decisions.

Second, dispensing fees should be streamlined and reset. Unjustified fees should be scrapped. Fees should be set independently, based on cost not bargaining. A fee for stocking high-cost medicines should be redesigned to work better, and save up to $285 million a year.

Third, rules on pharmacy location and ownership should be removed immediately, and restrictions on discounts should be phased out.

Fourth, services must deliver value for money. The criteria for MedsChecks should be tighter and administration aids should be repriced. Pharmacists should be able to prescribe for urinary tract infection, but other services must wait for decisive evidence from national trials on the most cost-effective options.

Finally, the federal government should fund pharmacists in GP clinics, where evidence shows that their expertise can improve care.

Fairer fees and competition will change the sector. Some pharmacies may struggle, especially in rural areas. Some companies could dominate and raise prices or cut quality. But safeguards can prevent these risks: targeted financial support, scrutiny from the competition watchdog, and a better system to measure pharmacy quality.

Replacing bargaining with evidence, and protectionism with competition, will give patients lower prices and more choice, and taxpayers better value, while keeping pharmacies the accessible and trusted service Australians rely on.

Recommendations

Recommendation 1

Restore independent community pharmacy policy

End Community Pharmacy Agreements.
If the federal government will not do this, include pharmacists and patients in the agreements, and base them on public evidence.

Recommendation 2

Make dispensing fees simpler and fairer

Expand and speed up price disclosure price cuts.
Pay pharmacies sooner for very high-cost medicines.
Automate the Safety Net recording process.
Remove unjustified fees: the Safety Net recording fee, discretionary patient charges, and fees for 60-day dispensing.

Recommendation 3

Base pharmacy funding on cost and reasonable profits

Make the Independent Health and Aged Care Pricing Authority (IHACPA) responsible for determining pharmacy remuneration, with pharmacies required to provide necessary data.
Replace payment adjustment and the regional allowance with monitoring of pharmacy viability, targeted support, and reverse auctions in areas without a pharmacy.

Recommendation 4

End unfair protections and unleash competition

Remove restrictions on where new pharmacies can be established, including allowing pharmacies in supermarkets.
Remove restrictions on who can own pharmacies and how many they can own.
Allow pharmacies to discount all medicines.

Recommendation 5

Safeguard competition and quality

Direct the ACCC to do a market study of the community pharmacy sector and design appropriate safeguards to protect competition.
Implement an independent quality and outcomes monitoring framework.

Recommendation 6

Ensure pharmacy services are good value

Replace arbitrary caps on MedsChecks with tighter eligibility and information-sharing requirements.
Reset pricing for dose administration aids to reflect increas-ing automation, and then remove caps.
Fund pharmacist prescribing for urinary tract infections. Fund rigorous national trials of prescribing for other minor ailments, smoking cessation, and collaborative chronic disease management.
Invest $80 million in pharmacists in general practice and Aboriginal Community Controlled Health Organisations.

1 Essential services are being held hostage

Community pharmacies perform vital services for Australians – dispensing medicines, advising patients, and providing one of the most accessible touchpoints in the health system. Governments and patients spend billions of dollars every year for these services, and they deserve good value.

But for decades, the Pharmacy Guild of Australia – one of the country’s most powerful lobby groups – has shaped pharmacy policy to protect the interests of pharmacy owners, blocking reforms that would deliver better value to taxpayers and patients.

1.1 Pharmacies are a critical part of our health system

The government subsidises prescription medicines and pays pharmacists – the main health professionals in Australia allowed to dispense medicines – to supply them to patients and provide advice.¹ Pharmacies are essential to access to and safe use of prescription medicines.

In 2024-25, there were more than 6,000 community pharmacies in Australia, and they dispensed 335 million prescriptions under the Pharmaceutical Benefits Scheme (PBS) and Repatriation PBS (a dedicated scheme for veterans).² Community pharmacies provide the most common touchpoint that people have with the healthcare system.

On average, each Australian visits a community pharmacy 18 times a year.³

Pharmacists are highly skilled health professionals with expert knowledge of medicines. In the community setting, they dispense medicines, counsel patients on how to take them safely, and flag medicine interactions and prescribing errors. They also provide informal health advice and increasingly deliver clinical services, such as vaccinations.

Community pharmacists are among the most accessible health professionals in Australia, and patients can seek their advice without an appointment.

Each year, pharmacies receive about $3.8 billion for dispensing medicines and professional services.⁴ Taxpayers and patients need to be confident they are getting good service, and good value, from this spending.

1.2 Pharmacy policy is dominated by the Guild

The Pharmacy Guild of Australia (the Guild) is the peak body representing community pharmacy owners (Box 1). It is also one of the most powerful lobby groups in the country.

Its political influence is partly financial, thanks to its significant political donations to successive governments on both sides of politics.⁵

Box 1: The Pharmacy Guild of Australia

Established in 1927, the Pharmacy Guild is the peak body representing community pharmacy owners in Australia. In 2023, it had 4,154 member pharmacies – about 70 per cent of community pharmacies.^a It doesn’t include any Chemist Warehouse stores, which together account for about 9 per cent of all pharmacies and probably a larger share of the market.^b The Guild is also a powerful lobby group. In the past five years, it has donated $2.5 million to political parties.^c This makes it the largest donor from the healthcare sector over that period, and the 15th largest overall – larger than the Minerals Council of Australia.^d Over the past four years, the Guild has also spent $16.3 million on public campaigns.^e

This political spending is funded in part by membership fees, and in part by the Guild’s wholly owned insurance and professional services firm. This firm – Guild Group – has generated $71 million in profits and has paid $51 million in dividends to the Guild over the past three years.^f

But the main source of the Guild’s power is its ability and willingness to weaponise a highly valued part of the healthcare system. Pharmacists are among the most trusted professionals in Australia.⁶ The Guild has repeatedly leveraged this trust to mobilise patients against reforms that would, in many cases, benefit patients directly. This generally involves claiming that any such reform would put their local pharmacy out of business.

Table 1.1 summarises instances when the Guild has successfully blocked or watered down reform over the past three decades. Box 2 provides more detail on the most recent example: the scare campaign against 60-day dispensing.

Table 1.1: The Guild has a track record of blocking reform

_{Notes: CPA = Community Pharmacy Agreement.}
_{a. Department of Health, Disability, and Ageing (2024b, p. 6).
b. See McInerney (2013), Clarke (2015), and ANAO (2015). To compensate pharmacies, the sixth Community Pharmacy Agreement partially delinked pharmacy fees from medicine prices: Ley (2015).
c. See Recommendation 14 of Harper et al (2015). The Guild threatened to launch a campaign against the proposal to allow pharmacies to discount over co-payment PBS medicines by $1 and only pulled back when the location rules were extended: Hurst (2015).
d. See Box 2.}

The Guild has ensured that the evidence base needed to challenge its claims does not exist. Its ongoing refusal to provide pharmacy cost data has meant that no comprehensive costing study has been conducted since 1989 – almost four decades ago.⁷ Without cost data being public, the Guild can maintain the impression that the sector is perpetually on a knife’s edge, making claims of catastrophic harm from reform impossible to test or refute.

Box 2: The 60-day dispensing scare campaign

Most medicines in Australia are dispensed for 30 days at a time. But in April 2023, Health Minister Mark Butler announced that more than 300 medicines for stable, chronic conditions would become eligible for 60-day dispensing, to be rolled out in stages from later that year.^a

This change would lead to significant savings for patients – halving the dispensing fees for these medicines – and bring Australia in line with countries including New Zealand, the UK, France, and Canada that had already offered 60- or 90-day dispensing.^b

The Guild opposed the change. Pharmacies would earn less from dispensing and lose retail revenue from reduced foot traffic. The Guild claimed this would result in mass pharmacy closures, commissioning modelling that projected up to 665 would shut within four years.^c

The Guild warned of medicine shortages, with president Trent Twomey declaring he didn’t want to see ‘a Hunger Games stand-off in any community in Australia where some patients get double the medicine they need, while others get nothing’.^d It also argued that larger medicine quantities in homes would increase the risk of accidental overdose by children. Both claims were widely disputed, and there are no reports of such problems in countries with 60- or 90-day dispensing.^e

Through billboards, television, radio, social media, phone calls, and encouraging direct conversations at the counter, the Guild tried to convince Australians that their local pharmacy would close and they would lose access to their medicines.^f

The government held firm. Stage one proceeded in September 2023. The Guild suspended its campaign soon after, having secured an agreement to bring forward negotiations for the eighth Community Pharmacy Agreement. That agreement began in July 2024 – a year earlier than planned – and included new payments that excessively compensate pharmacies for lost dispensing revenue (see Chapter 3).

In December 2024, stakeholders who opposed the Guild reportedly received a Christmas package from the Guild: a voodoo doll of Trent Twomey, some pins, and a packet of Glucogel jelly beans.^g

There have been no reports of medicine shortages or overdoses from 60-day dispensing.^h Meanwhile, the reform has delivered huge savings: in 2025 alone, patients saved $222 million and the government $252 million.ⁱ

1.3 Pharmacies seem to be getting a sweet deal

Thanks to its decades of political influence, the Guild has secured the best of both worlds. Pharmacies earn growing profits while guaranteed government income insulates them from revenue declines. In effect, they profit as private businesses while shifting financial risk to taxpayers.

Pharmacy income extends well beyond PBS dispensing. Retail and over-the-counter medicine sales comprise about 30 per cent of the average Guild pharmacy’s revenue, rising to about 67 per cent for Chemist Warehouse stores.⁸

Pharmacies also earn revenue from private prescriptions. These are medicines not listed on the PBS for which patients pay the full cost with no government subsidy.⁹ Unlike PBS prices, private prescription prices are entirely unregulated, meaning pharmacists can charge whatever they like. Two categories of medicine have turbocharged this revenue stream in recent years (Box 3).

The available evidence on pharmacy finances – limited as it is – suggests a highly profitable sector. Guild survey data suggest that average pharmacy profits have more than doubled over the past decade (Figure 1.1). This excludes Chemist Warehouse stores, but their rich valuation and surging sales suggest they’re not struggling either.¹⁰

Pharmacy discounting could also be a sign of profitability. Pharmacies often discount medicines to win customers, surrendering 17 per cent of their remuneration on average (see Chapter 6).¹¹

Figure 1.1: Pharmacy profit is increasing
Average profit (before tax) of Australian community pharmacies, adjusted for inflation

_{Notes: Net profit is total revenue minus total expenses, cost of goods sold, and notional proprietor’s salary. Data from the Guild Digest, an annual survey of 300-to-600 pharmacies that is weighted to represent the Australian community pharmacy sector. Years refer to financial year (e.g. 2023-24 is shown as 2024). Values have been inflated to March 2026 dollars using Consumer Price Index: ABS (2026a). Sources: 2015 to 2025 Guild Digests, available at Pharmacy Guild of Australia (n.d.[b]).}

1.4 What this report is about

It’s clear that pharmacies are receiving substantial government funding and generating substantial profits. The combination of rising profits, opacity, and regulatory capture warrants scrutiny.

The following chapters identify the many policies that benefit pharmacy owners at the expense of patients and taxpayers, and how to fix them:

An exclusive negotiating position to set policy and funding (Chapter 2)
Payments with no public justification for their structure or value (Chapter 3 and Chapter 4)
Unparalleled protection from competition through pharmacy ownership and location rules (Chapter 5)
Restrictions on discounting that increase costs for patients (Chapter 6)
Minimal monitoring and reporting of quality, efficiency, or results (Chapter 7)
Funding for pharmacy services that haven’t shown good value-for-money (Chapter 8)

This report does not cover the development, manufacture, or wholesale distribution of medicines in Australia, or the level and structure of patient payments or Safety Net thresholds.

