Opinion piece hits nerve

An article calling for supermarket ownership of pharmacies, dumping of CPAs and minimum $100K salary for experienced pharmacists has drawn the ire of industry reps

Published online, the piece has levelled some serious criticism at the Pharmacy Guild and in the process aligned itself with the pharmacists’ union PPA.

Business consultant Michael Rhodes, director of Rhodes Management and author of the piece, said he wrote it in response to requests from a number of industry pharmacists for him to provide “an independent perspective” on where the pharmacy industry is heading.

“It’s not my position to espouse what pharmacists do,” Mr Rhodes begins his article.

“I’m not a pharmacist, I am an industry strategist (among other things). However I’ve researched enough to know what is right and what needs fixing.”

In the piece Mr Rhodes argues the Pharmacy Guild’s strategy in support of location rules and pharmacist-only ownership “does not serve the interests of the broader community”.

“Should the major supermarket chains be permitted to enter the pharmacy industry and dispense prescription medicines? The overwhelming answer is ‘of course they should be’,” he says.

“Restricting the supply of anything only increases price which [is] inflicted on those least able to pay in the community. It perpetuates inefficiency and high government costs.

“Australia still pays the second highest price for prescription medicines in the world, which is manifestly unacceptable.”

Mr Rhodes then details a “phased approach” whereby supermarkets offer to buy pharmacies that are strategically located adjacent to them.

“There is no doubt some pharmacies will close, but the overall reality is that net numbers of pharmacy outlets will increase and this is good for pharmacists, consumers and most importantly good for price.”

He even argues that “the very notion of a CPA should be dumped” altogether and replaced with an alternative called that Value Based Efficient Supply of Medicines in Australia, which the Department of Health should ultimately be accountable for.

The Pharmacy Guild, the prime target of the article, disagrees with the premises of the article, and a number of PSA members have also written to Mr Rhodes criticising the piece.

“Mr Rhodes’ piece appears to be a subjective narrative and opinion piece,” says Anthony Tassone, President of the Pharmacy Guild of Australia (Victoria branch).

“It doesn’t substantiate what the health benefits are of the sector, and how they would be impacted by deregulation.

“The Pharmacy Guild of Australia, through its submission to the Harper Review, provided substantive evidence, cost-benefit economic analysis and consumer surveys that provided evidence that there was a cost-benefit to location rules and pharmacist ownership,” Mr Tassone tells AJP.

Surveys reveal consumers are happy with the current model of pharmacist-only ownership, he adds.

Others have written on social media saying the deregulation of pharmacy in other countries has actually driven up the price of medicines because a monopoly eventually develops.

The Guild has said in its 2016 submission to the King Review that it “strongly supports the tried and tested community pharmacy model, which is underpinned by location rules that ensure that Australians have high levels of accessibility to medicines through a well-distributed network of community pharmacies that are owned by pharmacists who have a professional obligation to deliver quality health outcomes for their patients”.

“The prohibition within the location rules in relation to the co-location of approved pharmacies in supermarkets should be retained,” says the Guild, adding that there is “clear evidence of their social benefits as well as meeting the objectives of the National Medicines Policy, particularly in terms of access and efficiency”.

The Guild also argues that “as the recognised representative of the majority of community pharmacy owners who fund and manage the infrastructure to deliver the PBS to patients”, it should continue to have responsibility for negotiating future CPAs with the Federal Government.

Pharmacist pay

The article also calls for higher pharmacist wages and a transformed role through the deregulation of sector.

“The average salaries of pharmacists is less than that of certain trades (those with cert 3 TAFE level qualifications, school teachers and other professions, and absolutely none of these professions is responsible for human health care advice, sometimes which is critical,” says Mr Rhodes, adding that “it has to change”.

“The problem stems from the fact that pharmacy outlets are now quasi-retail outlets … if supermarkets were allowed to enter the industry, this would provide a more compelling career path for pharmacists beyond the current stale ownership model that now exists. It would also drive the up demand for qualified pharmacists.”

He argues that all pharmacists with a minimum of six years’ experience should be on a minimum salary of $100,000 per annum for 40-45 hour work weeks.

In his view, there should be no penalty rates, and all pharmacists should be entitled to two full contiguous days in a row off per week.

And in addition, he argues that pharmacists should be compensated 50% of dispensing fees, which would provide them with additional compensation commensurate with the responsibilities they undertake.

“Because it is paid directly to the pharmacist as taxable income, it would not hinder cash flow management in the existing business,” he says.

