You would be hard pressed to find a bigger racket than Australian pharmacies.
How many any other industries in Australia have had laws implemented that ban new entrants from opening within 1.5 kilometers of an existing business?
How many other industries allow only registered professionals in the field to own and operate a business?
And how many other industries get to entrench a cartel in a bilateral agreement with the Government every five years?
Last week’s release of the Harper Review into competition policy recommended that the Government deregulate pharmacy ownership, by dumping pharmacy location and ownership rules, noting that “such restrictions limit the ability of consumers to choose where to obtain pharmacy products and services, and the ability of providers to meet consumers’ preferences”.
As expected, the rent-seeking Pharmacy Guild immediately hit back, claiming that deregulation would give supermarkets the power to compete with local pharmacies, driving independent operators out of business and putting health care second to profit.
However, as argued by Fairfax’s Peter Martin today, overseas experience shows that relaxing location and ownership rules, and allowing qualified pharmacists to dispense drugs in supermarkets (amongst other places), slashes costs for consumers, whilst also improving convenience:
The best estimate suggests the decision to allow supermarkets to sell medicine cut the prices charged [in Britain] by 10 to 30 per cent. Few in Britain would turn back the clock.
The rules governing Australia’s pharmacies are so strange we’ve come to think of them as normal. They apply in no other industry…
It’s illegal for a pharmacy receiving government payments to be located in or accessible from a supermarket, defined in the 56-page handbook as “the type of store in which a person could do their weekly shopping from fresh food (dairy, meat, bread), pantry items, cleaning products, personal care items and other household staples (laundry pegs, plastic food wrap)”…
The more important effect of the location rules is that they protect pharmacies from price competition and from competition for the government payments that make up over half of pharmacies’ incomes…
It’s far from true that Australian pharmacists support the restrictions. The Pharmacy Guild of Australia represents only the 4000 who own pharmacies. Another 20,000 are locked out of ownership and forced to work for those who got in early…
The Community Pharmacy Agreement pays the pharmacies to do the things many of us might have thought they did routinely, such as dispensing drugs and keeping electronic records. Its annual cost has climbed from $546 million in 1991-92 to $3.087 billion in 2013-14…
The only saving grace in Australia has been the emergence of Discount Chemists Warehouse, which is owned by an elaborate network of 300 separate pharmacists, and has challenged the old protected model and lowered pharmacies’ margins. Anyone that has shopped in one of these stores would realise just how much they were being ripped-off by traditional pharmacies. Obviously relaxing ownership and location rules would provide further gains to Australian consumers.
Like the Harper review, the Productivity Commission has for more than a decade pushed for changes to pharmacy ownership rules to enable pharmaceutical products to be sold in supermarkets (amongst other places), and has described the current restricted arrangements as adding “to health care costs for little apparent benefit”. The fast emergence of Discount Chemist Warehouse has shown that there is a strong appetite amongst consumers for more competitively priced pharmaceuticals. So why not enhance competition even further by allowing pharmacies to also operate in supermarkets, as is the case in Britain, New Zealand and the United States?
If the Government is fair dinkum about ending the age of entitlement, it should prioritise pharmacy reform, and in the process save consumers and taxpayers significant money in the process.