Box 3: Private prescriptions are a lucrative revenue stream

Two types of medicine have boosted revenue from private prescriptions in recent years.^a

Glucagon-like peptide-1 receptor agonists (GLP-1 RAs) – such as Ozempic and Mounjaro – are used to treat type 2 diabetes and obesity. Since May 2020, total sales have increased almost 10-fold, with most of the growth in private prescriptions.^b

In the 12 months to April 2025, an estimated 2.9 million private prescriptions for GLP-1 RAs were accessed.^c Based on current Chemist Warehouse prices, this represents about $83 million in pharmacy remuneration per year.^d The figure is conservative, because non-discount pharmacies probably charge even more.

Medicinal cannabis prescriptions are also increasing. In 2025, 6.35 million units were dispensed in Australia, almost entirely as private scripts.^e If pharmacies charged only the standard current PBS dispensing fee, this would represent an additional $91 million to pharmacies each year. Again, the true figure is probably higher.

2 Restore independent pharmacy policy

Community pharmacies are funded and regulated through Community Pharmacy Agreements, which are negotiated between the federal government and the Guild. This arrangement has its roots not in policy design, but in a political crisis. The result is a process that is sheltered from outside scrutiny, dominated by a single interest group, and unlike any other major health funding arrangement in Australia.

The Community Pharmacy Agreement should be abolished and replaced with the more transparent, evidence-based alternatives proposed in this report. If the government won’t do that, agreements should be based on public evidence, and negotiated with pharmacists and patients – not just pharmacy owners.

2.1 What is the Community Pharmacy Agreement?

Since 1990, the federal government has negotiated a series of five-year agreements with the pharmacy sector – Community Pharmacy Agreements – to govern how community pharmacies are funded and regulated. There have been eight agreements to date.¹² The sector is represented by the Guild (see Box 1).¹³

Community Pharmacy Agreements are expensive. The current agreement is expected to cost $25.8 billion over its five-year term.¹⁴

2.2 The Agreement emerged from a political standoff, not a policy process

Before the first Community Pharmacy Agreement, in 1990, the sector looked very different. Pharmacy remuneration was determined independently by the Pharmaceutical Benefits Remuneration Tribunal (PBRT).¹⁵

Under this model, dispensing fees per script fell as the number of scripts dispensed by a pharmacy rose, which rewarded small, inefficient pharmacies. As a result, Australia had a high number of pharmacies by international standards, with many clustered together in urban areas.¹⁶

This was the case until 1989, when the PBRT concluded – based on surveys of dispensing costs – that pharmacies were being overpaid, and it moved to cut fees sharply.¹⁷ Pharmacists responded by holding public rallies, with some owners closing their pharmacies in protest.¹⁸ The then Health Minister intervened by negotiating directly with the Guild and bypassing the PBRT entirely.¹⁹

The result was the first Community Pharmacy Agreement, signed in 1990. It replaced the old funding structure with one that no longer gave higher funding per script to lower-volume pharmacies, introduced location rules restricting where new pharmacies could open, and funded pharmacy buy-outs and mergers.²⁰

While the PBRT still exists, its only remaining roles are to give legal effect to the terms of the Community Pharmacy Agreement, and to step in and set remuneration if the parties fail to reach a deal.²¹

The precedent set by the first Community Pharmacy Agreement – a bilateral negotiation where politics pushed aside evidence – still haunts Australia today.

2.3 The Community Pharmacy Agreement is uniquely opaque and unrepresentative

The Community Pharmacy Agreement is determined through a process that is sheltered from outside scrutiny and dominated by a single interest group. No other major health funding arrangement in Australia works this way. Even compared to other countries with negotiated pharmacy agreements, Australia’s stands out for its lack of transparency and representativeness.

2.3.1 The negotiation is a black box

The terms of each Community Pharmacy Agreement are determined through months of closed-door negotiations.²² There is no public documentation of the process and no empirical justification provided for the policies and spending agreed.²³ For an agreement governing billions of dollars of public spending, this is a remarkably low level of transparency.

It hasn’t gone unnoticed. The Consumers Health Forum of Australia, the Pharmaceutical Society of Australia,²⁴ and other stakeholders not party to negotiations have repeatedly raised concerns.²⁵ Improved transparency was also recommended by the 2017 Review of Community Pharmacy Remuneration and Regulation (the King Review).²⁶

2.3.2 The right people aren’t at the table

Since the first Community Pharmacy Agreement, negotiations have taken place solely between the government and the Guild. The Guild represents most pharmacy owners, but not the pharmacists who work in pharmacies or the patients who rely on them.

This is a significant gap. Many stakeholders – including some pharmacists – say they are dissatisfied with the arrangement, and question the Guild’s ability to represent their interests.²⁷ This is unsurprising: the interests of pharmacy owners do not always align with the priorities of employed pharmacists, let alone patients.

The King Review recommended that the Pharmaceutical Society of Australia and the Consumers Health Forum of Australia be included as equal participants in negotiations.²⁸ For the past three agreements, stakeholder groups have had some formal participation in the lead-up to negotiations and in overseeing their implementation.²⁹ But this has not extended to the negotiations themselves. Apart from the Pharmaceutical Society of Australia – which was a signatory to a small professional services section of the seventh agreement – no one but the Guild and the Department has ever had a formal seat at the table.³⁰

2.3.3 Australian community pharmacy is an outlier

The Community Pharmacy Agreement is the only agreement of its kind for Australian healthcare services.³¹

GP, specialist, optometry, and allied health rebates are set through the Medicare Benefits Schedule by the government, with new items added on the recommendation of the independent Medicare Services Advisory Committee.³² Public hospital prices are set by an independent pricing authority, and calculated using cost data.³³ Bilateral funding agreements with other health sectors – for example, for pathology and diagnostic imaging – have not been continued.³⁴

Table 2.1 rates pharmacy funding arrangements in comparable countries on three dimensions: the representativeness of the stakeholders in the negotiating room, the level of evidence they use to make their decisions, and how well their decisions are explained to the public.

Some other countries use sector-level negotiations to set pharmacy funding, but even among those, Australia stands out. No other jurisdiction combines such a narrow negotiating group with such a complete absence of public evidence and transparency. Wales comes close, but even there, all pharmacy owners are represented – not just a majority.

Table 2.1: International comparison of community pharmacy funding arrangements

_{Notes: Representativeness = the degree to which decision-makers reflect the interests of those affected by their decisions. Evidence base = the amount and quality of evidence used to inform decisions.
Sources: Department of Health, Disability, and Ageing and Pharmacy Guild of Australia (2024), Community Pharmacy Wales (2025), Health New Zealand | Te Whatu Ora (2025a), Grant Thornton (2021), Department of Health Ireland (2025), Community Pharmacy England (2024), Fédération des Pharmaciens de France (2023), Andersen and Skov-Johansen (2024), Hansen et al (2021), Health and Global Policy Institute (n.d.), Health and Global Policy Institute (2019), Federal Union of German Associations of Pharmacists (ABDA) (2025), Sosiaali- ja terveysministeriö (2020), Apotekforengingen (2024), and Tandvårds- & läkemedelsförmånsverket TLV (n.d.).}

2.4 This Community Pharmacy Agreement should be the last

The key functions of the Community Pharmacy Agreement should be replaced with more transparent, evidence-based alternatives. Pharmacy remuneration should be set by an independent body (see Chapters 3 and 4), and funding for other community pharmacy services should be determined through a separate process (see Chapter 8).

That leaves little for Community Pharmacy Agreements to do, and no reason for them to continue. The current agreement should be the last.

If the agreements are retained, they should at least be reformed:

Include the Pharmaceutical Society of Australia, the Consumers Health Forum of Australia, and other pharmacy owners
Base decisions on cost data released before negotiations
Document the decision-making process and make outcomes subject to ongoing quality monitoring and reporting

The Guild will probably oppose the recommendations in this report. It is likely to claim, as it has before, that reform threatens the viability of the sector and the communities that depend on it. The best response to these arguments is transparency, so that taxpayers and patients can know if these claims are accurate.

3 Make dispensing fees simpler and fairer

Community pharmacies exist, first and foremost, to dispense medicines. For PBS medicines, the cost of dispensing is shared between patients and the government. Many fees that add to that cost are poorly designed, and some are completely unjustified. Fixing these issues would deliver better value for taxpayers, cut patient fees, and support the delivery of high-cost medicines.

This chapter outlines how to address these structural flaws, and Chapter 4 covers how the value of the fees should be set.

3.1 How dispensing is funded

Community pharmacies receive a series of payments for dispensing PBS medicines, each ostensibly covering a different cost. The fees are paid by the government, the patient, or both. The following sections explain each component.

3.1.1 The Commonwealth Price

When a pharmacy dispenses a medicine, the total amount they receive in return is called the Commonwealth Price.³⁵ The Commonwealth Price has four components:³⁶

Medicine costs – The approved ex-manufacturer price and wholesale mark-up ($0.24 to $223 depending on medicine price) reimburse the pharmacy for the price it has already paid to the manufacturer and wholesaler.
Handling and infrastructure – The administration, handling, and infrastructure fee ($5.12 to $100.12 depending on medicine price) covers the costs of storing and handling the medicine and maintaining the required pharmacy infrastructure.
Dispensing services – The dispensing fee ($9.24 for ready-prepared medicines, $11.28 for compounded medicines) covers dispensing – from receiving the prescription, verifying and preparing the medicine, to counselling the patient and handing it over.
Other – Fees that vary by medicine type, patient circumstances, and pharmacist discretion, including the dangerous medicine fee ($5.73), Safety Net recording fee ($1.54 for ready-prepared medicines, $1.99 for compounded medicines), and allowable additional patient charge (up to $2.79).

The exact values of these payments are listed in Table A.1 in Appendix A.

The Commonwealth Price is split between the patient and the government, with patients paying up to the maximum co-payment ($25 for general patients and $7.70 for concession patients) and the government paying the rest.³⁷ Figure 3.1 provides an illustrative example using atorvastatin – a common, low-cost medicine for high cholesterol – of how this payment is split.

Figure 3.1: Patients and the government split the cost of dispensing
Cost components of the Commonwealth Price of atorvastatin 10mg (pack of 30), July 2026

_{Notes: Atorvastatin 10mg (pack of 30) has the PBS item number 8213G. AEMP = Approved ex-manufacturer price. AHI = Administration, handling, and infrastructure. The full allowable additional patient charge ($2.79) has been applied to the general patient fee here, but pharmacists may choose to apply part or none of this charge, provided the total patient cost does not exceed the general patient co-payment of $25. No Safety Net recording fee or after-hours fees have been included. Atorvastatin does not attract any brand or therapeutic group premiums.
Sources: Department of Health, Disability, and Ageing (2026d) and Department of Health, Disability, and Ageing (2026b).}

3.1.2 Additional funding for 60-day dispensing

The current Community Pharmacy Agreement introduced the Additional Community Supply Support payments to compensate pharmacies for income lost due to 60-day dispensing (see Box 2).³⁸

These payments consist of two components:³⁹

Component 1: $5.12 for each over co-payment 60-day script dispensed.
Component 2: $0.13 for each over co-payment script dispensed.⁴⁰

Together these payments will cost $2.1 billion from 2024 to 2029.⁴¹

3.2 Pharmacy funding has structural flaws

There are three main problems with the design of dispensing fees:

Pharmacies are reimbursed above the prices they pay for medicines, and the policy to fix it isn’t quick or precise enough
The financial risks from stocking high-cost medicines are addressed through a wasteful and ineffective mark-up
Pharmacies get several arbitrary, unfair, and costly fees

3.2.1 Price disclosure works, but not well enough

When a new medicine is added to the PBS, the approved ex-manufacturer price is set through negotiations between the manufacturer and the government. This process takes into account the cost of manufacture, the type of medicine, and the prices of other similar medicines.⁴²

The approved ex-manufacturer price is the maximum price at which a manufacturer can sell the medicine for.⁴³ But they can – and often do – sell medicines to pharmacies for less than this price to gain market share.⁴⁴ Historically, this meant pharmacies could purchase medicines at discounted prices while being reimbursed the full ex-manufacturer price by the government, effectively profiting at taxpayers’ expense.