In regards to Mr Rhodes’ call for higher pharmacist wages, Mr Tassone says “Mr Rhodes does not appear to acknowledge the high costs of pharmaceuticals” to pharmacy owners.

“Pharmacist remuneration is the subject of a case before the Fair Work Commission now, with a process of consideration currently occurring,” says Mr Tassone.

Others have suggested on social media that pharmacists should be remunerated based on service provision, rather than script volume.

Mr Rhodes confirms he is in the process of compiling a second, follow-up piece that will respond to comments he has received so far.

Read the full letter here

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  1. Jarrod McMaugh

    Saw this when it was originally posted on the ECP group. Didn’t respond there because ultimately it’s not relevant.

    There are a number of glaring issues with the document that make me question the author’s understanding of the industry. It’s certainly written in a way that’s designed to generate enthusiastic agreement, but it doesn’t really hold up to much scrutiny.

    About the only thing in it I agree with is the remuneration for pharmacists is too low….. but the idea of pharmacists being paid the dispensing fee directly from the government is flawed, mainly because you can’t just “flick a switch” and implement this. It would require Medicare Provider numbers (not a bad thing!!!!) and ABNs for every pharmacist. It would also mean that pharmacists would be in a position where they would be paying some kind of fee to the pharmacy.

    • JimT

      Let PBS own the NHS stock, organise buying from manufacturers, pay for distribution to pharmacies and pay businesses a supply fee and then as above pay pharmacists a dispensing fee…takes out all the excuses……….

  2. Willy the chemist

    Evidently in the most deregulated markets esp. USA, prescription prices are cheaper than in Australia. Obviously US healthcare cost as a % of GDP is less than in Australia. And in suburbia, US pharmacies are generally not located outside a 15 to 20 mins drive. Maybe in a parallel universe.

    The author’s premise for arguing for supermarket ownership is a flawed understanding of the industry. For example, he went on to say that Australia still pays the second highest price for prescription in the world. The price of PBS prescription is not a market economy but determined by government. Hence the price disclosure mechanisms which are PBS reforms to control the prices.

    His statement that location rules does not serves the broader community also demonstrated his lack of understanding of this industry. We have arguably one of the most equitable distribution of PBS pharmacies across this vast wide nation. When I was in the US, outside of the main cities, you quite often have to drive miles to get to a pharmacy.

    He is also wrong when it comes to private prescription prices. He is even wrong with respect to OTC prices. I was in the US and many of the large pharmacies/supermarket have higher prices for general OTC. Sure, you get the headline low prices…but these are marketing. Like our milk prices and our 4 cents petrol promotions.

    He is correct however, spot on when he says that pharmacists are being paid too low. As a university graduated and a healthcare professional we are often paid lower than a blue collar worker. Unfortunately this is a problem due to the award rate and the ability of pharmacies to remunerate properly. Collectively we are all at fault, the individuals, the PPA and the Guild. We have some Guild members who are still resistance on higher award rate, even if at least in principle. We have the Union wanting to politicise this and even individuals for accepting a lower rate at the large discount boxes. To be honest, we also have the previous Guild leaders to blame for all the extra hoops we have to jump through in order to receive this or that additional payments. Then one by one, these payments stopped and the extra responsibilities stayed. And to the previous Guild leaders because all these burdensome paperwork and extra responsibilities do bogged us down and many pharmacists are suffering from PTSD of “too many, too often, too quickly and for too little pays”.
    Lastly we have the government to blame for keeping pharmacy on life support with all the cuts.

    • Michael Macdonald

      The US spends almost double on healthcare compared to Australia when looking at % GDP (9.4% Au vs 17% US – 2014) http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

    • Daniel Roitman

      Sorry to nitpick but the price of prescription drugs is not cheaper in the US. Yes, for some with high-end health insurance their medications come cheaper but that is only due to the enormous outlay they pay their health fund. Secondly, and this is the most important point, the US healthcare cost as a % of GDP is absolutely not less than in Australia. The USA has the highest expenditure on healthcare as a percentage of GDP in the world, and almost double that of the second highest.

      • Willy the chemist

        If I can give 2 thumbs up, I would! 🙂 I meant that as a joke!
        I did say maybe in a parallel universe.

        Yes, absolutely. The price of US prescription drugs are materially and significantly higher than in Australia.

        Yes absolutely. The US spends 17.9% of GDP on healthcare and they DO NOT even have a universal healthcare system! And yes, they spend nearly double the dollars of the 2nd highest spending country in terms of healthcare.

