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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