In 2007, the government introduced a price disclosure policy to claw back savings for taxpayers.⁴⁵ Manufacturers are now required to report the actual prices at which medicines are sold, with reimbursement gradually reduced to reflect those prices.⁴⁶

Similar systems are used successfully in other countries, including in England⁴⁷ and in the Medicaid program in the US.⁴⁸

In Australia, price disclosure has cut the price of many medicines. Over the past 10 years, there have been about 2,000 price reductions, averaging 21 per cent.⁴⁹ The prices of 251 medicines were cut in 2024, saving the government and patients about $167 million in 2025.⁵⁰

But two flaws limit the effectiveness of price disclosure.

First, because data are collected over six months and then processed over a further six months, it can take up to a year for a fall in market prices to translate into a lower PBS price.⁵¹ Shortening this cycle to monthly – as in England and the US – would deliver savings sooner.⁵²

Second, price reductions only kick in if the discount is more than 30 per cent for some medicines and more than 10 per cent for others.⁵³ Smaller discounts have been more common than larger ones over the past decade (Figure 3.2). But the thresholds mean that discounts smaller than 10 per cent are ignored.⁵⁴ There is no good reason for these excluded discounts.⁵⁵

Figure 3.2: Patients and taxpayers are probably missing out on more discounts below the 10 per cent threshold
Number of price disclosure reductions by size, October 2017 to April 2026

_{Notes: Includes all price reductions from the October 2017 to April 2026 price disclosure cycles. Reductions below 10 per cent are due to medicines from designated brands hitting the $4 price floor.
Source: Grattan analysis of PBS Brand Price Reductions Reports, available at Department of Health, Disability, and Ageing (2025c).}

The threshold should be set to zero, so that each cycle the reimbursement price is simply reduced to match the average market price. Under this model, manufacturers would still have an incentive to discount to win market share, but those discounts would be passed on to taxpayers in full.

Since 2022, discounts have been ignored for some medicines that cost $4 or less.⁵⁶ This is supposedly because shortages are more common for these medicines.⁵⁷ But no public analysis has been released to show this, or to enable assessment of whether the policy has worked.

Price reduction thresholds should be removed and the justification for, and level of, the $4 price floor should be publicly reviewed.

3.2.2 A cheaper and better way to manage financial risk from high-cost medicines

Pharmacies receive an administration, handling, and infrastructure fee for every PBS medicine they dispense. One part of this is a fixed fee of $5.12 for the physical infrastructure to store and supply medicines. The other part increases with the cost of the medicine, which is intended to compensate pharmacies for the financial cost of stocking high-cost medicines, and reaches a maximum of about $100 (Table A.1 in Appendix A).

These two components should be separated.

The physical cost of storing a medicine does not vary with its price,⁵⁸ so the fixed component should simply be absorbed into the dispensing fee. The dispensing fee would then cover all costs associated with stocking, handling, and dispensing a medicine.

Unlike storage costs, financial risk does vary with medicine price.

The number of high-cost medicines on the PBS is rising.⁵⁹ The King Review noted that current funding arrangements do not adequately support the supply of these medicines.⁶⁰

The problem is the structure of pharmacy reimbursement.⁶¹ Pharmacies purchase medicines and are reimbursed only after dispensing them. If they can’t dispense a medicine – because a patient orders it specially and fails to collect it, or because it is damaged – the pharmacy has no reimbursement pathway and bears the full cost. Separately, pharmacies must pay GST at the point of purchase but cannot reclaim it until the end of the month. For most medicines, that is manageable, but for a medicine costing tens of thousands of dollars it may not be.

Pharmacies may choose not to stock these medicines at all, or to order them only after considerable delay.⁶² This could have real consequences for patients.

Until now, the financial risk associated with high-cost medicines has been managed through the administration, handling, and infrastructure fee, with more expensive medicines attracting a higher fee. But even the highest level is low compared to the cost of some medicines, only covering a tiny fraction of the potential financial loss. For the 217,000 PBS scripts dispensed in 2025 with a wholesale cost greater than $5,000, it covered less than 2 per cent of these costs.⁶³

With the fixed component of this fee moved into the dispensing fee, the variable component should be abolished and replaced with a risk-sharing mechanism that pays pharmacies faster for these high-cost medicines.

For medicines with an ex-manufacturer price above a defined level, the government should pay pharmacies a fixed proportion – say, 80 per cent – of the purchase price when the pharmacy purchases the medicine, rather than waiting until dispensing.⁶⁴

Almost none of this would be new expenditure: it’s money the government would pay anyway once the medicine is dispensed, just brought forward to give pharmacies security when they stock high-cost medicines. By covering most, but not all, of the upfront cost, the government would reduce the financial risk of stocking these medicines without eliminating the incentive not to waste them.

The cost to government of paying for medicines that are not dispensed would probably be small. And the savings would probably be substantial: in 2024-25, pharmacies received almost $285 million in variable, cost-linked administration, handling, and infrastructure fees on over co-payment scripts alone.⁶⁵

This reform would reduce a barrier to patient access to high-cost medicines, and deliver savings to taxpayers in the process.

3.2.3 Some smaller fees are unjustified and unfair

Pharmacy remuneration includes many small fees. Three of them cannot be justified: the allowable additional patient charge and the Safety Net recording fee, which are charged to patients, and the Additional Community Supply Support payment, which is paid by the government.

The allowable additional patient charge

When a medicine costs less than the maximum patient co-payment, pharmacists may charge general patients an additional fee of up to $2.79, provided the patient’s total out-of-pocket cost does not exceed the maximum co-payment amount.⁶⁶

This fee doesn’t compensate for a service. If dispensing fees are set to cover the full cost of dispensing (see Chapter 4), then it’s just a government-sanctioned surcharge on patients buying cheap medicines.

The cost to patients adds up. No data are reported on how often the fee is charged. But in 2025, if all eligible prescriptions had attracted the maximum fee, it would have cost patients up to $347 million.⁶⁷

The discretionary nature of the fee is also unfair. Pharmacists will be more likely to waive it if they face price competition from nearby pharmacies. In areas with less competition – for example, rural and regional areas with limited pharmacy access – patients may have no choice but to bear the full additional charge. This means the fee falls most on those with the least ability to shop around.

The solution is simple: the fee should be removed.

The Safety Net recording fee

The PBS Safety Net allows patients who spend above a certain amount on medicines in a calendar year to pay less for their remaining prescriptions that year.⁶⁸

To access the scheme, patients must have their spending on prescriptions recorded. This is done either by attending the same pharmacy each time – which keeps a digital record – or by the patient physically carrying a paper record to present at each pharmacy they visit.⁶⁹

The clunkiness of this system is limiting its effectiveness. While no official data are available, in 2025 the ABC reported that almost 500,000 Australians who qualify for the Safety Net each year do not access it, potentially forgoing hundreds of dollars in savings each.⁷⁰

Pharmacies can choose to charge the Safety Net recording fee – $1.54 for ready-prepared medicines and $1.99 for compounded medicines – as compensation for the administrative work of recording prescriptions.⁷¹

But there are two problems with this fee.

First, the task it compensates for is trivial. Recording a prescription involves filling out a simple table.⁷² But dispensing involves many small administrative steps – not all of which apply to every medicine – so there is no reason to pay a discrete fee for this one and not the others.

Second, the fee applies to some patients and not others. As with the allowable additional charge, pharmacists can apply it only to general patients, for under co-payment medicines, where the fee doesn’t push the patient’s out-of-pocket cost above the co-payment cap.⁷³

These conditions shield concession-cardholders from extra costs and prevent fees from exceeding the maximum co-payment. But if the purpose is to compensate pharmacists for a service they perform, limiting the scripts that attract the fee makes little sense. The administrative work of Safety Net recording does not vary by concession status or medicine price.

The solution is to abolish the fee and automate PBS Safety Net recording entirely, as is already done for Medicare Safety Nets.⁷⁴ This would eliminate the administrative burden for pharmacists and ensure no patient misses out.

Additional Community Supply Support payments

Unlike the other two unjustified fees, which are paid entirely by patients, Additional Community Supply Support payments are paid by the government.

The payments are intended to compensate pharmacies for lost dispensing revenue from 60-day dispensing (see Box 2).⁷⁵

There are three problems with this justification.

First, uptake of 60-day dispensing has been much slower than expected. In 2025, only about half of the 60-day prescriptions that were forecast in the eighth Community Pharmacy Agreement actually materialised (Figure 3.3).⁷⁶

Figure 3.3: Compensation for 60-day dispensing losses was based on overestimates of uptake
Forecast and actual monthly volume of over co-payment PBS medicines dispensed from 60-day prescriptions

_{Notes: Medicines were added to the eligibility list for 60-day dispensing in three stages, with the final stage commencing in September 2024. Volume forecasts are from half-yearly forecasts provided in the eighth Community Pharmacy Agreement, which have been divided by the number of months to convert them to average monthly rates. Actual volumes are calculated using the methodology outlined in Breadon and Hu (2025).
Source: Grattan analysis of Department of Health, Disability, and Ageing and Pharmacy Guild of Australia (2024) and Department of Health, Disability, and Ageing (2026c).}

Yet pharmacies were compensated as if the forecast had been met. The Community Pharmacy Agreement guarantees pharmacies the full $2.1 billion regardless of actual dispensing volumes.⁷⁷

Second, the payments are poorly targeted. Compensation should have been tied only to the number of 60-day scripts dispensed, since they reduce dispensing volume and revenue. Instead, most standard 30-day scripts attract small compensation payments too, meaning pharmacies are compensated regardless of whether they are affected by the policy change at all.

The third problem is that, like all components of pharmacy remuneration (see Chapter 4), the values of the payments lack any transparent or evidence-based justification. There is no public documentation of how the values were determined or whether they bear any relationship to actual losses incurred.

Additional Community Supply Support payments should be removed.

The right way to maintain sector viability is with fair dispensing fees that cover the cost of dispensing, and focused support for struggling pharmacies. The next chapter shows how to do it.

4 Set the right price

Not only is pharmacy remuneration poorly structured – as the previous chapter showed – the level is also set the wrong way.

Community pharmacies exist to ensure all Australians have adequate, safe, and equitable access to medicines. Achieving that requires dispensing fees that fairly compensate pharmacists – while also ensuring public money is spent wisely.

But dispensing fees are set through negotiation and not grounded in real-world evidence, so there is no way to know whether they represent fair value – for patients, taxpayers, or pharmacies themselves.

Fees should instead be based on the actual cost of dispensing, with ongoing monitoring of pharmacy profitability.

4.1 Dispensing fees are a stab in the dark

Pharmacy remuneration is the largest financial component of the Community Pharmacy Agreement.⁷⁸ In 2024-25, pharmacies were paid about $3.4 billion (Figure 4.1).⁷⁹

Community pharmacies dispensed 335 million prescriptions in 2024-25, so even a small increase quickly adds up: each additional cent per script translates to $3.4 million for pharmacies.⁸⁰ Even overpaying slightly has big budget consequences. Yet fee levels have been determined through successive Community Pharmacy Agreement negotiations, with no public justification.⁸¹

Figure 4.1: Pharmacy remuneration costs billions each year
Pharmacy remuneration for over co-payment dispensing by cost component, 2024-25

_{Notes: AHI = Administration, handling, and infrastructure. Values include total government and patient funding for over co-payment Section 85 and Section 100 PBS items dispensed by community pharmacies. Wastage fees compensate pharmacies for medicines that cannot be dispensed because a pack had to be opened to supply a smaller quantity than the standard pack size, and container fees cover the cost of any additional packaging supplied with a dispensed medicine: Department of Health, Disability, and Ageing (n.d.).
Source: Department of Health, Disability, and Ageing (2026a, Table 17a).}

4.2 We might be paying too much for dispensing

No one knows what it actually costs to dispense a prescription in an Australian community pharmacy.⁸² And it’s no accident. Unlike in other countries, efforts in Australia to establish the real cost of dispensing have been blocked by the Guild, forcing the government to negotiate fees in the dark (Section 1.2).