        And Yes absolutely, they are the most deregulated healthcare system in the world. Supposedly most market driven, in another word, “competitive” healthcare system. NOT.

        And yes, the author does not know healthcare. Why is it that we always think that an economist or an academic is better at healthcare than actual healthcare professionals?
        I can make valid suggestions of economics, finance and banking too. Too many too rich.

        • Daniel Roitman

          Hah! My apologies, I didn’t see the last sentence…(puts head in hands).

    • Anthony Tassone

      Some of the forum comments refer to expenditure measures within the USA health system as compared to Australia.

      The USA has not been shown to demonstrate superior outcomes to Australia in terms of healthcare expenditure and other measures.

      Below are some comparative measures to demonstrate this comparing Australia and USA to the OECD average (this is only a sample of some examples);

      – Life expectancy (Australia above OECD average, USA below);
      – Ischemic heart disease mortality rate [2011-2013] (Australia below OECD average, USA 9% above);
      – hospital admissions due to hypertension and congestive heart failure [2013] (Australia below OECD average, USA 32% above);
      – hospital admissions related to diabetes [2013] (Australia, below OECD average, USA 30% above;
      – health expenditure as a % of total government expenditure [2013] (Australia comparable to OECD average, USA 33% above);
      – health expenditure as a % of GDP [2013] (including all expenditure not just government) – (Aust comparable to OECD average, USA 89% above);
      – health expenditure per capita [2013] (Aust 12% above OECD average, USA over double OECD average);
      – expenditure on pharmaceuticals as % of GDP (all expenditure not just government [2013] (Australia – comparable to OECD average, but would probably be falling as a result of PBS reforms while USA 36% above OECD average)

      There are other components to the USA system that are relevant in terms of not having a comparable pharmaceutical benefits scheme to Australia and also non-restrictive advertising of prescription medicines direct to consumer that may drive demand and prescribing.

      There may be a false assumption amongst some that US system is producing greater cost efficiencies, lower consumer costs and tax payer value than the Australian system.

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

      • Willy the chemist

        Oh but Anthony, we are just lowly healthcare professionals. What do we all know?
        The economists and academias must be right. They have to be…they know everything.

  3. Slim Jim

    Quote: “I’m not a pharmacist, I am an industry strategist (among other things).
    However I’ve researched enough to know what is right and what needs fixing.”

    I kind of lost perspective, if there is any, of the whole “article” after this… statement of authority and relevance.
    I wonder if 30+ years in the “industry” would qualify any of us as all-knowing industry strategists?

    Note to self:
    Update Resume and send to Rhodes Management.

  4. William

    The responses are typical of a trade trying to protect itself and are losing the protectionism that they have managed to get via political means over the last 100 odd years.
    There is no rational reason why supermarkets could not provide quality services. They can as easily employ pharmacists in their stores the same way as they do with other trades like butchers.
    The “pharmacy” section would be a separate section with its own staff. One only has to look at how they operate in USA to see that it functions very well.

    • Willy the chemist

      If I may ask, William, which book are you reading from?
      “No rational reason why…” and ” One only has to look at how they operate in USA to see that it functions very well”
      Does heathcare cost of 17.9% of GDP, shorter life expectancy, and 25% of elderly Americans spend more than the total household assets on healthcare mean anything to you, William?

      PS: Oh, don’t tell me you are also an economics professor as well.

      • William

        Your argument has nothing to do with supermarkets being involved in distribution of medicines.

        Can you explain how it would? It would help to reduce distribution costs.
        Your attitude is in line with all rent seekers and protectionists.

        Face up to it, the days of protectionism are over. For younger pharmacist they should retrain in something else. The heady days of pharmacy are rapidly coming to an end and burying your head in the sand will not stop it from coming.

        An alternative could be centralised distribution centres where doctors electronically send the scripts which would be supplied by robotics. All run by software with one qualified person overseeing it. Something needs to be done to reduce the overall cost of health care.
        Which model would you prefer Willy?

        • Wilson Tan

          Willy prefers the current Australian pharmacy model over the US deregulated and fully privatised pharmacy model.

          We have less cost, better outcomes, better distribution of pharmacies esp. in regional and bush areas, and more equitable pharmaceutical system for all Australians.

          The distribution of pharmacy in the US is inferior esp. outside of the major city areas. Often one has to drive miles to get to a pharmacy.
          The distribution of medicines which involves large corporations and supermarket has not resulted in better prices for Rx and OTC. Rather the opposite. Sure you have some headline molecules that are discounted just like Coca Cola or some confectioneries but this is the same as what we are doing with the 4 cents petrol and milk prices.

