King warns against GP, pharma ownership


Prof Stephen King

Stephen King has taken aim at “absentee landlord” owners, especially of multiple pharmacies, in a Queensland Inquiry public hearing

But he also warns that care would need to be taken in any loosening of the ownership rules to avoid a situation similar to that of England, where “dead retail pharmacy businesses” were the result of deregulation.

Professor King, who was the chair of the Review of Pharmacy Remuneration and Regulation, was one of several interested parties who spoke at the public hearing on Monday morning.

The Queensland Inquiry is looking into the establishment of a Pharmacy Council in the state as well as transfer of pharmacy ownership.

Prof King told the hearing that in his personal opinion – based upon visits to a number of pharmacies around the country, as well as hearings, during the King Review, and which he pointed out may not be shared by fellow members of that panel – that the ownership rules were “good in theory” but “not working in practice”.

“In theory, it is a good thing to have a health care practitioner directly responsible for the outcome of their patients – whether a GP, whether a specialist, whether a pharmacist,” he told the hearing.

“You want the individual who’s providing the medical service to have… skin in the game as far as the patient’s welfare and the patient’s outcome is concerned.”

But this theory was tested, in his observation, during King Review research into the sector.

“There are a large number of pharmacy owners who may best be categorised as absentee landlords,” he said.

He said he asked shop-floor pharmacists how often their pharmacy’s owners visited, and answers varied from “never”, to “perhaps once every three months”.

While this was not a uniform observation, Prof King said that if the aim of the ownership rules is to have the pharmacist owner engage directly in that oversight, and facing the consequences of poor dispensing or service, there were “a significant number of pharmacies where that just wasn’t occurring”.

He said another issue was what he hesitated to call “gaming of the pharmacy ownership rules, but certainly ‘playing the rules as best as possible for the owner’.”

“In Western Australia I was talking to one of the owners who came along to one of our sessions,” he told the Queensland hearing.

“This was an owner who had maximised the number of pharmacies they could own in Western Australia, in Queensland… and in Victoria. And I actually asked him: ‘How often do you get to each of these pharmacies?’ and he says, ‘Well, usually once a year I get to do a bit of a road trip around the various states’. I think he lived in Melbourne.

“If the idea is to have that very close connection through the ownership rules between a pharmacist and the patients who are receiving the medicines from that pharmacist, clearly this pharmacist, and that’s just one example… that’s not what these rules are achieving.”

He expressed concern that in some regional areas, all the pharmacies were owned by a small group of pharmacists, which limited competition and effectively created a “closed shop”.

A number of submissions to the Inquiry said that competition would be harmed in rural and regional Australia by loosened ownership rules, but Prof King suggested that this was happening already.

He said he had seen no evidence that an absentee owner was any better than an absentee shareholder owner or co-operative structure.

Some practices he saw during the King Review were “eye-opening and unsafe,” he said, and suggested that professional (non-pharmacist) owners might quickly crack down on these.

Some pharmacies owned by pharmacists are struggling financially and beginning to cut corners, he said, and better business management skills could help.

No free-for-all

But Professor King also warned strongly against complete removal of ownership rules, and loosening of the rules without a transition plan in place.

“I think there’s issues and dangers with the complete removal, there’s transition dangers, and I think we’ve seen some of the transition issues that have occurred in England, where they removed ownership rules,” he said.

“They also allowed large new entry. The last time I looked… they were in the process of trying to sort out an oversupply of pharmacies.”

This had left “a lot of dead retail pharmacy businesses” by the side of the road, he said.

A second and more significant risk of removing the ownership rules is vertical integration, said Prof King.

“One of the concerns that we found during the pharmacy inquiry was where you have for example medical doctors, GPs, directly or indirectly having close connection with the profitability of a pharmacy.

“So a medical centre where there was a pharmacy closely connected, renting space from the medical centre, but in the sense the owners of the medical centre having strong incentives to have the scripts dispensed at the pharmacy, and that then feeding back into the GPs, and potentially giving the incentive… for what I would call increased prescribing and potentially increased dispensing.”

Prof King said he would be “concerned” at the concept of doctors owning pharmacies, or indeed pharmacists owning GP surgeries.

“And I believe in fact there are some pharmacists who own doctor’s clinics even though not the reverse.”

Prof King also said he would be concerned if there were individual drug companies who moved down the chain towards pharmacies.

“Again, there would be an incentive to suggest for example that the owners’ generics products and pharmacist employees would be under pressure to make sure that the relevant owners generic medicines were being used that may not be the best generics or the cheapest generics for the customer.

“Other than those, I haven’t thought of any areas where I’d have problems and conflicts.

“Obviously there needs to be professional standards, obviously dispensing should always be under the direct supervision of a qualified pharmacist and that pharmacist’s professional and ethical obligations would hold over the supervision of dispensing.

“I personally can’t see that having individual investors who are not pharmacists would lead to a change in incentives compared to what we see in terms of the absentee owners of some pharmacies today particularly where those owners are maximising the number of pharmacies they own in various states.”

Prof King also spoke in favour of an expanded scope of practise for pharmacists, pointing out that the King Review had recommended identical remuneration for identical services – such as flu vaccines – regardless of the setting in which they took place.

He described pharmacists as “very bright, very well trained medicine experts” and a “tremendous human asset”.

What else was said?

Several pharmacy stakeholders spoke at the public hearing, including Anthony White CEO, TerryWhite Chemmart, who said that community pharmacists have the potential to perform a much broader role within their existing competencies.

Karen Brown, Pharmacist, TerryWhite Chemmart Samford, Qld, warned against removing the ownership rules.

“When you are locally owned you are a true health hub in our community – we put the patient first and it is not about the profit, which it would be if we were de-regulated. Corporate ownership would be all about the bottom line,” she said.

“We are under-utilised and we are the most accessible health professionals.  We work with doctors – there’s a turf war in the media, but not in practice.”

Group Commercial Manager of Chemist Warehouse, Damien Gance, said pharmacy ownership rules have “no place in modern Australia”.

Mr Gance said the ownership of a medical practice had no bearing whatsoever on the doctor patient relationship.

“Provision of care by a medical practitioner is entirely unrelated to the ownership,” he said.

Reading pharmacy media stories on pharmacists breaking the law, being de-registered and committing other misdemeanours had shown him that pharmacists were “not holier than thou – and I am one,” he said, saying that many pharmacists are “plainly putting profits first”.

However Mr Gance did agree that “pharmacists are well and truly appropriately qualified to have an expanded scope of practice.”

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