But while there is currently no way to know if pharmacies are being overpaid, or underpaid, there are signs that the sector may be over-compensated.

4.2.1 Funding has grown despite efficiency gains

Dispensing payments for each over co-payment script have risen by 45 per cent since the first Community Pharmacy Agreement was signed in 1990, after accounting for inflation (Figure 4.2).⁸³ Some of this increase may reflect legitimate cost pressures – an older, sicker population and growing polypharmacy may place greater demands on pharmacists’ time.⁸⁴

Figure 4.2: Pharmacy remuneration has increased since the first Community Pharmacy Agreement
Average pharmacy remuneration per over co-payment script, adjusted for inflation using CPI and WPI

_{Notes: CPI = Consumer Price Index. WPI = Wage Price Index. Average remuneration per script is calculated as total pharmacy remuneration (excluding ex-manufacturer costs, wholesale remuneration, Additional Community Supply Support program, cost Funding of Chemotherapy, and funding for pharmacy professional programs) divided by total pharmacy prescription volume and inflated to March 2026 dollars using both the CPI and WPI: ABS (2026a) and ABS (2026b). WPI was first reported in 1997. Years refer to the end of the financial year (e.g. 1991-92 is shown as 1992). Data for 2014-15 and 2015-16 are not available. The jump in 2008-09 is partially due to the introduction of the Premium Free Dispensing Incentive and PBS online payments: ANAO (2015).
Sources: Data for 1991-92 to 2013-14 from ANAO (ibid, Appendix 10); for 2016-17 to 2024-25 from Tables 15a and 17a of the PBS Expenditure and Prescriptions
reports, available at Department of Health, Disability, and Ageing (2026a), though table numbers vary across editions.}

But over the same period, technology has substantially reduced the labour required to dispense a standard script. PBS Online Claiming and ePrescribing have replaced labour-intensive, paper-based systems.⁸⁵ Automated dispensing robots – already common in Australian hospitals⁸⁶ – are increasingly being used in community pharmacies,⁸⁷ further reducing physical labour. And online dispensing (see Box 4) will only continue to streamline dispensing.

Yet negotiated fees have never been adjusted to reflect these efficiency gains, meaning all the cost savings have flowed to pharmacies, and none to patients or taxpayers.

Box 4: Online dispensing

Online dispensing involves patients having their prescription medicines delivered, with written medicine information supplied, and pharmacist advice available by phone or online.^a

Online dispensing offers patients greater convenience and access to medicines, and demand will probably grow over time.^b

Pharmacy policy needs to adapt to support the benefits of online dispensing while addressing the potential risks:

– Quality and safety: International evidence suggests online dispensing can improve medicine adherence relative to in-person dispensing.^c Quality and outcomes of online dispensing should still be monitored.

– Pricing: To ensure patients and taxpayers don’t over- or under-pay for online dispensing, the Independent Health and Aged Care Pricing Authority should consider whether a different remuneration structure is needed.

– Equitable access to pharmacies: Online dispensing may increase access to medicines for those who cannot easily visit a pharmacy, but this may also reduce the need for some brick-and-mortar pharmacies.^d Resulting pharmacy closures could threaten medicine access for patients who do not use online options, and reduce locations delivering pharmacy services. This risk should be assessed as part of the proposed viability monitoring scheme.

4.2.2 Pharmacists may be paid for time they don’t spend

Some pharmacy payments – the dispensing fee, dangerous medicine fee, and Safety Net recording fee – pay for a pharmacist’s time and related overheads rather than infrastructure.

For these payments, we can work backwards from the fee levels and the typical pharmacist’s hourly pay rate to calculate how many minutes of pharmacist time each fee implicitly funds (Table 4.1).⁸⁸ On this basis, for example, it would take a community pharmacist about eight minutes to dispense a ready-prepared prescription.⁸⁹

Table 4.1: Implied time taken for components of dispensing

_{Notes: Calculated using an estimated hourly pay rate of $52 for community phar-macists, with a 1.3 multiplier applied to capture related on-costs: ANU (2015).
Source: Grattan analysis of Department of Health, Disability, and Ageing (2026d) and Jobs and Skills Australia (2025).}

Unfortunately, there is little research on how long these tasks actually take. The only available Australian evidence – a time-and-motion study of 15 community pharmacies in WA and NSW – found that across almost 100 hours of observed dispensing time, there were about 5,700 prescriptions dispensed.⁹⁰ That’s one every 62 seconds, on average.

This evidence isn’t definitive – it draws on a small sample of pharmacies and may not be nationally representative. It also probably understates total dispensing time, since pharmacy assistants and other pharmacists often handle parts of the process and their time may not have been captured. Even so, the total labour time per prescription – across all staff involved – is probably far less than the eight minutes the dispensing fee implicitly funds.

4.3 Dispensing fees should reflect the cost of dispensing

In Chapter 3, we made the case for a simpler dispensing fee that no longer includes unjustified payments. Critically, the level of this fee should be grounded in actual cost data.

In a well-functioning pharmacy sector, the dispensing fee should cover the cost of dispensing a medicine plus a reasonable profit margin.⁹¹

Fortunately, an institution already exists with relevant expertise for setting this fee.⁹² The Independent Health and Aged Care Pricing Authority (IHACPA) is an independent statutory body that already develops evidence-based pricing advice for government. Most relevantly, it uses detailed cost data from aged care providers to calculate funding rates.⁹³

IHACPA will need to determine the most appropriate method for calculating the baseline cost of dispensing.

One approach is calculating the actual average cost of dispensing a medicine.⁹⁴ This will require data on cost inputs – including labour and infrastructure – as well as the time taken to dispense. IHACPA could gather these data as part of a broader time-and-motion study of community pharmacy covering dispensing and other professional services.⁹⁵ These data could be collected from a representative sample of community pharmacies each year, and the dispensing fee updated to reflect changes in technological efficiency, medicine complexity, and patient mix. Pharmacy participation should be mandatory, as a condition of receiving PBS payments.

Where cost data reveal a type of dispensing that is significantly more or less expensive and unevenly distributed across pharmacies, IHACPA should set an additional targeted fee. This may include compounded medicines,⁹⁶ complex or dangerous medicines, or in-person dispensing as opposed to online.

We estimate that expanding IHACPA’s role to include community pharmacy would cost about $9.8 million per year, with any necessary primary data collection adding a further $3.3 million a year.⁹⁷

Implementing this change will require amending the National Health Act 1953 to give IHACPA responsibility for advising on community pharmacy dispensing fees.

4.4 A better approach to protecting sector viability

Setting fees that cover costs is the best way to ensure the sector as a whole is financially viable. Instead, the government gives the sector a blanket revenue guarantee. Rural subsidies take the same unfocused and wasteful approach, providing extra funding whether a pharmacy needs it or not.

Policy should focus on the real goal: maintaining patient access to medicines. Financial viability should be actively monitored using administrative tax data to identify pharmacies that genuinely need support, and make sure they get it.

4.4.1 Replace a blanket guarantee with targeted support

Community Pharmacy Agreements guarantee a total amount of pharmacy remuneration. Under the current agreement, it is $24.6 billion over five years.⁹⁸

That funding is locked in through the payment adjustment mechanism (Box 5). If there are fewer scripts than expected, the fees paid for each script are adjusted up, to ensure pharmacies still receive the promised total. And the opposite is true if there are more scripts than expected. This reduces the risk of unexpected government spending while securing pharmacy income.

The goal of ensuring pharmacies can viably and safely dispense medicines is legitimate, but the payment adjustment mechanism is the wrong instrument, for four reasons.

First, it is skewed in pharmacies’ favour. If prescription volumes exceed forecasts by more than 10 per cent, fees are reduced to claw back the overpayment. But if volumes fall short by any amount – even by 1 per cent – fees are increased to make up the shortfall.⁹⁹ Taxpayers have got the short end of the stick.

Second, locking in funding five years in advance makes it difficult for the system to respond to changing circumstances, such as improvements in efficiency driven by technological advances.

Third, the payment adjustment mechanism compensates all pharmacies equally regardless of individual circumstances. Dispensing volumes will not fall uniformly – some pharmacies will have increases, others decreases – yet the mechanism adjusts remuneration sector-wide, meaning pharmacies who haven’t suffered any adverse impacts will benefit alongside those who have.

Fourth, even where dispensing volume does fall, viability is not necessarily threatened. Pharmacies with high margins or strong non-dispensing revenue (Box 3) can absorb modest volume reductions without any risk to survival.

Instead of guaranteeing a fixed pot of money to the sector regardless of need, the government should monitor viability and respond accordingly. It should use existing administrative tax data to assess pharmacy profitability across location types, ownership models, and pharmacy formats. If parts of the sector are struggling, affected pharmacies should be able to seek support if they provide additional financial information demonstrating genuine need. But support should be provided only if a closure would leave a community without equitable and adequate access to medicines. If that can be achieved by other pharmacies in the area, or by online dispensing, additional support should not be provided.

Box 5: The Community Pharmacy Agreement payment adjustment mechanism

The seventh Community Pharmacy Agreement introduced a payment adjustment mechanism^a to keep total pharmacy payments broadly in line with the amount agreed. Roughly once a year, forecast prescription volumes were compared with actual dispensing volumes. If the difference was too large, pharmacy remuneration was adjusted to offset the gap.^b

Over the life of the seventh Community Pharmacy Agreement, the payment adjustment mechanism identified only one required adjustment: a $0.21 reduction in the Commonwealth Price, scheduled to take effect on 1 July 2024. However, this change was never implemented because the seventh Community Pharmacy Agreement was terminated early and superseded by the eighth.^c

The eighth Community Pharmacy Agreement updated the payment adjustment mechanism, which also incorporated the new payments for 60-day dispensing. Adjustments are now made every six months rather than annually, making the mechanism more responsive, and the tolerance band for payment adjustments has been widened in pharmacies’ favour.^d

4.4.2 Payments to support struggling pharmacies should be better targeted

The government already provides some targeted funding to support the viability of pharmacies through the Regional Pharmacy Maintenance Allowance (RPMA). This program distributed $48 million to pharmacies in 2024-25.¹⁰⁰

But the RPMA is poorly targeted. Eligibility depends on the remoteness of the pharmacy – as defined using the Modified Monash Model¹⁰¹ – and its dispensing volume, with more funds available to pharmacies that are more remote and dispense fewer prescriptions.¹⁰² There are two problems with this.

First, the Modified Monash Model is a poor guide to profitability. It groups areas by remoteness, but this can mask significant variation within categories. For example, two regional pharmacies classified identically may face vastly different infrastructure, connectivity, and local economic conditions.¹⁰³

Second, dispensing volumes are also an imperfect guide. While higher volumes reduce per-prescription costs through economies of scale, profitability is also determined by other cost structures, such as non-dispensing revenue.

These funds would be better directed toward pharmacies that are genuinely unprofitable and operating in under-served areas.

A harder problem arises in areas where no pharmacy can viably operate in the first place. In these areas, the government should take a more active role in commissioning pharmacy services directly.

One way to do this is a reverse auction: pharmacies submit applications demonstrating their proposed business model and the minimum grant funding required to establish a viable service, with the contract awarded to the applicant requiring the least public subsidy.¹⁰⁴ This would ensure that government support is targeted, competitive, and no greater than necessary to deliver access.

5 Unleash competition

Incumbent pharmacy owners benefit from generous and unique protections that limit who can own pharmacies and where they can be located. The result is less competition, and less incentive to improve services and innovate.