          In saying that Australia has the 2nd highest medicine costs of OECD countries, this is wholly the effect of the negotiating position of the PBAC and drug companies. And largely the PBS reforms which is a mechanism for pushing medicine prices down is addressing this post haste. Ultimately this is government.
          However the PBS is NOT a market economy in that PBS prescription prices are NOT set by pharmacies.

          The days of protectionism may be over but the days of large corporate largesse, money politics, banking and finance corruptions are still happening.
          Privatisation and deregulation is the sing song of capitalism. The problem we are facing is that Capitalism is now dictating to government, determining policies and outcomes. Capitalism must never rise above the rights of the people, it must be subservient and not enslave the very people it is suppose to serve. Capitalism is an extremely useful tool, but it is only a tool.
          It takes an astute government to govern for all.

    • Russell Smith

      The “rational reason” is that whatever you may think to be the case, the commercial imperatives of a supermarket, managed by persons with neither qualification nor understanding of professional ethics and responsibilities will be found to be inimical to the practice of pharmacy. To the point that some supermarket manager, keen to meet budgets will try and influence a pharmacist to act unethically or unlawfully with the treat of termination for non compliance. Personal experience KMart 1974-76 is still fixed in my mind. You probably wouldn’t want to be a supermarket manager either.

    • John Smith

      Hi William,
      yes you are totally right, the same pharmacists whom the clients trust now will be employed by the any other chain and provide the same level of service.

  5. John Smith

    I kinda love all the comments I read and how both the owners and the pharmacy guild representatives have the same responses. Bottom line Australia (PBS) prices the medicines dearer than other countries, do you need a proof? Follow the price reductions over the past few years, which is an enough evidence that the government over priced the medicines and wasted billions of dollars. Second, as OECD report states all the good health outcomes, it didn’t mention what the contributing factors were, however, of course they were number of factors and not only the location/ownership rules. Nevertheless, the fact that no one denied the health outcomes were good, but we can achieve the same results with less cost. If the pharmacy owners are trying to reduce the expenses to make more profit, why don’t they let the government reduce its medicine expenses as well… Finally the consumers trust the pharmacist, not the model…

    • Jarrod McMaugh

      Ramez I do think think there is anyone against the idea of the government reducing their spend on medications (so long as it’s sustainable). I think the issue people have with this paper’s discussion of pricing is the flawed logic.

      This paper discusses the idea that lots of small businesses can’t negotiate for lower drug prices the way big corporations (IE supermarkets or other entities that own pharmacies overseas) could.

      The problem is that individual pharmacies don’t set the market price directly – the government does via the PBS. The federal government has a monopsony in our market and sets the price. Having corporations owning a majority of pharmacies in Australia wouldn’t impact on pricing since the current system already gives the grratest bargaining power in the market

      • John Smith

        That’s great point of view, however, letting the big corporations in the game is going to increase the number of pharmacies, which leads to increase of demand and hence increase of supply, which will give the PBAC more power to negotiate on prices compared to other markets. You as an owner know how much price reductions we’ve been through, and the companies are still making profits, which means that the prices before were highly over priced by the government…

        • Jarrod McMaugh

          I’m not convinced that supermarket ownership of pharmacies would lead to a net increase in pharmacies…. and I am also not convinced that an increase in demand generated by an increase in pharmacies would impact on the buying power of a monopsony….

          I would also point out that PBAC only advises on whether a medication should be listed based on it’s cost effectiveness, which is based on the submission from a medication’s sponsor. The nitty-gritty of price negotiation is done by the health department and to a lesser extent treasury.

          You are correct about price reductions over the last few years… although I’ve only been an owner for 12 months – the rest I witnessed as an employed manager, and still understood the impact on the bottom line of the business. I would yet again ask, how is this related to pharmacy ownership? The price of medications has always been negotiated by the government, and whether pharmacies were owned by 10000 individuals, 4 supermarket chains, or 1 government department, this would not have affected how the PBS negotiated with manufacturers.

        • Simon Sponza

          I agree with Jarrod. Supermarkets entering the game would significantly reduce the number of pharmacies open, and would lead to job losses.

