Success of discounters ‘inevitable’ says former ACCC boss


A former ACCC head has called on Australians to contact pollies about relaxing location rules in the name of lower prices – a suggestion welcomed by Chemist Warehouse

But the Pharmacy Guild’s Anthony Tassone told the AJP that before the location rules were introduced, the sector experienced “market failure”.

The comments followed a report in News Limited media earlier this week by Sue Dunlevy, which included Chemist Warehouse survey data of 325 people which found that two-thirds of respondents had driven to another town to save money when filling scripts.

Ms Dunlevy’s article referred to the Guild as “the chemist monopoly that means you pay more for medicines” and quoted former ACCC head Graeme Samuel.

The Guild called the article a “misleading shameless beat-up” while Mario Tascone, chief operating officer of the My Chemist Group (which includes Chemist Warehouse) compared the location rules to constraints on business in Soviet Russia and criticised the Guild’s comments about cheaper medicines.

Graeme Samuel spoke to Julie Reynolds on ABC Radio Mildura-Swan Hill on Thursday and called for the “silly” location rules to be abolished.

“Back in 1994… every Australian government entered into a formal agreement. And the formal agreement said this: ‘We will now place the public interest ahead of that of private vested interests’,” he said.

He said this favours competition, which is “really good,” as well as the consumer in terms of more choice and lower prices.

He said that in most cases, changes were made despite the interests of private interests, such as taxis and newsagents, because consumers said “We want choice. We want lower prices, we want a better deal”.

“The taxi industry had to face up to that competition. Pharmacy’s been another one where the Pharmacy Guild has been an extraordinarily powerful union that has prevented these reforms taking place in relation to the pharmacy industry.”

He said that in the past, he had seen letters to Governments from the Pharmacy Guild over the years claiming it had a multi-million dollar fighting fund which it would use to campaign against incumbent Governments in elections if they “dared” to attempt to deregulate pharmacy.

“What we’re seeing at the moment is the inevitable. What’s going to happen. Which is that groups setting themselves up as discount pharmacists… have established themselves throughout Australia.

“They provide enormous choice in the products that they sell, they provide significant discounts.

“There’s a queue at the dispensing counter because people want to get a discount on their pharmaceuticals and so they should, they’re entitled to.”

The location rules should be removed, he said.

Mr Samuels agreed with Ms Reynolds that patients should contact their local Member of Parliament to tell them they want the issue addressed.

“I think it’s the only course of action that’s available,” he said, saying it was not in the ACCC’s remit to “get rid of the silly rules that say you can’t have a pharmacy within one and a half kilometres of another”.

Chemist Warehouse’s Mr Tascone told the AJP that he supported Mr Samuel’s call to the public to contact politicians about script prices and the location rules.

Mr Samuels also spoke to 3AW’s Tom Elliott and said that customers were voting with their feet and saying they did not want to pay “high prices” that apply in non-discounters.

He referred to the Community Pharmacy Agreements as containing rules which restricted competition amongst pharmacies.

Discount pharmacies “ought to be popping up in regional areas but of course they’re not allowed,” Mr Samuels said.

Meanwhile, a piece by the ABC’s Monique Ross for Who Runs This Place? discussed the Guild as “the most powerful lobby group you’ve never heard of”.

“It’s been called the most influential lobby group in Australia, and some believe it has the power to bring down a government if it really flexed its muscle,” she wrote.

She interviewed Jennifer Doggett, chair of the Australian Health Care Reform Alliance, who said that the Guild had been able “to maintain a funding and regulatory regime which privileges and protects them from competition in a way no other sector has been able to achieve”.

She said there was evidence to show that the location rules meant consumers paid more for medicines than they should, citing Grattan Institute data from 2017 which stated that “Australians on average pay five times the best international price for a group of seven commonly prescribed drugs”.

She also said that there was evidence supporting benefits to consumers from supermarket pharmacies.

 

Why pharmacies are not like taxis

Anthony Tassone, president of the Pharmacy Guild’s Victorian branch, told the AJP that the location rules had been of significant benefit to Australians.