5.1 Competition is good for patients

Competition drives lower prices, higher service quality, better access, and faster innovation.

Competing for consumers motivates businesses to reduce costs, improve quality, and find new ways to meet consumer needs.¹⁰⁵ Competition also promotes new business models, unlocks new sources of capital, and attracts managers with skills that existing businesses may lack.

As this chapter explains, evidence from pharmacy markets overseas shows the benefits of competition.

5.2 Location rules benefit pharmacy owners, not patients

Strict rules in Australia dictate where new pharmacies can open.

The Guild claims these rules encourage pharmacies to set up in under-served areas.¹⁰⁶ In practice, they shield pharmacy owners from competition while doing little to improve people’s access to pharmacy services.

5.2.1 New pharmacies are blocked from opening

The first Community Pharmacy Agreement in 1990 included a major boon for existing pharmacy owners: strict regulations stopping new pharmacies setting up shop nearby.¹⁰⁷ Box 6 summarises these rules.

A decade later, the National Competition Policy Review of Pharmacy recommended these rules be abolished.¹⁰⁸ Despite many subsequent reviews also recommending their removal, the rules have not only been retained but enshrined in federal legislation.¹⁰⁹

Today, applications for new pharmacies are submitted to the Australian Community Pharmacy Authority, which makes a recommendation to the Secretary of the Department of Health, Disability, and Ageing.¹¹⁰ A recommendation is necessary for approval, but an application can still be rejected even after being recommended.¹¹¹

Location rules also prohibit any new pharmacy that can be accessed through a supermarket.¹¹²

These rules stop new pharmacies being opened, shielding existing pharmacies from incentives to better serve patients. The King Review received numerous reports of pharmacists wanting to open pharmacies but being unable to because of location restrictions.¹¹³

Box 6: Rules on the location of new pharmacies

Generally, a new pharmacy must be at least 10km from the nearest approved pharmacy. But there are exceptions:^a

– A pharmacy can be within 1.5km of another if it is within 500m of either a full-time prescribing medical practitioner and a supermarket with at least 1,000m_² of leased area, or a supermarket with at least 2,500m² of leased area.

– A pharmacy can be in the same town as another if it is 200m from the nearest pharmacy in town and 10km from any other pharmacies. There must also be four full-time-equivalent prescribing medical practitioners and supermarkets with at least 2,500m² of leased space.

– A pharmacy can be established in a small shopping centre if the centre has no other pharmacies and is 500m from another pharmacy.

– A pharmacy can be established in a large shopping centre, depending on how many the centre already has.

– A pharmacy can be established in a large medical centre if the medical centre operates for 70 hours a week and has eight full-time-equivalent PBS prescribers. The medical centre must also be 300m from the nearest pharmacy.

So why are there still pharmacy clusters? Some areas have many pharmacies because they existed before location rules were introduced, or because there are many medical practitioners, shopping centres, and supermarkets nearby.

5.2.2 Scrapping location rules can bring benefits

In the late 1990s and early 2000s, several European countries removed regulations on pharmacy locations, including Norway, Iceland, Ireland, and the Netherlands.¹¹⁴

Deregulation consistently led to a substantial increase in the number of pharmacies.¹¹⁵ In the three years after the rules were removed in Norway in 2001, 128 new pharmacies were established (nearly double the number established in the previous nine years).¹¹⁶ In Iceland, the number of pharmacies rose from 43 to 61 in the two years after deregulation.¹¹⁷

In Australia, the Guild claims the location rules are required for a well-distributed geographic spread of pharmacies, especially outside major cities.¹¹⁸

International evidence does not support this. After deregulation, more pharmacies open in urban areas, but rural areas benefit too.¹¹⁹ In Norway, the number of local government areas without pharmacies reduced after location rules were removed.¹²⁰ The number of pharmacies in Reykjavik, Iceland, grew by 67 per cent within two-and-a-half years of deregulation, but pharmacy numbers also increased by 17 per cent in the rest of the country.¹²¹

There is some evidence that deregulation improves convenience for patients beyond simply increasing the number of pharmacies. Pharmacy opening hours increased in some countries after deregulation.¹²² In Norway, despite lowering the required hours for pharmacies, average opening times increased by two hours.¹²³ Accessibility in Norway also improved through innovations spread by the newly formed pharmacy chains.¹²⁴

The evidence on prices is more mixed, indicating either no effect or some price declines from deregulation.¹²⁵

In Ireland, the Netherlands, and Norway, there is evidence that prices for over-the-counter medicines – those not requiring a prescription – did not meaningfully change after deregulation.¹²⁶ In Norway, there is additional evidence from an independent evaluation that deregulation did not lower prices.¹²⁷ In England, there is evidence that supermarket pharmacies, which increased in number due to changing regulations, offered over-the-counter medicines at lower prices, but there no evidence of over-the-counter price reductions elsewhere.¹²⁸

In Iceland, it was reported that prices for patients, including for prescription medicines, fell after deregulation, but little measurement of these decreases.¹²⁹ There is stronger evidence from Portugal that allowing new pharmacies lowered the costs of over-the-counter medicines in areas where new pharmacies set up.¹³⁰

The Australian picture looks more promising. The interim report of the King Review found that pharmacies in urban areas with high competition were much more likely to discount medicines (in the limited circumstances where discounting was allowed).¹³¹

On balance, greater competition in Australia should lower prices.

5.2.3 Location rules do not improve access to pharmacies

The strongest argument for location rules is that they increase access to pharmacies in rural areas. But the rules were not designed for that purpose, evidence that they achieve it is weak, and other policies would do the job better.

The rules were not designed to increase rural access

One argument for location rules is that they protect access to pharmacies, particularly in rural areas.¹³² But that was never their purpose.

Before 1990, very small pharmacies were clustered in urban areas.¹³³ This was the result of a dispensing fee structure that paid higher rates to smaller pharmacies, creating an incentive to stay small.¹³⁴

To reduce the oversupply of small, inefficient pharmacies, the government flattened the dispensing fee across all pharmacies and offered payments to pharmacies to close or amalgamate. From 1990 to 1995 – when payments were offered – there were 630 pharmacy closures and 64 amalgamations.¹³⁵

Location rules were introduced to complement these payments. They were designed to stop a new pharmacy opening up in the same spot the government had just paid another to leave.¹³⁶

The policies aimed to reduce an oversupply of pharmacies in cities, not boost access elsewhere.

There is little evidence that location rules boosted rural access

Since then, location rules have been repositioned as an incentive for pharmacies to open in regional and rural areas.

The Guild points to independent analysis showing that, after the rules took effect, pharmacy numbers fell in cities and rose in smaller centres.¹³⁷ That comparison is misleading. Urban pharmacy numbers fell because the government stopped paying extra for small, inefficient pharmacies, and paid urban pharmacies to close. Growth in rural pharmacy numbers outside cities was modest, and in line with population growth.¹³⁸

Pharmacies can be trusted to pick viable locations

An even weaker claim is that location rules ensure pharmacies are commercially viable when they set up.¹³⁹ Otherwise, goes the argument, pharmacies would cluster and compete each other into closure.

But this logic applies to any retail business, and no other sector (including in healthcare) is regulated this way. Operators are trusted not to set up where they cannot sustain themselves, and when new entrants do compete with incumbents, consumers benefit: prices fall, quality improves, and product ranges expand.¹⁴⁰

There are better ways to improve access

Even if location rules did improve access, they are far from the best tool for the job. The Guild regularly touts that 96 per cent of Australians in capital cities and 74 per cent outside of capital cities live within 2.5km of a pharmacy.¹⁴¹ This is a meaningful sign of access. But equivalent shares of Australians live within 2.5km of a GP clinic.¹⁴²

The government supports GP access with workforce incentives and rural subsidies. These tools target the real constraints on rural healthcare: small populations and difficulty attracting staff.¹⁴³

Pharmacies that provide an essential service in places that cannot sustain a normal business should be supported directly. Chapter 4 sets out how. Direct support can improve access to medicines without constraining competition across the whole sector.

5.3 Rules on pharmacy ownership are poorly designed

Australia’s ownership rules restrict who can own a pharmacy and how many they can own. Neither restriction is needed.

5.3.1 Ownership rules aren’t needed for quality and safety

In Australia, only registered pharmacists are allowed to have a financial stake in a pharmacy.¹⁴⁴ This rule is ostensibly to ensure pharmacies prioritise the care and well-being of patients over profits, but it is not an effective way of ensuring high quality service.¹⁴⁵

Australians access many healthcare services in their daily lives: GPs, optometrists, dentists, and specialists. Other businesses also provide advice on potentially dangerous goods and services (such as car mechanics and hardware stores). None of these services have ownership rules.

Similar ownership regulations for dental practices were removed from 2010,¹⁴⁶ and there is no evidence that the quality of care declined.

There is also no evidence that pharmacies owned by non-pharmacists (those owned by friendly societies) provide service that is less ethical or professional.¹⁴⁷

Ownership restrictions are unnecessary because Australia already has regulatory frameworks designed to ensure high standards.¹⁴⁸ And removing ownership rules would not affect registration and accreditation requirements for people working as pharmacists.¹⁴⁹

5.3.2 Ownership rules aren’t stopping market concentration

State rules also limit one person to having a financial interest in no more than six pharmacies.¹⁵⁰

In theory, ownership restrictions oxygenate a pharmacy sector where competition is choked off by restrictive location rules. Location rules may reduce (or entirely remove) the chance that any individual pharmacy faces competition from another but, to balance this out, ownership limits aim to stop a few businesses from dominating the sector and potentially using their market power to the detriment of patients.¹⁵¹

In practice, ownership limits do not prevent market consolidation, and so Australia has both significant corporate concentration and limited local competition. The ways that large corporations coordinate independently-owned stores are described in Box 7.

About 60 per cent of community pharmacies are part of a banner group, and most are in one of the four large groups (Figure 5.1).¹⁵² These businesses also represent a disproportionately large part of the market. The Productivity Commission has cited 2018 estimates that the then four major banner operators held a 73 per cent market share.¹⁵³ That is a similar market share to that held by the big four banks.¹⁵⁴

Figure 5.1: The four major banner groups make up nearly half of all pharmacies
Approximate proportion of pharmacies under each banner group

_{Notes: Banner groups are represented here by the most notable brands, but most banner groups also operate lesser known brands. Reported proportions reflect all pharmacies under all brands of the banner group. Proportions are approximate. Chemist Warehouse and Amcal brands are owned by Sigma, which also owns MyChemist, Discount Drug Store, and PharmaSave.
TerryWhite Chemmart brand is owned by EBOS, which also owns Cincotta Discount Chemist, Good Price Pharmacy Warehouse, and healthSAVE.
Priceline brand is owned by Australian Pharmaceutical Industries (API), which also owns Soul Pattinson and Pharmacist Advice.
Advantage and Alliance brands are owned by Independent Pharmacies of Australia (IPA), which also owns Chemist Discount Centre.
Source: ACCC (2024).}

Banner groups typically have standardised purchasing, customer experience, pricing frameworks, loyalty programs, and promotional campaigns. That reduces the scope for innovation and competition.

Many franchises take this further with strict conditions on how pharmacies can operate. In 2021, current and former Priceline Pharmacy owners took their banner group operator to court for exerting excessive control over how pharmacies operated.¹⁵⁵ Separately, the Australian Competition and Consumer Commission determined that Chemist Warehouse probably has a ‘particularly strong’ level of control over its franchise stores.¹⁵⁶

The result is a sector where ownership is nominally dispersed but competition is constrained.

In addition, loopholes in personal ownership restrictions allow expansive empires.

The number can be stacked across family, friends, and business partners.¹⁵⁷ For example, four key managers of Sigma (owner of Chemist Warehouse) and their families had an ownership interest in 182 franchisee pharmacies in 2025.¹⁵⁸

The limits are set at a statewide level, which does little to encourage competition in regional areas that have few pharmacies. For example, of the four pharmacies in Broome, WA, in 2017, three were owned by the same group.¹⁵⁹

This misguided and ineffective policy should be replaced. Protections should move from counting the number of stores someone owns to tracking measures of market power, and managing threats to a competitive sector. Chapter 7 shows how.

