King Review interim report findings won’t pass the test of public scrutiny, argues Dr Rohan Miller

An interim report titled Review of pharmacy remuneration and regulation was quietly published recently which could have far reaching consequences for everyone who uses prescription medication, over the counter medicines or seeks health advice from their family pharmacist. In short, all Australians. I believe the interim report is riddled with erroneous assumptions and should not be allowed by the government to play any role in the future of the sector.

The approach taken by the interim report and the jargon used leaves no doubt that the authors were led by a rational economist. The King Interim Report also reflects the farce of Yes Minister, as former Minister Ley’s carefully selected team leader, economist Stephen King, has already pre-determined that there should be change and consolidation in the Australian community pharmacy sector.

This is where taxpayers and people interested in good governance, or quality evidence-based regulatory reflection are entitled to be very disappointed. In November 2015, King was appointed to lead the review into pharmacy remuneration and regulation. In December 2015, King (2015) published a paper claiming that pharmacies were among the usual suspects protected by anti-competitive regulations. King provided no empirical analysis to support what seems to be nothing more than his opinion. Not surprisingly, the Interim Report also reflects King’s view that the Australian community pharmacy sector needs to change and become more competitive.

In the same 2015 paper, King specifically argued that Friendly Societies should not be “discriminated against” when it comes to operating pharmacies. Interestingly, or perhaps co-incidentally, the East Yarra Friendly Society, that operates pharmacies through the Chemist Warehouse brand, commissioned a Deloitte Report (2016) that was submitted to the King Review (submission #218).

There appears to be a substantial potential conflict of interest in the King Review that would be far too surreal for a Yes Minister plot. Having prepared a report in support of the East Yarra Friendly Society / Chemist Warehouse case for the sector’s deregulation, Deloitte accepted a commission from Professor King’s team on behalf of the Australian Government.

When challenged on the alleged conflict of interest, Professor King is reported to have denied any conflict and to have claimed that Deloitte “was hired to provide analysis of selected overseas pharmacy models and would not be providing advice”. What is the point of commissioning Deloitte (2017) unless their work was to be used to advise the King Review? Indeed, conclusions (p.113) such as “Reforms, innovations and trials are necessary to ensure the development and transformation of community pharmacies and the pharmacy industry as a whole” look for all intents and purposes like advice.

The Deloitte (2017) report itself states that the company was “commissioned by the Australian Government Department of Health to undertake a literature review of community pharmacy in Australia” and several other places and “is an input to the broader Review of Pharmacy Remuneration and Regulation” (Deloitte 2017 p. 1). Again, it seems very clear that the reason for retaining Deloitte was to obtain “advice”.

The original East Yarra Friendly Society/The Chemist Warehouse funded Deloitte (2016) report claims to focus on “Reforming ownership and location rules for community pharmacy in Australia”, two of the fundamental components of the King Review. This report is prescriptive of how the pharmacy industry should be structured. It is cited in the government funded Deloitte report (2017), along with a number overlapping references (although the citation methods used in the two Deloitte reports inexplicably varies).

While various reports from the equivalent of Pharmacy Guilds in places like Sweden, Denmark and Japan are cited in the Deloitte’s government funded report, a glaring omission to this literature review is any apparent reference to material submitted by, or available from The Pharmacy Guild of Australia. So Deloitte’s report informing the King Review cited its own report funded by interests associated with Chemist Warehouse, but ignored the report from the Guild representing Australian pharmacists?

But wait, there’s more. During the brief period when the public was able to comment on the review, information was released in such a way that stakeholders found it almost impossible to respond in an informed fashion. Taxpayers and community pharmacy clients deserve much more than what seems to be a self-serving regulation of information.

Given the potential influence the two Deloitte reports may have on Stephen King and his panel, shouldn’t all documentation be disclosed for public scrutiny in a timely fashion? After all, transparency is something the King Interim Report is seeking.

If there is to be a review, community pharmacy and Australian taxpayers deserve a review that is free from potential bias. As an ageing nation with an increasing need for health support, it is imperative a review into community based pharmacy properly meets our needs. A simplistic economic approach that, for example, largely overlooks costs (compare the rents on Toorak Road in Melbourne with Lithgow in NSW) and focuses on selected constructs such as fixed pricing, suggests there are fundamental flaws in the King Review.

The Interim Review argues for economic change. It should be proposing ways to improve our health outcomes. Somehow, the report argues for cost cutting (p.9) regardless that our society is increasingly dependent on pharmaceuticals (p.10). The administration of pharmaceuticals is to be dictated by “return on investment,” not health outcomes.

The King Review gives little or no consideration to the likely implication of removing restrictions on pharmacy ownership which would include a bigger operator being able to systematically “out-compete” smaller operators, gain market power, and then  exploit this market position. Sometimes anti-competition laws exist for reasons, even if some economists seem to assume the market should be deregulated.

Just who will the final King report impact? The short answer is everyone who will get a medical prescription filled, or pops into their local pharmacy to buy over the counter medication, or discuss a small medical problem.

So, why aren’t these report findings being disseminated through a range of media to inform people?  Probably because it won’t pass the test of public scrutiny.

Dr Rohan Miller is a Senior Lecturer in Marketing at the University of Sydney Business School.

He has no conflict of interest to declare.