CWH attacks location rules, Guild hits back

Chemist Warehouse and the Pharmacy Guild of Australia go head-to-head on location rules in their Pharmacy Review submissions

Both the giant pharmacy chain and membership organisation commissioned analyses of the geographical distribution of community pharmacy in Australia – although each came to a different conclusion.

Chemist Warehouse commissioned Deloitte Access Economics to complete a geospatial analysis, which it says “far from finding a uniform distribution of pharmacies … revealed that population-to-pharmacy ratio differed markedly across the country as did the number of prescriptions dispensed by pharmacies across Primary Healthcare Networks.”

According to the report, “the considerable geographic variation suggests that the existing rules may be restricting the sector from responding to demand through establishing new pharmacies.”

“Far from assisting to ensure an equitable and uniform distribution, what the data shows is that the Rules act to entrench inequity and restrict normal market forces from working to match supply and demand. The data is unequivocal; it shows that many communities could be serviced by additional retail pharmacies without materially affecting the viability of the existing providers,” it says.

“Consumers lose through restricted access to a wider range of pharmacy services offered at more competitive prices in more convenient locations and through different commercial organisational structures.”

The submission adds that location rules also act to create monopoly rents for existing pharmacy owners.

Meanwhile the Pharmacy Guild also commissioned a geospatial analysis through MacroPlan Dimasi in 2014 and 2016.

It says the results prove location rules are positive for pharmacy distribution.

For example, the data show that:

  • In the capital cities, the average resident is located less than one kilometre from the nearest pharmacy, while 97% of consumers are no further than two and a half kilometres from a pharmacy.
  • Outside of capital cities, country residents are just 6.4 kilometres on average from the nearest pharmacy, with 65% having a pharmacy within two and a half kilometres.
  • In total, 80% of consumers take ten minutes or less to get to the pharmacy of their choice.

“It is important to stress that community pharmacy achieves these high levels of access with relatively low numbers of outlets,” says the Guild.

“For example, community pharmacy provides no lower a level of access than medical practice (broadly defined) but does so with 16% fewer outlets. That means there is less duplication of fixed costs and a greater ability to achieve economies of scale, thus saving resources and ensuring that the network of community pharmacies is sustainable over the longer term.”

It also points to the time prior to location rules being introduced, when many pharmacies were clustered in few, and mostly urban areas.

“There were some areas with few or no pharmacies. In addition, there were a number of relatively inefficient pharmacies which were primarily in commercially attractive urban areas. There was also a concern that the pharmacy to population ratio, at that time, was too high compared to other developed nations.

“The pharmacy network, left to market forces alone up to 1990, did not deliver reasonable access to PBS medicines for all Australians,” the Guild concludes.

Read the full Chemist Warehouse submission

Read the Pharmacy Guild of Australia submission (see pp. 43-39 for location rules discussion)

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  1. william so

    In the years to come, students from B.Economics & B.Managment will have a nice debates based on these 2 submissions with each team argue their views until they are blue in the face.

  2. worried

    if ” relatively inefficient ” means taking the time to assist customers with their medication for free without selling them supermarket goods ……so be it!

  3. Anne Todd

    I love their example in Seven Hills of the problem with the distance location rules restricting trade, by my count some 20 pharmacies are located just outside the 1.5km radius but within the map image used in their submission, including the 9 in the purple circle, presumably the key shopping precinct in the area. And using the national health directory tool I find 25 pharmacies within a less than 4km radius of “Seven Hills” and at least 50 within 5km. Not sure how that prove under-servicing in any way shape or form!

  4. JimT

    …never ask a question that you don’t know the answer too. Or re ask the question in a different way if necessary. CHW agenda is coming from the point of view of establishing more businesses, The Phy Guild’s position is protecting the current businesses. Of course there is going to be conflict. The tricj here is to get someone who is completely un-bias…good luck

    • Tony Lee

      Spot on Jim. The $40/hour locum struggling to feed his/her family would probably take their chances whether it be CWH or Colesworths. The Guild has done a great job protecting the status quo, but the portion of the market not sequestered by CWH is now controlled by a small number of moneyed groups who have screwed the market the same way.

  5. Big John

    If you are a CWH employee and are reasonably happy there – do whatever you can to STAY there. They are by far the most powerful pharmacy group out there. And your job is generally straightforward compared to many other pharmacies out there, many of which are becoming marginal as time goes on. Your job is also very secure due to the innate strength of CWH. CWH have fantastic leadership, the best market research, IT team and in turn are the undisputed #1 in Australian pharmacy group.
    Pharmacy groups now fall into two categories: on one side there are those that excel at folly & foolhardiness and on the other are those that are daring and calculating.

    • Still a pharmacist

      Abolish the ownership rule or at least change to one pharmacist can own maximum one pharmacy within Australia. It will stop all the debate.

      It is funny that a pharmacist can be an investor (where he/she is not working) but others can not. It is not fair.

      • Big John

        The single pharmacist, single pharmacy concept will never be introduced – how would you reverse the current network of ownership without significant cost to the Government?

      • worried

        we HAVE a rule that a Pharmacist can have a pecuniary interest in only 5 Pharmacies per state! So want makes you think anyone will take notice of only one pecuniary interest?

  6. Sandra

    Does everyone forget why the location rules where put into place …. it was because pharmacists were setting up next to each other sending the other and in some cases themselves broke …. then the area lost their pharmacy altogether especially in areas outside of major cities where volume of customers can be a problem . Do we really want a monopoly group putting smaller business, who really care about their customers, out of business ?

  7. Philip Smith

    Please dont tell me a study/analysis you commissioned (paid for!) found out the answer you wanted?
    That is unbelievable! 🙂

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