Box 7: Buyers, banners, and franchises

The pharmacy sector is shaped by three overlapping forms of collective organisation:^a

– Buying groups negotiate the cost of medicines and products with wholesalers or manufacturers. By pooling their purchasing power, member pharmacies can secure lower costs. Members of a buying group typically remain independent and do not share common branding.
– Banner groups are networks of individually owned pharmacies under the same brand. Banner group owners provide a range of services to member stores, which may include advertising, pricing systems, and lease management. Banner groups can be, but are not necessarily, franchises.
– Franchises are a form of banner group. Under a franchise agreement, a franchisor provides services such as branding, advertising, corporate systems, stock management, and pricing frameworks to an individual pharmacy, which in return agrees to operate on the franchisor’s terms.

5.4 Supermarket pharmacies would be good for patients

Location and ownership rules, taken together, rule out a model of pharmacy retail that is normal overseas: supermarket pharmacies.

In Australia, supermarkets cannot own pharmacies, and pharmacies cannot be located in or accessible through a supermarket.¹⁶⁰

The pharmacies-in-supermarkets model works elsewhere. In the UK, supermarkets dispense prescriptions through hundreds of in-store pharmacies that provide the same suite of clinical services as standalone community pharmacies.¹⁶¹ In Canada, the three largest grocery businesses run in-store pharmacies.¹⁶² New Zealand retains pharmacist-ownership rules broadly similar to Australia’s, but allows pharmacies inside supermarkets.¹⁶³ In these countries, patients can get their medicines while picking up groceries for dinner.

The Guild’s strongest argument against this reform in Australia is about market power: the Coles-Woolworths supermarket duopoly should not, it says, be allowed to dominate the community pharmacy sector.¹⁶⁴ Large supermarkets could, in theory, amass significant market share and use it to squeeze suppliers and, eventually, raise prices or reduce service quality for patients.¹⁶⁵

But international evidence suggests there is a low risk of aggressive supermarket expansion.

Supermarket-owned pharmacies make up about 5 per cent of community pharmacies in the UK.¹⁶⁶ In Canada, about 15 per cent of pharmacies are embedded in food and mass merchandisers.¹⁶⁷ Both of these countries have less concentrated supermarket sectors than Australia.¹⁶⁸ But in New Zealand, which has a more concentrated sector, Woolworths only has about 40 in-store pharmacies (less than 4 per cent of pharmacies).¹⁶⁹

Supermarket pharmacies that use their economies of scale to pass savings onto patients should be encouraged. Potential harms to consumers from concentrated market share should be monitored and addressed if needed, but do not justify blanket ownership restrictions.¹⁷⁰

Pharmacists working in supermarket pharmacies are bound by the same registration, ethical, and professional obligations as any other pharmacist. International evidence suggests that patients trust and get good service from supermarket pharmacies.¹⁷¹

5.5 Location and ownership rules should be abolished

The location and ownership rules, including those banning supermarket pharmacies, should be removed in favour of more targeted and effective safeguards (see Chapter 7).

Removing these regulations will face strong opposition and require both legislative change and reforms to state and territory policies. If these reforms are blocked, patients and taxpayers should not be left paying high prices due to lack of competition. So, if these anti-competitive protections are not removed, the Independent Health and Aged Care Pricing Authority should reduce the dispensing fee to account for the additional profits pharmacies gain due to the lack of competition.

6 Let pharmacies discount prescriptions

Pharmacies are willing to cut prices, and patients want cheaper medicines, but a tangle of rules blocks discounting. These rules are not needed to ensure quality services and only lead to higher prices.

6.1 Complex rules block discounting

Countries with highly regulated pharmacy margins – as in most of Europe – don’t allow pharmacies to discount what patients pay for prescription medicines.¹⁷² But countries with systems more similar to Australia’s – such as New Zealand and Ontario in Canada – do.¹⁷³ Australia is unusual in combining unregulated pharmacy profits with complex rules that prevent pharmacies from passing savings on to patients.

In Australia, prescription medicines below the maximum co-payment can be discounted by any amount.

Allowing pharmacies to discount these medicines has produced real savings for patients.¹⁷⁴ Each year, general patients save about 17 per cent of the cost of these medicines.¹⁷⁵ In 2025, these savings were $319 million (or about $3 off every script).¹⁷⁶

But for medicines that cost more than the maximum co-payment – which make up 69 per cent of all scripts – discounts are heavily penalised or outright prohibited.¹⁷⁷ While two policies technically allow pharmacies to discount these medicines, one policy is being phased out, and the other imposes stiff financial penalties for discounting.

6.1.1 The $1 discount

From 2015, pharmacies were allowed to offer patients up to a $1 discount on PBS medicines above the maximum co-payment.¹⁷⁸ The primary goal was to increase competition on price.¹⁷⁹ The discount was supported by discount pharmacies and opposed by the Guild.¹⁸⁰

The death knell for the $1 discount sounded when the eighth Community Pharmacy Agreement was signed.¹⁸¹ From 2025, it was reduced to 10 cents for general patients – going to zero from 2026 – and to 80 cents for concession patients – going to zero from 2029.¹⁸²

6.1.2 The discretionary discount

Discounts on medicines that cost more than the maximum co-payment are banned (besides the diminishing $1 discount).¹⁸³ That means when the maximum co-payment is reduced, the ban applies to more medicines.

In 2023, the maximum co-payment fell from $42.50 to $30, restricting discounting on many medicines. Previously, a pharmacy could offer any discount on a medicine that cost $40, for example. But after the change, such a medicine was above the new maximum co-payment, so the pharmacy could only offer the doomed $1 discount.

In response, the government allowed medicines priced between the new and old maximum co-payments ($30 and $42.50) to be discounted by any amount. The thresholds have been updated, and now apply to medicines priced between $25 and $51.10.¹⁸⁴ Unlimited discounts on medicines in that price band might sound like a win for patients, but there is a big catch.

If a pharmacy offers such a discretionary discount, it forgoes the government funding it would otherwise get.¹⁸⁵ This gives pharmacies a strong incentive not to discount and, where they do, to limit discounts to cheaper medicines so they give up less government funding. Patients saved $8.8 million from these discounts in 2025, and pharmacies gave up a further $4.3 million in government revenue to offer them.¹⁸⁶

As all medicines for concession patients are above the maximum co-payment,¹⁸⁷ once the $1 discount has been fully abolished in 2029 (see Section 6.1.1) it will be impossible to discount concession medicines.

This deprives concession patients of potentially cheaper medicines.

6.2 Patients are missing out on big savings

Preventing discounting is withholding cheaper prices from patients.

In 2022-23, the $1 discount saved patients about $48 million.¹⁸⁸ One in five eligible prescriptions was discounted, with patients saving the full $1 in 98 per cent of cases. The vast majority of savings were for concession patients.¹⁸⁹

In 2025, about 14 per cent of eligible medicines received a discretionary discount and the average saving was $7.72.¹⁹⁰ But the savings could be much greater if pharmacies weren’t penalised for discounting.

About 70 per cent of medicines receiving a discretionary discount were priced within $5 of the maximum co-payment (Figure 6.1).¹⁹¹ At that price pharmacies surrender at most $5 in government funding. Understandably, as the penalty increases, discounting declines sharply.

Figure 6.1: Pharmacies will reduce their profit to provide discounts, when allowed
Discounts as a share of pharmacy remuneration, by dispensed price, 2025

_{Notes: Pharmacy remuneration is defined as the maximum price a medicine can be sold for minus the price the pharmacy paid for it. Data include only general patients under Section 85 (excluding Section 100 and prescriber’s bag medications) and exclude premium-loaded scripts and Safety Net prescriptions. In 2025, pharmacies could choose from potential discounting options, depending on medicine price:
(1) for medicines below the maximum general co-payment of $31.60, there were no restrictions on discounting;
(2) for medicines priced above $49.50, pharmacies could only discount by 10 cents (the reduced $1 discount); and
(3) for medicines priced between $31.60 and $49.50, pharmacies could choose to either discount by only 10 cents and still receive the government subsidy (equal to the gap between the maximum co-payment and the dispensed price), or discount by more than 10 cents and forgo that subsidy.
Source: Grattan analysis of Department of Health, Disability, and Ageing (2026b) and Department of Health, Disability, and Ageing (2026c). 2025 thresholds from Department of Health and Aged Care (2025b).}

If the $1 discount was reinstated, patients might save an additional $32 million a year.¹⁹² Higher discount limits could save patients more: a $2 discount might save patients an additional $60 million a year and a $5 discount an extra $137 million a year.¹⁹³ Concession and Repatriation PBS patients collect about 77 per cent of the savings from discounting, because most prescriptions are dispensed to concession patients.

The $1 discount should be reinstated immediately and increased to $5 over the next five years, with full deregulation of discounting after that, subject to advice from the Australian Competition and Consumer Commission.¹⁹⁴

6.3 The reasons to restrict discounting do not stack up

There are concerns that discounting leads to unfair differences in prices, because discounts are more likely in areas with more pharmacies, and more competition.¹⁹⁵ But discounts in one area don’t come at the expense of patients in another.¹⁹⁶

Another Guild objection is that discount pharmacies operate with lower service levels that can reduce quality and increase professional risks.¹⁹⁷ The evidence for these claims is inconclusive, at best.¹⁹⁸ Quality must be taken seriously and would be monitored through the safeguards we propose in Chapter 7. But throttling discounting that pharmacies are willing to do, and that saves patients money, is the wrong way to address these risks.

7 Monitor market concentration and quality of care

Removing restrictions on location, ownership, and discounting will lead to more competition. But there is a risk that a few large companies could dominate and use market power to reduce quality or increase cost for patients.

Government can unlock the benefits of competition while avoiding the potential harms of market concentration, and promoting quality care.

7.1 Competition policy should be more targeted

In other countries where the pharmacy sector was deregulated, large pharmacy chains (often vertically integrated with pharmaceutical wholesalers) have established large market shares.¹⁹⁹ In Norway, three chains controlled about 81 per cent of the pharmacy sector after deregulation.²⁰⁰ In Iceland, three chains accounted for 72 per cent, and in Ireland, 79 per cent.²⁰¹ But consolidation is not an inevitable consequence of deregulation. After regulations were loosened in the Netherlands, the top three chains held only 20 per cent of the market.²⁰²

Consolidation is also not always harmful. Larger chains can achieve economies of scale, invest in better infrastructure and technology, and pass some savings to consumers. International experience shows that high market concentration is compatible with better access, longer opening hours, and – in some circumstances – lower prices (Chapter 5).

Concentration should be monitored for any negative impacts, such as on pharmacist workloads. But policy should target the harms that consolidation can cause, not consolidation itself.

Competition policy is the best way to prevent harmful effects of market concentration. In 2025, the Australian Competition and Consumer Commission (ACCC) gained new roles and powers to review corporate acquisitions.²⁰³ They include assessing the cumulative effect of serial acquisitions and requiring approval before firms above certain thresholds complete acquisitions. This increases oversight of consolidation trends, and can help prevent rapid conglomeration.

Overseas, deregulated pharmacy markets consolidated through horizontal integration: existing pharmacies bought or merged with their competitors.²⁰⁴ This is precisely the dynamic the ACCC is well-equipped to police. If a few players try to buy up large slices of the sector, this can be stopped if there is a harm to competition.

Given international experience, the Treasurer should direct the ACCC to do a market study of the pharmacy sector, and report regularly.²⁰⁵ The ACCC should review consolidation in the pharmacy sector and design appropriate safeguards, potentially including mandatory review of acquisitions, requirements to separate wholesale and retail businesses, or limits on maximum market share.

