Australians will soon be able to fill two months’ supply of medicines at their community pharmacy, rather than one, for 325 common medicines. This change is expected to halve the cost of prescriptions for six million Australians.
The Pharmacy Guild of Australia has taken exception to the government’s policy change, warning it will create medicine shortages and make pharmacies financially worse off.
The president of the guild wept at the thought of pharmacies going under because of reduced income from dispensing fees and co-payments.
Mark Butler, the federal minister for health and aged care, was deft in his response, advising Australians to:
take advice around medicine supply and medicine shortages from our medicines authorities rather than the pharmacy lobby group.
This argy-bargy between the government and the guild is not uncommon.
What is uncommon is the public dismissal from a health minister of the guild’s views. This government is using its political capital to push health reform forward and doesn’t seem afraid to ruffle a few feathers.
What is the Pharmacy Guild of Australia?
The guild is an influential peak body registered under the federal Fair Work Act 2009. It acts like a union for community pharmacy (also known as chemists) owners. It provides resources to help pharmacists improve their small businesses, but most of its membership value comes from advocating for community pharmacy owners.
The Pharmaceutical Society of Australia is a separate group which represents all pharmacists, including those who work in hospitals and those who don’t own the pharmacy they work in.
The guild and the Pharmaceutical Society of Australia negotiate five-year agreements with the government on remuneration and funding for supplying Pharmaceutical Benefits Scheme (PBS) medicines in the community and for delivering pharmacy programs to support patients.
Known as Community Pharmacy Agreements, the first was signed in 1990, while the most recent seventh Community Pharmacy Agreement was signed in 2020. That agreement is due to expire in 2025, potentially costing A$25 billion over five years. Of this, $16 billion will be paid for by the government and $9 billion will be paid for by patients.
How does the guild wield its power?
The guild is nearly 100 years old. It understands health care and how health policy is made. It has a reputation for shaping government health policy envied by many a health care peak body.
It doesn’t have authority over government policy. It asserts its influence through its soft power by shaping community preferences to get patients behind what it wants. This stems from community pharmacy’s reach into every corner of Australia and the inherent trust between a pharmacist and a patient. It undertakes its own research to generate ideas and to criticise government policy when it suits.
The guild also takes a more direct approach to influencing government policy. The Australian Electoral Commission reported the guild was the 13th largest political donor in 2021–22, donating $578,000 to political parties across 88 separate donations. This was in an election year, which almost doubled its donations compared to the previous year.
What policies has the guild influenced?
The recent extent of the guild’s power is reflected in favourable policy outcomes for community pharmacies, despite these sometimes being unfavourable for taxpayers or patients.
The guild convinced the government to provide community pharmacies and pharmaceutical wholesalers with an extra $225 million in the 2017–18 budget because prescription volumes were lower than expected within the sixth Community Pharmacy Agreement. This was a simple cash grab by pharmacies from taxpayers.
The guild also won a contentious policy back-flip in 2018 by getting the government to retain the Pharmacy Location Rules, arguing they provide “certainty and stability” for pharmacy small business.
What are the Pharmacy Location Rules?
The Pharmacy Location Rules are an agreement between the Australian government and the Pharmacy Guild of Australia. They place restrictions on where a new pharmacy can be established or where an existing pharmacy can be relocated. Pharmacies must meet location based criteria to be approved by the Australian Community Pharmacy Authority to receive pharmaceutical benefits.
The Pharmacy Location Rules do not allow new pharmacies to open within 1.5 kilometres or 10 kilometres of an existing pharmacy depending on the location, distance to the nearest pharmacy, and the number of supermarkets and medical practitioners in the area. Unless exempt, they do not allow pharmacies to be relocated from the town in which the approval was originally granted.
While no research has directly examined the impact, this policy has likely inflated consumer costs due to a restricted competitive pharmacy environment.
The Pharmacy Location Rules were introduced in the first Community Pharmacy Agreement to help larger pharmacies generate efficiencies and profit through scale. The rules sweetened accompanying restrictions on PBS remuneration from the government. They have been included in each subsequent Community Pharmacy Agreement.
The Pharmacy Location Rules were meant to expire in 2015 after the government initiated Competition Policy Review recommended they “should be removed in the long term interests of consumers”. Instead, the guild pulled back on a threat made to the government to launch a major campaign on another policy initiative, in exchange for delaying the removal of the location rules for five years.
Upon further lobbying, the Pharmacy Location Rules sunset clause was removed after the guild formed a Pharmacy Compact with the government in 2017.
Pharmacy policies that benefit consumers
Some government policy change has aligned guild and patient interests.
Community pharmacists are increasingly providing services traditionally delivered by GPs. Pharmacists can now administer flu and COVID vaccines, and state trials allowing pharmacists to dispense oral contraception and antibiotics without a prescription are gaining favour.
This push towards greater scope of practice is embedded in the current and prior Community Pharmacy Agreements. But it threatens GP revenues.
The Australian Medical Association, the peak body for doctors, recently took a swing at the guild. It outlined ways to improve pharmacy competition in a government submission, which included removing Pharmacy Location Rules and getting pharmacies to compete on medicine prices through discounting.
What does this all mean for patients?
The government has assured the guild that the $1.2 billion savings from allowing patients to fill two months’ supply of medicines will be invested directly back into pharmacies.
Savings will be used to further expand the scope of practice for pharmacists, potentially informed by a National Scope of Practice Review to start in 2023.
Despite this assurance, the guild will fight. It has already canvassed 2,500 “voters” across Australia on the budget proposal. In addition to reduced dispensing fee revenue, having patients with chronic diseases reduce their pharmacy visits by half means the opportunity to sell other products sitting on shelves is also halved.
Substantial health reform is on the horizon, but it won’t be painless. Policy change can upset embedded business models. It can impact livelihoods if providers don’t respond to their new regulatory environment. In the coming whirlwind of power struggles, wouldn’t it be nice if the government and providers worked together to put the patient first?
This article is republished from The Conversation is the world's leading publisher of research-based news and analysis. A unique collaboration between academics and journalists. It was written by: Henry Cutler, Macquarie University.
Henry Cutler does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.