CWH calls for urgent ownership rules reform


Chemist Warehouse was unable to raise a significant bank loan against its annual turnover – thanks to the ownership rules, it says

The exact figures are redacted in the group’s submission to Queensland’s pharmacy inquiry, but the case illustrates how Chemist Warehouse is restricted by the legislation, it says.

“The requirement that only pharmacists may own pharmacies, and that a pharmacist can own only five pharmacies in any one state, is unnecessary regulation that should be repealed,” it says.

“These constraints are creating financial instability that is more likely to threaten than secure the ability of the industry to continue to provide equitable and affordable access to medicine.

“The ownership rules, coupled with changes in the supply chain relationships in the industry in recent years, have created a serious capital constraint for the pharmacy industry.

“In practice, a group of pharmacies cannot accurately demonstrate its financial success or ability to meet substantial repayments, because pharmacy businesses must be registered in the name of individuals, rather than as part of a group.”

The ownership legislation limits the market for individual pharmacists who want to dispose of their business – suppressing prices and limiting credit worthiness, the group says.

“For larger pharmacy enterprises, such as Chemist Warehouse, the ownership structure required by the current regulatory regime prevents capital raising to support innovation, expansion and modernisation,” it says in its submission.

“This constraint on Chemist Warehouse’s ability to operate as any modern business should, is illustrated by the fact that the business has previously been unable to raise an $XX million bank loan against an annual turnover at the time of $X billion with a X% profit margin.

“The complex ownership arrangements these regulations force on pharmacists who wish to be part of the Chemist Warehouse group of companies, means the banks cannot be confident that they will be able to secure collateral against their loans.”

Chemist Warehouse says that retail pharmacy in general in Australia is “under capitalized,” which means innovation through investment is stymied, leading to inefficiency and higher prices for consumers.

Chemist Warehouse’s submission also states that while the group understands that the rationale for pharmacy regulation is aimed at a desire to ensure equitable access, “the effect of these regulations threatens the opposite”.

“The impact of regulation has been to raise costs for consumers, to prevent innovation in the industry and to undermine the value of investments.

“Chemist Warehouse contends that this heavy-handed regulation of the industry could put at risk its long-term viability.”

The group believes the ownership regulations should be reformed “as a matter of urgency,” it says.

The Inquiry is looking into a number of issues, particularly around the scope of practice of pharmacists as well as the establishment of a Pharmacy Council in the state.

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10 Comments

  1. Andrew Topp
    25/07/2018

    56 submissions. I confess to not reading them all from top to bottom, but the only ones in favour of deregulation or further relaxing of regulations were, surprise surprise, Chemist Warehouse, and the Grattan Institute.

  2. PharmOwner
    25/07/2018

    Oh, boo hoo! They could always tap one of the Gances or the Verrochis on the shoulder for vendor finance. They’re allegedly worth a lazy $800 million apiece. That is, of course if they have confidence in their business and their business partners.

  3. Gavin Mingay
    25/07/2018

    “Chemist Warehouse contends that this heavy-handed regulation of the industry could put at risk its long-term viability.”

    So they have been skirting the rules for years, and we should change the rules just so they can do further damage the pharmacy industry…

  4. William
    25/07/2018

    There is no doubt that the cosy protection racket that has governed and protected pharmacy needs to change.
    Maybe they could separate the true pharmacy items from the other “healthcare items” which probably account for the main part of the turnover and become a “health products supermarket” which could be used to gain the loans.
    The days of “protected species” is truly gone and there is no justifiable reason that this state of affairs should be allowed to continue.

  5. H Shan
    25/07/2018

    Yes, change the ownership rule to One pharmacist One pharmacy (and not 5 pharmacies). Anyone owns more than one pharmacy is an investor and it is unfair to block non-pharmacist investors to invest in pharmacy industry.

    • Tony Lee
      26/07/2018

      Spot on. But who is listening?