7.2 It’s not clear how deregulation will affect quality

The effect of increased competition on quality is uncertain. Pharmacies may compete by providing higher-quality offerings to attract patients.²⁰⁶ Alternatively, competition may encourage pharmacies to spend less time with patients to increase turnover.

International evidence suggests workload increases in pharmacies after deregulation, and that pharmacists working in chain and discount pharmacies feel greater pressure to dispense quickly and spend less time with patients.²⁰⁷

However, anti-competitive protections are an ineffective way to guarantee quality, and there is no evidence they do so. Instead, Australia should implement a new quality and outcomes monitoring scheme.

7.2.1 Improve quality and outcomes monitoring

There is no comprehensive system to measure the quality of community pharmacies in Australia, and the outcomes they achieve. Instead, the only program for assessing pharmacy quality is run by the lobby group representing pharmacy businesses.

Accreditation for pharmacies is exclusively assessed through the Quality Care Pharmacy Program (QCPP).²⁰⁸ The Guild is responsible for developing QCPP standards and governing the scheme, and it partners with private assessors who accredit pharmacies.²⁰⁹

The QCPP should be redesigned to avoid any conflicts of interest.²¹⁰ The scheme should instead be governed by the Australian Commission on Safety and Quality in Health Care, with standards developed by the Pharmaceutical Society of Australia. Multiple organisations should be approved to accredit pharmacies’ compliance with these standards.²¹¹

Australia should comprehensively measure pharmacy quality.

The QCPP has limited scope and does not provide data on outcomes. It focuses primarily on whether pharmacies have the required policies, equipment, and systems in place.²¹² It does not track specific data on quality or outcome indicators.²¹³ In October 2026, the QCPP will transition to the Quality and Safety Pharmacy Program (QSPP), but this will not substantially change the program.²¹⁴

The QCPP has included a ‘mystery shopper’ component to assess the quality of dispensing.²¹⁵ This involved random assessment visits conducted by a contracted mystery shopper, accompanied by a QCPP representative. This program assessed compliance with the sale of schedule two (pharmacy only) and schedule three (pharmacist only) medicines – not prescription medicines.²¹⁶

Several countries have developed quality measurement regimes for community pharmacies, with varying designs and results (Table 7.1). Their experience points to three clear lessons: indicators must measure what matters, tied payments can distort pharmacy behaviour, and public information holds pharmacies accountable.

Table 7.1: Examples of pharmacy quality monitoring schemes

_{Sources: NHS Business Services Authority (2026), Schafheutle et al (2025), Torabi et al (2025), and Schoenmakers et al (2015).}

Australia should use these lessons to design a system that tracks the quality of pharmacy dispensing and services, and monitors patient outcomes.

Many of these indicators could be built from existing linked administrative data.²¹⁷ These data could track medicine adherence, problematic polypharmacy, and dispensing of contraindicated medicines.²¹⁸ Drawing on existing data, rather than requiring new reporting, would reduce costs and increase accuracy. Some potentially valuable indicators, such as patient reported outcome measures, would require additional data collection from pharmacies.

We estimate this scheme would cost about $6.4 million to set up, with ongoing costs of about $1.7 million per year.²¹⁹

Over time, transparent reporting would help improve care and inform patient choice. It would also enable the government to monitor whether different types of pharmacy are providing lower-quality care.²²⁰

8 Ensure services are good value

Pharmacists are medicines experts, with the skills to do more than just dispense medicines. Community pharmacies offer a growing range of services, and the sector is advocating to do more – which could provide accessible healthcare and take pressure off other providers.

But services have not been immune from the failures of community pharmacy governance. Reform is needed to ensure that services are governed appropriately, and that two of the biggest services, MedsChecks and dose administration aids, provide value-for-money and get to the patients who need them most.

And trials here and overseas show government should be cautious about funding new pharmacy services. Among new services, only prescribing for uncomplicated urinary tract infections is ready to roll-out.

For other promising services, government should build the evidence base by funding rigorous, independent trials designed to measure cost-effectiveness. These include care for other minor ailments, oral contraceptive prescribing, smoking cessation, and collaboration with GPs on chronic disease management for specific conditions.

The government should also embed pharmacist expertise in general practice by funding integrated non-dispensing pharmacists in GP clinics and Aboriginal Community Controlled Health Services.

8.1 Pharmacies offer important services beyond dispensing …

Federal, state, and territory governments fund pharmacies to provide a range of services beyond dispensing, and the scope of these services has grown over time.²²¹

For example, pharmacies have become a cornerstone of Australia’s vaccination program since the COVID pandemic, now delivering 26 per cent of adult flu vaccinations, up from almost none a decade ago.²²² Patients value the convenience and accessibility of pharmacist vaccination, and there is evidence it can increase vaccination rates.²²³

And pharmacies play an important role in harm minimisation for drug users through opioid pharmacotherapy, needle and syringe programs, and take-home naloxone – evidence-based services that have been shown to reduce drug-related harms.²²⁴

Pharmacies may also choose to provide other services, such as informal health advice or health checks.²²⁵

8.2 … but services are poorly managed

Funding and rules for most pharmacy services are set in the Community Pharmacy Agreements.

Under the current agreement, for the first time, some services are moving into a new Pharmacy Programs Agreement. This is being negotiated with the Pharmaceutical Society of Australia. Other services will remain in the eighth Community Pharmacy Agreement.²²⁶

It is a positive development that the Pharmaceutical Society is involved. But negotiation is not the right way to decide how health services are chosen, designed, and funded. As with dispensing fees, negotiating service funding with industry groups risks paying too much (see Chapter 4).

Negotiation has also led to services diverging from evidence-based models, under pressure from the Guild.²²⁷

And currently, there is no consistent requirement that pharmacists communicate service outcomes to a patient’s GP or the government.²²⁸ This risks fragmenting and duplicating care, and also reduces oversight of pharmacy services.²²⁹

These services should be treated as the important health services they are, and governed accordingly. Program rules should be set independently, rather than through negotiated agreements.²³⁰ And the Independent Health and Aged Care Pricing Authority (IHACPA) should be given responsibility for determining prices.

The government should not sign the first Pharmacy Programs Agreement until these governance arrangements are in place. For pharmacy services that remain in the eighth Community Pharmacy Agreement, this transition should take place when that agreement expires.

The government should also expand the ‘Sharing by Default’ requirement to encompass pharmacy services, requiring pharmacists to upload documentation of their consultation and recommendations to a patient’s My Health Record.²³¹

And, to enable evaluation and outcomes monitoring, the government should link service data for pharmacy services to other administrative data.²³²

8.3 Some existing services are poorly targeted or mispriced

Spending on some of the biggest services – medication reviews and dose administration aids – has grown substantially over the past 15 years (see Figure 8.1).

But despite technology reducing costs, and worrying evaluation findings in that period, governments have not reformed these services to ensure they are effective and good value.

Figure 8.1: Australia is spending more than ever on dose administration aids and MedsChecks
Expenditure, adjusted for inflation

_{Notes: Expenditure has been inflated to March 2026 dollars using the Consumer Price Index: ABS (2026a). Years refer to financial year (e.g. 2024-25 is shown as 2025).
Source: Table 18 of the PBS Expenditure and Prescriptions reports from 2011-12 to 2024-25, available at Department of Health, Disability, and Ageing (2025j), though table numbers vary across editions.}

8.3.1 MedsChecks are poorly targeted

The federal government pays pharmacies to deliver MedsChecks and Diabetes MedsChecks: brief, one-off medication reviews.²³³

Almost a decade ago, a review of these services by the Medical Services Advisory Committee²³⁴ found there was not enough evidence to demonstrate their effectiveness or value-for-money.²³⁵ But MedsChecks have been retained in two subsequent Community Pharmacy Agreements, costing taxpayers a further $356 million.²³⁶

Subsequent international evidence shows that some medication review services in community pharmacies are cost-effective. But they have tighter eligibility, more intensive service models, and stricter requirements for GP collaboration than Australia’s MedsChecks.²³⁷

MedsCheck eligibility criteria are broad and open to interpretation. To be eligible, a patient must take five or more prescription medicines, have recently had a significant medical episode, or be taking high-risk medicines.²³⁸

These criteria don’t ensure services are provided to patients with high risk of medication-related harm. There is still no evidence that medication reviews with criteria this broad are cost-effective.²³⁹ And because Australian pharmacies can offer MedsChecks opportunistically and are paid per service, they have an incentive to deliver more services regardless of patient need.

When the program was launched, claims quickly exceeded expected volumes, and there were reports of pharmacy chains pressuring staff to conduct as many MedsChecks as possible.²⁴⁰

To deal with surging costs, the government introduced caps on MedsChecks. Currently, each pharmacy is able to claim a maximum of 20 services per month.²⁴¹ This is a blunt way to manage costs, which doesn’t address the underlying targeting problem. The number and needs of a pharmacy’s patients vary, and a cap doesn’t ensure that the 20 services are delivered to the 20 people with the greatest need.

Instead, the government should tighten eligibility in line with international best practice, targeting only older patients with specific conditions.²⁴² International models that have achieved cost-effectiveness target older adults and/or those with specific conditions, such as cardiovascular disease, or diabetes.²⁴³ With these tighter eligibility requirements in place, government should remove the cap for MedsChecks, as well as equivalent caps for Home Medicines Reviews.²⁴⁴

Pharmacists providing MedsChecks are not required to directly report back to a patient’s prescribing doctor. This reduces the chance that a MedsCheck results in changes to a patients’ prescriptions, probably makes reviews less effective,²⁴⁵ and increases the risk of duplicated care. The requirement for service outcomes to be uploaded to My Health Record proposed in Section 8.2 would improve this information sharing, ensuring that the patient and their GP, as well as other healthcare providers, could see and act on MedsCheck recommendations.²⁴⁶

8.3.2 Dose administration aid prices should be updated

Community pharmacies are paid to pack medicines in dose administration aids, such as Webster-paks,²⁴⁷ for patients who have difficulty managing their medication.²⁴⁸ These aids improve medication adherence.²⁴⁹

Dose administration aids have been funded under the Community Pharmacy Agreement since 2007.²⁵⁰ Since 2017, pharmacists have been paid a flat fee for each dose administration aid.²⁵¹

But, as with other payments to pharmacies, there is no publicly available evidence to suggest that the current fee reflects the actual cost of providing the service.

The most recent available estimates of the cost of providing a dose administration aid are from 2010.²⁵² A lot has changed since 2010. But, despite some fluctuations, the price that government pays is very similar, after accounting for inflation, to what it was in 2012 (Figure 8.2).

Figure 8.2: The payment per dose administration aid has stayed high despite increasing automation
Expenditure per dose administration aid, adjusted for inflation

_{Notes: The structure of payments has changed over time. For comparison purposes, this chart shows total expenditure divided by total services delivered, which may not match other published estimates. Expenditure has been inflated to March 2026 dollars using the Consumer Price Index: ABS (2026a). Years refer to financial year (e.g. 2024-25 is shown as 2025).
Sources: Expenditure data are sourced from Table 18 of the PBS Expenditure and Prescriptions reports from 2011-12 to 2024-25, available at Department of Health, Disability, and Ageing (2025j), though table numbers vary across editions. Service counts are sourced from Department of Health, Disability, and Ageing (2026i) and Department of Health and Aged Care (2024b).}

Pharmacies are now allowed to provide up to 90 dose administration aids per month, up from 30 in 2010.²⁵³ And there are now a range of automated packing options explicitly advertised as a way to cut packing time and increase profit, so costs have probably fallen over time.²⁵⁴

As with dispensing fees, government should set the fee for a dose administration aid to cover the cost of providing an aid, plus a reasonable profit margin.²⁵⁵ To do so, it should collect up-to-date data on the cost of providing these services that takes into account increasing scale and automation of packing.