        • Russell Smith

          Reckon on an INCREASE in the number of pharmacies? Just like there’s been an increase in butchers, bakers, green grocers, fishmongers, etc. – need I go on? NO there will not be such, the supermarkets WILL use price predation to take over if given the chance – AND whoever reckons they will be better employers just don’t get it. They will NOT be better employers – pharmacists will need to take orders from those who have merely clawed their ways to become “managers” of a department, a store, a region etc. without any qualification or understanding of ethics or legislation – let alone that which applies to pharmacy.

          • Andrew

            The grocer and butcher and fishmonger and all the other things did disappear but now they’re back stronger than ever. People found that although supermarkets do a lot of things they didn’t do these things very well and that drove the demand for them to come back.

            I think the phenomena of non-pharmacist “managers” is already an issue and getting worse despite the protections we apparently have against this sort of thing. Anecdote – I once had a regional manager phone me to ask why I had refused to dispense a methylphenidate repeat for a particular gent (he called H/O). The fact that I had never seen the bloke before, we didn’t hold this script as per regulations, and that the script was out of date didn’t seem to convince her. I got a written warning for that one.

          • Jarrod McMaugh

            Don’t you see the flaw in your logic?

            If the outcome is for all of the other “absorbed” professions to flourish again due to poor implementation by supermarkets…. Then why should pharmacy go through this? Why close hundreds of businesses and make unemployed hundreds of pharmacists to end up in the same position at the end of it all?

            With regards to your anecdote, why didn’t you take it further?

        • PharmOwner

          Actually John, a number of generic products (particularly antibiotics) have been discontinued because the manufacturer is not making a return on their investment. APO has pulled a number of products, Ialex capsules and suspensions have disappeared, and Cilamox suspension looks like the latest casualty. I believe manufacturers will increasingly look at the Australian market as a small, unprofitable segment and we will see further discontinuations from the Australian marketplace.

          • John Smith

            Some pharma companies can make more profit than others by following best practices or low cost supply chain or many other things. Some companies can keep low profit products just to keep customers happy in a way of showing that they are serving all market segments, but when the profit is too low, they just get rid of it. Why do you need many brands of the same thing anyway? The truth is Australian market is tiny compared to UK or USA (population) of course. However, Increasing the pharmacies numbers means expanding the market, more demand on medicines and hence more supply, more profits for companies, more transparency, more negotiations and better pricing. It is one thing leads to another

          • PharmOwner

            Hi John, clearly we don’t need twenty brands of essentially the same product, but it is beneficial to have more than 1 brand of a medication. It means more competition from manufacturers and lower drug costs. However, increasing pharmacy numbers does not expand the market. It simply means the market has more choice and fewer customers per pharmacy. Factors affecting market size and demand include population growth (from higher birth rates and migration), an ageing population (who will use more medications). The number of pharmacies has zero effect on medication market supply and demand.

          • Charlotte Hutchesson

            How can there be greater demand on medicines when this is limited by the prescriptions written by doctors? I don’t understand the assumptions you are making.

    • Simon Sponza

      John, if you look into what is happening in the UK and US drug prices there are rising very fast. Just google drug rises in US or UK and see the many many articles on how drug companies are hiking prices (US$600 epipens are a start). Price disclosure is actually a great policy for the government, and now with the handling fee, dispensing remuneration has a floor and apart from a small loss of generic discount (the big drops are largely behind us). Had price disclosure not occurred I would agree with your point about wasted billions. I don’t know any owner paying themselves $48 an hour plus super etc. It’s just not sustainable at current levels. Hopefully if the government puts funding into services (as they have indicated), then as demand for pharmacist would increase, and wages would follow. I definitely don’t think what some pharmacies are paying pharmacists at the moment is acceptable.

      • John Smith

        If you don’t agree that’s your opinion and if you don’t respect your colleagues that only didn’t make you the employer of choice. Here’s an idea, let the business be handled by corporates, and then you might get $50+ per hour like Canada. Have a good day guys

        • Simon Sponza

          Please read my final sentence. Also, I suspect “John” is a pseudonym. Put your real name down and people will take you more seriously. If we can get paid $50 an hour like Canada, I’m all for it.

          • John Smith

            Great to know that you are all for it 🙂 Hope you had a good day

    • David Lund

      Im not interested in working for someone who doesn’t care about patients and only cares about the dollars rolling in!

    • David

      What is our population compared to other countries Mr know it all?

  6. David Lund

    If it aint broke, don’t fix it! Pharmacy is in great hands where Pharmacists own Pharmacies. There is great competition. Access is fine in city areas and prices are cheap. I have no idea why a review is necessary??

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