‘Fundamental’ misunderstanding of location rules’ purpose

Critics of the location rules just don’t understand them, says the Guild’s executive director

In this week’s edition of Forefront, David Quilty writes that the Guild welcomed the passage through Federal Parliament last week of amendments to remove the Pharmacy Location Rules sunset clause.

This was a “timely reminder of the importance of maintaining the tried and trusted community pharmacy model,” he wrote.

“The small number of commentators who almost obsessively rail against the Location Rules fundamentally misunderstand their purpose as well as the fact that the PBS is a monopsony market where the Government as the sole funder quite validly seeks to ensure that its public policy objectives are achieved in a way that is both efficient and delivers quality health outcomes.”

The rules work for the Government, pharmacies and patients, he says.

“It is sometimes argued by opponents of the Location Rules that they are restrictive and anti-competitive because they prevent any pharmacist from opening up a pharmacy in any location,” Mr Quilty writes.

“This misunderstands their public policy purpose and ignores the international experience when such rules either don’t exist or are dismantled.

“The purpose of the Location Rules is to ensure that all Australians, regardless of where they live, have timely and equitable access to the PBS delivered through an efficiently distributed network of viable community pharmacies.”

Mr Quilty says the Location Rules encourage pharmacies to operate in areas of unmet or increased public need, such as rural and regional locations and outer metropolitan suburbs, as well as reducing over-concentration in areas that already have good pharmacy access.

“In comparable countries where pharmacy location regulations either do not exist or have been dismantled, there is demonstrated tendency for pharmacies to over-concentrate in inner city and higher socio-economic locations while less commercially favourable locations remain under-served.

“The United Kingdom is a good example where the relaxation of pharmacy location rules has led to an inefficient over-concentration of large numbers of pharmacies in preferred locations, with policymakers regretting the change and contemplating rectifying actions to ensure the sustainability of the network.”

The Australian rules avoid this while still allowing the number of overall pharmacies to grow alongside the population, he writes.

This, alongside the Ministerial Discretion available in cases where opening a pharmacy is deemed to be in the public interest despite the Rules otherwise prohibiting its opening, allows for appropriate access for patients, he says.

“For nearly 30 years, the Location Rules have been a proven success in ensuring that all Australians have equitable and timely access to the PBS which is not only consistently recognised as the world’s best subsidised medicines model but is also the most fiscally sustainable part of Australia’s health system.

“The fact that the Federal Parliament last week overwhelmingly acknowledged this success story by legislating the continuation of the Location Rules on an ongoing basis is an important health reform that will provide an increased level of certainty to enable Australia’s 5,700 community pharmacies to continue investing in delivering the best possible medicines supply and support and broader health outcomes for their patients.”

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  1. GlassCeiling

    Fallacies and obfuscation. Strange that the independent bodies charged with supporting public policy seek removal of the rules. All critics ‘misunderstand’ the reason a minority of pharmacists have job security ,make good money and maintain a poorly innovative profession while the majority of pharmacists cannot practice a health profession in a self determined manner .
    When a majority of people are accused of misunderstanding a simple issue perhaps the accuser should reexamine his own understanding and bias.

    • Jarrod McMaugh

      I’ve found that many people who criticise the location rules, the ownership rules, or both, do not understand their intended purpose.

      You don’t need to agree with them, but people should have a grasp on the intended purpose if they wish to criticise it. In fact I tend to listen quite intently to the opinions of people who do understand the intended purpose, and have criticisms that account for these.

  2. Anthony Tassone

    Community pharmacies are the most accessible major service across Australia, with superior accessibility to; supermarkets, banks, and yes even medical centres (of any type including; day procedural centres, specialist consultancy suites and general practice clinics).

    This is largely thanks to the outcomes of ‘Pharmacy Location Rules’ which were introduced by the Federal Government in 1990 around the commencement of the 1st Community Pharmacy Agreement (1CPA).

    Prior to the Location Rules being created under the 1CPA, many pharmacies were clustered in few, and mostly urban areas. Conversely, 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.

    In 2014 and 2016, the Guild commissioned a detailed mapping of the geographical distribution of community pharmacy from MacroPlan Dimasi, a highly respected firm that specialises in analysing retail and outlet location.

    MacroPlan Dimasi assessed:
    • the level of access consumers enjoyed to community pharmacy
    • the degree to which non-metropolitan areas, socially disadvantaged areas and areas with above average numbers of older Australians secured equity of access
    • compared locational outcomes in community pharmacy with those for banks, supermarkets and medical practices

    These full findings (available in the full submission to the Competition and policy review by the Guild) provide clear evidence of the high level of consumer access, including for older or disadvantaged consumers and for consumers with special needs, that has emerged under the Location Rules:

    • Australians—including especially older and disadvantaged consumers—have a very high level of access to community pharmacy. 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.

    As a result, travel times to pharmacies are also very low. Some 50% of Australians enjoy a travel time of less than five minutes to their preferred pharmacy, with a further 30% having a trip time of between five and ten minutes. In total then, 80% of consumers take ten minutes or less to get to the pharmacy of their choice.

    • Community pharmacies are also highly accessible in terms of their opening hours. Thus, 55% of consumers shop at a pharmacy that is open seven days, with a further 32% shopping at a pharmacy that is open on Monday to Saturday but is closed on Sunday. These are remarkable levels of access to a complex, professional service. And that service is speedy as well: 40% of consumers estimate it generally takes five minutes or less for their prescription to be filled, with an additional 40% waiting
    no more than ten minutes

    • Moreover, Australians typically have a choice of local pharmacies; that is, the Location Rules do not materially detract from effective competition. Most Australians are in reasonably close proximity to competing pharmacies, with MacroPlan Dimasi finding that 94% of metropolitan consumers are within two and a half kilometres of at least two pharmacies and 76% of non-metropolitan consumers are within no more than five kilometres of at least two pharmacies.

    The Department of Health’s own Post-Implementation Review- Amendments to the National Health Act 1953 to extend the Pharmacy Location Rules to 30 June 2015 that was conducted in 2011, provides an outline explaining the need for the Location Rules.

    “The community pharmacy network is the distribution system for the PBS. If the pharmacy network, left unaided, cannot deliver reasonable access for all Australians, as was the case immediately prior to the commencement of the First Agreement, then some regulatory intervention in the market is needed to ensure that medicines are available (to all Australians) efficiently and equitably through the PBS.

    Without a well distributed network of pharmacies, consumers in rural and remote areas would experience distance barriers to access to pharmacies. As was the case before the First Agreement, it can then be difficult or expensive for consumers to access needed prescription medicines, which is counter to the key pillars of the National Medicines Policy.

    This also results in poorer health outcomes for rural and remote Australians than for those in urban or near-urban areas.

    The Government is interested in a well distributed network of approved community pharmacies that closely matches the demographic distribution of the Australian community which, in addition to the supply of medicines subsidised under the PBS, can deliver a range of pharmacy services that form part of the Fifth Agreement.”

    Pharmacy Location rules are not an instrument of anti-competitive red-tape but an essential part of health policy to help delivery National Medicines Policy and equity of access to PBS medicines and health services for the Australian public.

    Anthony Tassone
    President, Pharmacy Guild of Australia (Victoria Branch)

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