And as with MedsChecks, government should abolish caps on how many dose administration aids services each pharmacy can provide.

8.4 Expanding services seems like a good deal …

The pharmacy industry has called for expansion beyond these longstanding services. The Guild and the Pharmaceutical Society have called for services such as community pharmacy prescribing, diagnosis, and disease management, which are traditionally the remit of general practice. They claim this would take pressure off GPs and improve health outcomes.²⁵⁶

At first, the case seems strong. Pharmacists have extensive training and already provide some of these services overseas.²⁵⁷ And community pharmacies are well-located, accessible, and highly trusted.²⁵⁸

Against this backdrop, many Australian states are trialling, or permanently expanding, pharmacy services.²⁵⁹

8.5 … but the evidence on cost-effectiveness is sobering

Evidence suggests that pharmacy services are safe and effective.²⁶⁰ Consumers also find pharmacy services convenient, and express high satisfaction.²⁶¹ But evidence about the cost-effectiveness of pharmacy services is weak.²⁶²

Government should only fund health services that are good value-for-money in the context of the broader health system. With rising demand for care, and government budgets under strain, this is more important than ever. And even where patients pay for services directly, government should still consider if those services are cost-effective.²⁶³

Systematic reviews show mixed results for cost-effectiveness of extended-scope pharmacy services.²⁶⁴ Findings vary significantly by type of service, health system context, and implementation approach.²⁶⁵ They suggest that some services are more effective and cost-effective than others, and point to specific risks to achieving value.

8.5.1 Community pharmacy services face risks to value

International evidence shows that pharmacy services can duplicate GP care, with the government (and possibly also the patient) paying twice.²⁶⁶

And the community pharmacy setting increases the risk of low-value care. Usually an appointment isn’t needed, so patients may seek care for issues that would have resolved on their own.²⁶⁷ And fee-for-service funding encourages pharmacies to provide more services, even if they aren’t necessary (see Section 8.3.1). There is international evidence that when the same provider both prescribes and dispenses medicines, they prescribe more, and more expensive, medicines.²⁶⁸

The cost-effectiveness evidence in Australia is also weak, and shows mixed results.²⁶⁹ There are reasons community pharmacy services might be less cost-effective here than overseas: a poor track record of managing existing services, broader health system problems, and emerging alternatives that may offer better value.

There has been sustained funding for poorly targeted and mispriced services in successive Community Pharmacy Agreements, despite independent reviews (see Section 8.3). That suggests new services are likely to be poorly designed and badly implemented.

The wider context matters too. Australia’s health system is fragmented and relies heavily on fee-for-service payments.²⁷⁰ The incentives and information gaps this creates make duplication between pharmacy and GP services more likely.

And cost-effectiveness must be assessed against the alternatives, some of which have momentum. Designated registered nurses now have expanded prescribing powers.²⁷¹ Significant investment and reform is focused on urgent care centres and multidisciplinary general practice, including pharmacists working in general practices.²⁷² If they prove cost-effective, the case for providing overlapping services in community pharmacies will get weaker.

8.6 Focus on the most promising new services

Given weak evidence and risks to value-for-money, the federal government should take a cautious and selective approach to expanding community pharmacy services. Only one proposed new service type – prescribing for uncomplicated urinary tract infections (UTIs) – has a strong enough evidence base to justify rolling it out at scale.

8.6.1 Fund pharmacists to treat uncomplicated UTIs

Government should fund pharmacists to treat uncomplicated UTIs in women aged 18 to 65, including through prescribing antibiotics.²⁷³ This has been shown to reduce overall costs and improve access to care.²⁷⁴ The evidence for this service is strong, but does not prove that other services will also be cost-effective.²⁷⁵

In funding pharmacists to treat uncomplicated UTIs, government should enable pharmacists to provide PBS prescriptions, subsidise services for concession card holders, and introduce caps on how much pharmacists can charge patients for a consultation, based on independent IHACPA pricing. Trials have shown that, without these settings in place, pharmacy services are disproportionately accessed by wealthier patients.²⁷⁶

We estimate that this would cost up to $2 million per year, if government chose to cover the cost for all eligible patients.²⁷⁷

8.6.2 Fund trials to test other services

Other pharmacy service types don’t yet have enough evidence to justify making them permanent. But some are promising enough that government should invest in large-scale trials, with carefully designed safeguards, to test their cost-effectiveness in the Australian context.²⁷⁸

The services the government should focus on are: prescribing for other minor ailments beyond uncomplicated UTIs, oral contraceptive prescribing, smoking cessation, and chronic disease management for specific conditions such as diabetes and hypertension (see Box 8). International evidence suggests they are safe, effective, and probably cost-effective.²⁷⁹ Early findings from Australian trials also suggest they are safe and can be implemented here.²⁸⁰

Services without enough evidence to justify a large-scale government-funded trial include: screenings for chronic diseases or risk factors, and lifestyle change services for weight loss or reduced alcohol use.²⁸¹

Box 8: Promising services that government should trial

Minor ailments services, which involve consulting with a patient, making a diagnosis, and potentially prescribing for minor, short-term ailments.^a

Pharmacists are generally required to follow a protocol^b outlining which data they must collect, medications they can prescribe, and risk factors that trigger referral for further assessment and treatment.^c

Prescribing oral contraception, which similarly involves consulting with a patient, following a protocol, and where appropriate either initiating or continuing a prescription.

Smoking cessation services, which involve education, advice, and pharmacotherapy to help patients quit smoking.

Chronic disease management services, which focus on:
– Specific conditions, including diabetes and hypertension.
– Specific functions, such as education, medication management, repeat prescribing, and monitoring.
– GP collaboration, requiring a referral or periodic review.

See Appendix C for a summary of the evidence.

Get trials right this time

There have been more than 20 government-funded trials of new community pharmacy services in Australia over the past decade.²⁸² But almost none provided the information needed to expand, or rule out, new services.²⁸³ And many new and ongoing trials appear to be repeating this pattern, focusing on measures of patient satisfaction and safety, without rigorous evaluation of effectiveness and cost-effectiveness.²⁸⁴

New trials must be different. They should be designed to test specific service models and generate evidence of effectiveness and cost-effectiveness sufficient to inform a health technology assessment.²⁸⁵ That assessment should be the threshold for introducing a new service into usual pharmacy practice.

That means trials should follow Australian Centre for Evaluation (ACE) and Medical Services Advisory Committee guidelines. ACE should also peer review and approve the trial designs before they start.²⁸⁶ These guidelines specify how to choose appropriate patient health outcome measures and how to design a trial and recruitment strategy that minimises bias and facilitates economic analysis.

8.7 Integrated pharmacists are good value

Embedding pharmacists in general practices and Aboriginal Community Controlled Health Services is a different way to have pharmacists provide more services.

Integrated pharmacists don’t directly sell medicines to patients. Instead, they provide medicine reviews, education, and monitoring as part of a patient’s multidisciplinary care team. This includes providing patient services, as well as participating in case conferences and providing advice to other staff.

Integrated pharmacists in primary care are widespread overseas, particularly in the UK and, to a lesser extent, Canada.²⁸⁷ In England, pharmacists in general practices have been common for more than a decade.²⁸⁸

They improve the clinical outcomes for people with chronic disease.²⁸⁹

Integrated pharmacists in general practices have been successfully trialled in Australia.²⁹⁰ And in 2023, the Medical Services Advisory Committee supported public funding for integrated pharmacists in Aboriginal Community Controlled Health Services, following a 15-month trial that found the model was safe, effective, and good value-for-money.²⁹¹

8.7.1 Integrated pharmacists provide expertise with fewer risks

Integrated pharmacists would increase access to the unique medicines expertise of pharmacists, while avoiding many of the risks from offering services in a community pharmacy, which were discussed in Section 8.5.1.

The duplication risk is reduced because integrated pharmacists have highly collaborative relationships with GPs.²⁹² They share a physical clinic, and all the record-keeping and care coordination infrastructure that sits within it.

The risk of low-value care is reduced by locating pharmacists within a clinic, rather than a shopfront. Typically, a patient would be referred to the pharmacist or explicitly make an appointment.²⁹³

And integrated pharmacists do not have the conflicts of interest that come with a retail setting.

8.7.2 Invest in integrated primary care pharmacists

The federal government should get Primary Health Networks to commission integrated pharmacists in general practices. Primary Health Networks should assess proposals for integrated pharmacists from general practices, make funding decisions informed by their population’s health needs, and support continuing improvement.²⁹⁴

We estimate that this would cost about $57 million per year.²⁹⁵ This could support about one in every eight Australian general practices (about 900 clinics) to employ a pharmacist for two days each week.²⁹⁶

The government should also fund the National Aboriginal Community Controlled Health Organisation (NACCHO) to commission the model of integrated pharmacists in Aboriginal Community Controlled Health Services that the Medical Services Advisory Committee supported in 2023, which would cost about $23 million per year.²⁹⁷

This could support every Aboriginal Community Controlled Health Service to employ a pharmacist for at least one day each week. At full scale, this would mean an additional 500 pharmacists working across general practice and the ACCHS.²⁹⁸

9 Build a better future for pharmacy

Community pharmacy is a crucial part of Australia’s healthcare system, and it will only get more important. Every year, Australia’s population gets older and sicker, new medicines are added to the Pharmaceutical Benefits Scheme (PBS), more scripts are dispensed, and government healthcare spending rises.

Australia has trusted medicines experts in almost every community, available without an appointment. It’s vital that we make the most of them. The reforms in this report would do that. Together, they would build a sector that delivers three things Australians should be able to expect.

The first is affordable medicines.

Patients would stop paying fees that buy nothing. They could get a discount on any medicine, at any pharmacy that wants to compete for their business. And the Safety Net would kick in automatically, so no one misses out on savings they’re entitled to. Taxpayers would pay dispensing fees based on what dispensing actually costs, and get the full benefit of manufacturer discounts.

The second is competition that drives innovation and cuts prices, like it does in the rest of the economy.

New pharmacies could open where patients are. The best operators could grow. Longer opening hours, home delivery, and lower prices would spread because they win customers, not because an agreement allows them. Rural Australians would get guaranteed access to medicines, not subsidies that don’t go where they’re needed.

The third is pharmacists doing more of what they are trained for.

Pharmacists would treat uncomplicated urinary tract infections, with PBS prescriptions and capped fees. Within a few years, rigorous

national trials would settle which other services are worth rolling out at scale. 500 pharmacists would work in general practice and in

Aboriginal Community Controlled Health Services, where the evidence shows their expertise improves care.

With these reforms, the sector will give some things up: guaranteed revenue, protected locations, and fees set by bargaining. But it will get more in return.

Owners would get fees that cover their costs, faster payment for expensive stock, freedom to grow, and targeted funding if they serve communities that can’t sustain a business without government support.

Pharmacists would get a bigger clinical role, in a system that measures and values the quality of their work.

The current Community Pharmacy Agreement expires in mid-2029. Three years is enough time to collect cost data, start trials, legislate competition reforms, and set up quality monitoring. If the federal government acts now, the eighth agreement can be what it should be: the last.

Acknowledgements

This report was written by Peter Breadon, Mia Jessurun, Molly Chapman, and Thomas Shortridge. Jonathon Bolton provided research assistance. The report was edited by Paul Austin.

We would like to thank Philip Clarke, Amjad Alsaeed, and Vinita Fonteyn for reviewing this report, alongside numerous other government and industry participants and officials who reviewed the report or gave input.

The opinions in this report are those of the authors and do not necessarily represent the views of Grattan Institute’s founding members, affiliates, individual board members, reference group members, or reviewers. The authors are responsible for any errors or omissions.

Grattan Institute is an independent think tank focused on Australian public policy. Our work is independent, practical, and rigorous. We aim to improve policy by engaging with decision makers and the broader community.

We acknowledge and celebrate the First Nations people on whose traditional lands we meet and work, and whose cultures are among the oldest in human history.

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