Embrace competition, it’s coming: Harper Review panel member

Man tears up page that reads "rules" (Harper Review)

The current community pharmacy ownership and location rules are a relic of the 20th century which restrict consumer choice and can lead to “silly and perverse” outcomes, a Harper Review panel member has told the AJP.

He says critics of the review’s recommendations need to realise that pharmacy is in one of the best positions of all sectors to compete on a deregulated playing field.

“In an overall sense, the report has been well received, but in those sectors of industry where they see some threat, the general response has been that we like a lot of the other things in the report, but not the area where it touches us,” says Peter Anderson, a Competition Policy Review panel member who recently stepped down from the position of Chief Executive of the Australian Chamber of Commerce and Industry.

“Those who are taking a helicopter view on how our report affects the economy as a whole have generally given it the thumbs up, but those who have reservations only tend to have reservations about a specific impact on them, rather than the underlying principles we advocate.”

The review, released on Tuesday, recommends the gradual removal of the ownership and location rules on community pharmacy, as well as deregulation in other sectors, such as the taxi industry.

The Review also recommends that remaining restrictions on retail trading hours should be removed, and that any jurisdictions choosing to retain restrictions should limit them strictly to Christmas Day, Good Friday and the morning of ANZAC Day.

It has been rejected by the Pharmacy Guild and criticised by other industry stakeholders, though Professional Pharmacists Australia welcomed its recommendations.

“Overall I respect the Guild, and I know colleagues in the Guild well; I respect them in the same way I respect my local pharmacist, who’s a Guild member,” Anderson told the AJP.

“But the days of any industry sector mapping out where, when and by whom businesses in that sector are to be conducted is a relic of the last century. We cannot map out where businesses should or should not operate, like putting pieces on a chessboard.

“We have a different consumer environment and a different level of expectation in the general community of freedom of people to enter markets.”

He cited the case of a pharmacist who employed a “loyal and capable” administrative staff member for over 10 years, who would have liked to purchase the pharmacy when the owner sold.

“They couldn’t, because they weren’t a registered pharmacist, yet that staff member knew more about the business than most of the other people working in the business.

“These are silly and perverse outcomes.”


Staying competitive

Anderson says that rather than focusing on preventing competition, pharmacists could move forward under a relaxed regulatory model by capitalising on their excellent reputation as health professionals.

“Our report does not seek to favour the rights of supermarkets to operate pharmacies over a local, independently-operated pharmacy,” he stresses.

“The mistake the Guild’s making is that it tries to present the debate as that. And the evidence we received is that even within the regulated pharmacy sectors, there are many different business models, with significant pharmacy chains operating in the pharmacy sector, some of whom are much more sceptical about the model the Guild advocates than it would appear.”

Chemist Warehouse, for example, in its submission to the Review, cited an OECD review which found pharmacy sector deregulation in several European countries increased accessibility of medicines to consumers and that price decreases were observed in many countries (the Pharmacy Guild has submitted that this is a misrepresentation of the OECD Review’s findings).

Anderson says that some regulation would be required – for example, there would always need to be a pharmacist in a pharmacy, “but that doesn’t mean pharmacies should be only owned by the registered pharmacist.

“There would need to be regulation to ensure that there is accessibility for all members of the public to medicines; our assessment of the submissions was that getting rid of the ownership and location rules does not compromise that principle in 99% of cases, but in 1% there might need to be community service obligations imposed to ensure access to dispensed medicines.”

There’s no doubt that a change to ownership and location rules would present a competitive threat to some of the existing pharmacies and pharmacy owners, Anderson says.

“That is not ignored by the Panel. Our report does indicate that there need to be appropriate transitions which respect existing investments.

“The idea that the status quo will remain is not sensible, and the industry’s own internal pressures will ultimately open up some of these cracks.”

He says that he has had similar discussions about the impact on small businesses over past regulatory changes, but that good small businesses can thrive by providing good service.

“In my days in South Australia, when the retail trading hours were changed they said it would be the demise of small businesses, and that if fresh meat was sold on the weekends it’d be the demise of butcher’s shops,” Anderson says.

“But we saw small business able to compete with supermarkets if they delivered highly valued, quality products and could engage more closely with their customers.

“I am confident that the strength the pharmacy sector has, in the psychology of the consumer and in the trust they have, would place them in the best position of all smaller businesses for competition from chains.”

Other industries such as taxis do not enjoy such trust, he says.

“So the pharmacy industry is well placed to meet the competition. It just needs to not turn its face against the competition.”

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