“Prior to the introduction of pharmacy location rules in 1990 there was market failure in that there were more pharmacies than what we have today, for a smaller population in areas that the community did not need them most,” he said.

“An unregulated market and the removal of location rules would lead to a clustering of pharmacies in affluent areas, while areas of genuine demand and need would be under-serviced.

“It would also make the distribution of medicines under the PBS inefficient as the pharmacy network would be disrupted and uneven and compromise equity of access.”

Mr Tassone said that the purpose of the rules was to see a viable network maintained, so that people in need can get access to a pharmacy near where they live.

“My understanding is that there are around 400 Chemist Warehouse pharmacies across Australia, and growing—so they have not been without the same opportunities as others,” he said.

Mr Samuel’s comparison of pharmacy to the taxi industry, and its disruption via ride-sharing apps such as Uber, was not a good fit.

“The difference between pharmacies and taxis is very simple. Some consumers may have felt that they had issues with taxis in terms of accessibility, cleanliness of the vehicle, knowledge of the driver and the overall experience. 

“Disruptors such as Uber tried to solve what they felt was a problem in the market. On the other hand with pharmacy, the community are satisfied with the experience they have with pharmacies, have a high level of trust with pharmacists and are open for pharmacies and pharmacists to play a greater role in healthcare.

“It’s a lazy comparison from someone who doesn’t understand the value and difference our profession makes in the healthcare system.”

Mr Tassone also queried the Grattan Institute data cited by the ABC, comparing Australia’s medicines system with other countries, saying it should be treated with considerable caution.

There are other ways to address script costs than removing the location rules, he said.

“We want Australians to get the best possible value when the obtain medicines, and the current system delivers very well for consumers. 

“We have proposed a $1 reduction in the PBS patient co-payments for all subsidised prescriptions, replacing the flawed optional $1 discount that is applied to only 28% of scripts. We think the universality of the PBS should be restored.

“Australia has a very good subsidised medicine system in the Pharmaceutical Benefits Scheme, meaning that most life-saving medicines cost the same or close to the same price wherever patients obtain them from a local pharmacy.

“The prices of non-subsidised medicines may vary across regions depending on a range of factors including market forces and other cost factors.

“Most prescriptions dispensed in Australia attract a PBS subsidy, therefore the price to the patient is largely the same. This is a fundamental pillar of our national medicines policy, and equity of access for all Australians.

“If patients are concerned about the cost of medicines they should talk to their pharmacist, including about the availability of less expensive generic alternatives.”

He also noted that if script prices are reduced through making a script private, patients should be made aware that these scripts do not add to their PBS Safety Net tally and may delay their access to the Safety Net.

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11 Comments

  1. Paul Sapardanis
    20/06/2019

    Remove retail from the discounters offer and see if lower prescription prices remain. If pharmacies are so expensive then why are pharmacists so poorly paid? Further to these points it is obvious that the main discounter is using prescription pricing to disrupt the industry. Further is price everything?

    • Michael Khoo
      21/06/2019

      I would like to see “scheduled drug only” pharmacies. They would be awesome, and I wouldn’t have to keep dispelling bull$hit alternative health myths, perpetuated for massive profit by the same clowns who claim we pay too much for the medicines that actually work!

  2. Michael Khoo
    21/06/2019

    Yes Mr Samuels, Come and visit my Pharmacy, spend a while, and see the level of care and attention we provide to our local community.

    I would Love to be able to move my business to a much busier location by the way, more profit for me!

    But…. I would miss MY community, the people I have spent a generation helping. Then we can both go and spend some time at the local Discount chain store. I will prove to you that we are comparing two very different service models. And my community know this, and support me and for that loyalty I will always do my best for them in return. I am proud to be a community pharmacist.

  3. Ai Nguyen
    21/06/2019

    Thanks to CWH, patients look at pharmacists with no respect. Pharmacy is like retail in their eyes. CWH do not counsel patients in my limited experience. I went there to buy a few box of antihistamine to test whether anyone asked me something related to my medical history or similar and nobody asked. Also, CWH pay their employees the least wages they can. CWH is all about money and they don’t care about the profession. Very sad.

