Pharmacy location rules in question


The King Review discussion paper is scrutinising location and ownership rules, and supermarket restrictions

Currently there are 11 pharmacy location rules agreed to by the Department of Health and the Pharmacy Guild of Australia within the Sixth Community Pharmacy Agreement, which specify where pharmacies can be opened – with a focus on spacing them out across urban areas.

These regulations cover both the relocation of existing pharmacies and the establishment of new ones, and were introduced in 1991 after it was discovered most pharmacies in urban areas were clustered together while rural and remote areas had significantly poorer access.

While some have submitted to the recently released Pharmacy Remuneration and Regulation Review panel that the current location rules allow pharmacies to provide a range of high-quality services to the community, others have argued that they limit access to, and affordability of, prescription medicines.

Questioning the rules

Lead author Professor Stephen King along with former Victorian Pharmacy Guild President Bill Scott and Consumers Health Forum Deputy Chair, Jo Watson, ask questions of location regulations and ownership as part of their review, summarised as follows:

  1. How do location rules impact access to and affordability of pharmaceuticals for the public?
  2. Would the removal of location rules in urban areas discriminate against rural and regional consumers or benefit them?
  3. If any party could own a pharmacy, how should that affect pharmacy location rules?
  4. Is it a viable option to allow pharmacies to enter new locations subject to the payment of an appropriate approval fee to prevent excessive entry into the pharmacy market?
  5. Do the location rules limit competition for existing pharmacies, raising the profitability of some or all community pharmacies?
  6. Should a pharmacy operating exclusively in an area be required to provide a minimum level of services in addition to the dispensing of PBS medicines?
  7. Should pharmacists who own one pharmacy in a particular area continue to be allowed to open a second one in the same area?

Short distance relocation

Rule 124 (short distance relocation) is especially considered in the review. This rule requires a relocating pharmacy to be within one kilometre of its original location, provided that pharmacy has been at its original location for at least two years.

If relocating from within a shopping centre, the pharmacy is also not allowed to move within 500 metres of any existing pharmacy not located within that shopping centre.

“This [rule] aims to avoid clustering of pharmacies outside shopping centres, as had previously occurred,” they write.

However, the review asks the following questions:

  1. Is the short distance relocation rule appropriate?
  2. Does the short distance relocation rule lock pharmacies into specific shopping centres, “transferring effective ownership of the pharmacy approval number to the shopping centre”?
  3. Should the short distance relocation rule be modified?

Who do the current rules benefit?

In their review, King, Scott and Watson are questioning whether the current rules support consumers.

For example, they point out that the current location rules allowing pharmacists to open more than one pharmacy in the same area may “restrict local competition” and thereby remove choice and value for money for consumers.

Again looking from the consumer angle, the review panel asks whether the current pharmacy location rules “raise the profitability of some or all community pharmacies” by “limiting competition for existing pharmacies”.

A spokesperson from Professional Pharmacists Australia told AJP last year that the current location rules are exclusionary.

“I think the location rules act firstly, as a restriction on younger pharmacists’ ability to innovate in the space and compete against existing pharmacists,” says the spokesperson.

The review panel agrees that it could be an issue and is considering it in their discussion paper.

“It has been suggested to the review that the current location rules create an undesirable barrier to new pharmacies within the compete for business in particular locations. This could provide benefits to the business viability of existing pharmacies,” they write.

“Anyone with a basic grasp of economics can see the current location rules are grossly distorting the market,” says pharmacist John Cook.

“Unsustainable pharmacy values and crazy shopping centre rents are tying up productive capital. Simplest fix to improve the situation is to greatly relax location rules. Short term pain, long term gain,” he says.

Read the full discussion paper report here.

See the full list of pharmacy location rules here.

What do you think of the pharmacy location rules?

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3 Comments

  1. Michael Downing
    28/07/2016

    The current rules would appear to work well for most stakeholders. Indeed for rural areas it would be desirable to extend the concept to provider Numbers for GPs.

  2. Tony Lee
    28/07/2016

    Having retired from retail pharmacy, & owned pharmacies before and after 1991, I have always believed the profession should not be regulated by location. Young pharmacists should be able to freely compete anywhere if they believe they have the professional ability + the financial skills to succeed.. I am aware of the many arguments to retain location rules & the benefits, but overall believe them protectionist & undemocratic. . Competition stimulates new ideas & stops complacency.

  3. Harriet Wright
    29/07/2016

    Interesting Tony. Perhaps all these young pharmacists could be encouraged to look at some of the rural pharmacies who are struggling to get colleagues. I am lucky to have found a local colleague, but will be looking for partnership and eventual buy-out in the next 10 years or so. I must say I don’t see many keen young pharmacists out my way. When we originally advertised for the job as co-pharmacist, with a view to future partnership, I had 2 young pharmacists interested – one who wanted to know if he could commute from Newcastle (4 hours away – so not unless he was doing it by air), because he didn’t want to live in the country and the other who didn’t want to be left alone in the pharmacy because it made her nervous to be alone in a shop in such a small town. So I think that although you may see lots of keen young owners in the city, it is the needs of the rural population that are met by the location rules. We have seen this play out in the de-regulation of GP practice. Let’s not repeat the experiment in pharmacy, which works well as it stands.

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