      • D.Pharm
        30/07/2018

        Sure as heck not the PGA. The PGA are all about maximising profits for pharmacy owners, so limiting potential buyers for pharmacies to only non-owners would slash demand & in-turn prices. With community pharmacy representation to Govt. 100% in the hand of the PGA, you are dreaming if you think they would ‘advocate’ for this.

        • Andrew
          30/07/2018

          With artificial supply instruments like Location Laws, Pharmacist-only ownership, and Pecuniary Interest laws, the retail pharmacy industry is based on a Ponzi that must eventually collapse. So much value tied in to regulations that owners bank on lasting forever (or at least until the next sucker).

  6. Karl Landers
    26/07/2018

    I think this is what they are really saying….:)

    “These constraints are creating financial instability (In Chemist Warehouse) that is more likely to threaten than secure the ability of the industry (Chemist Warehouse) to continue to provide equitable (Non-equitable) and affordable access to medicine (because no other Pharmacy does?)
    “The ownership rules, (that stopped us from taking total control community pharmacy) coupled with changes in the supply chain relationships in the industry in recent years, have created a serious capital constraint for the pharmacy (chemist warehouse) industry.
    “In practice, a group of pharmacies (like Chemist Warehouse) cannot accurately demonstrate its financial success or ability to meet substantial repayments, (even with 6 months forward charging and overleveraging) because pharmacy businesses must be registered in the name of individuals, (Three individuals….) rather than as part of a group. (Chemist Warehouse)”
    The ownership legislation limits the market for individual pharmacists (ahem….Chemist Warehouse) who want to dispose (buy every last one) of their business – suppressing (increasing) prices and limiting (promoting) credit worthiness, the group says.
    “For larger pharmacy enterprises, (3 billion dollar behemoths that just can’t get enough pharmacies) such as Chemist Warehouse, the ownership structure required by the current regulatory regime prevents capital raising to support innovation, (stops Chemist Warehouse from getting all the money it needs to control pharmacy in Australia), expansion (a Monopoly) and modernisation (not sure what that means but it sounds good) ,” it says in its submission.
    “This constraint on Chemist Warehouse’s ability to operate as any modern business should, is illustrated by the fact that the business has previously been unable to raise an $XX million bank loan against an annual turnover at the time of $X billion with a X% profit margin. (Welcome to the world of banking that all business’ in Australia have and do work with)
    “The complex ownership arrangements (they’re not that complicated… pharmacist only and limited numbers per state) these regulations force on pharmacists (all three of us!) who wish to be part of the Chemist Warehouse group of companies, means the banks cannot be confident that they will be able to secure collateral against their loans.” (Such a shock when the glory years of your 6 month forward charge is retracted and you have to play on the same field as everyone else)
    Chemist Warehouse says that retail pharmacy in general in Australia is “under capitalized,” which means innovation through investment (by all three of us) is stymied, leading to inefficiency (smaller profits) and higher prices for consumers.(that Chemist Ware will have charge and hence answer the question we don’t want answered on all our shop fronts “are we Australia’s cheapest chemist….NOOOOOO! )
    Chemist Warehouse’s submission also states that while the group understands that the rationale for pharmacy regulation is aimed at a desire to ensure equitable access, “the effect of these regulations threatens the opposite”. (…only to Chemist Warehouse!)
    “The impact of regulation has been to raise costs for consumers (you mean..Chemist Warehouse), to prevent innovation in the industry (you mean…new ways Chemist warehouse can screw community Pharmacy) and to undermine the value of investments (you mean…destroy every other Community Pharmacy in Australia).
    “Chemist Warehouse contends that this heavy-handed regulation of the industry could put at risk its long-term viability.” (and go broke like all the other pharmacies they ruined…how awful. Lucky you have that 1.6b tucked away)

  7. Ugh
    26/07/2018

    Awww didums. Maybe we should change the ownership rule to one pharmacist can own one pharmacy and thats it. What happened to it being a community minded profession? Chemist Warehouse/MyChemist are only in it for the money. Let’s face it though, they will more than likely get things their own way.

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