  4. pagophilus
    21/06/2019

    Remove location rules, yes, but strictly enforce ownership restrictions. No grandfather clauses, no loopholes, no taking advantage of friendly societies provisions (c’mon, what is a friendly society these days?) Update the law to match the 21st century reality.

    • Michael Khoo
      21/06/2019

      The ownership restrictions were intended to prevent the emergence of large corporate entities that seek profit above all else. That battle has clearly been lost, and that in itself is a powerful argument in favour of retaining location rules.

      • pagophilus
        21/06/2019

        But I think ownership rules are being worked around and nobody wants to deal with the elephant in the room.

  5. Bob
    21/06/2019

    https://grattan.edu.au/report/cutting-a-better-drug-deal/

    https://grattan.edu.au/wp-content/uploads/2017/03/886-Cutting-a-better-drug-deal.pdf

    This is the article the Grattan institute refers to wholesale prices for pharmaceuticals, which is negotiated between the government and the drug company itself. Community pharmacy is not involved in this process.

    The way the Grattan institute proposes the savings are as follows:

    Benchmarking: When a drug goes off patent the price the government pays immediately goes to an internationally competitive price determined by an independent body. This has been proposed by Grattan to save 1.2 billion over 3 years(400 million per year). A problem with benchmarking is that Australia is not the same as the UK, a less commonly used drug will be multiples more expensive due to increased wastage and higher cost of transportation and shortage

    It should also be noted that the returns on benchmarking are going to be much less in the future as all the high volume drugs will be off patent. The next set of cost reductions will come from biosimilars

    https://www.nps.org.au/australian-prescriber/articles/top-10-drugs-2017-18

    The Grattan institute also admits that ‘ Australian pharmacist mark-ups are internationally competitive ‘ (pg7). The final price that patients pay for their drugs is determined after pharmacist fees and mark-ups are added to the wholesale price (pg7).

    When comparing Australian drug prices to Canada, who has a similar population density and wealth to Australia, Australians receive their medications cheaper than Canadians according to the grattan institute.

    My personal belief is that location rules will not be changed very much in the medium term. Shopping centres groups and the Guild will lobby hard to keep location rules as it exists today. CWH wants location rules to be removed but pharmacist ownership to remain and ColesWorth would want both ownership and location rules to be removed.

  6. Tim Hewitt
    21/06/2019

    There is NOTHING stopping Mr Tascone expanding his empire into ANY town in Australia that he wants.
    1. BUY any existing pharmacy in any town.
    2. SET UP shop in any town that does not have a pharmacy (fat chance..)

  7. Mick Rhodes
    21/06/2019

    The Pharmacy Industry today is what the Taxi Industry was like 6 years ago. Figuratively speaking it will eventually be “Ubered”. Location rules for those economically literate amongst us is bad for the industry and bad for patients and our extensive research proves it.

    • Anthony Tassone
      24/06/2019

      Mick

      It’s been a while since we’ve heard from you.

      If your ‘extensive research’ is the same as it was a couple of years ago – then it would be the same non-compelling case trying to undermine the success of pharmacy location rules in promoting equity of access for the Australian public to PBS medicines.

      Below is a link to the Pharmacy Guild’s submission to the interim report of the Harper Competition Policy review which included a geo-spatial analysis of the comparative accessibility of community pharmacies to that of other major services including; supermarkets, banks and medical centres. There was also a cost benefit analysis comparing scenarios of removing or retaining pharmacy location rules.

      https://www.guild.org.au/__data/assets/pdf_file/0017/6173/summary-of-submission-re-competition-policy-review-draft-report.pdf

      Below is a link to the post implementation report (PIR) conducted by the Department of Health in 2014 when pharmacy location rules were extended at the end of the 5th Community pharmacy agreement.

      https://ris.pmc.gov.au/sites/default/files/posts/2014/11/02_accessible-final_20141128.pdf

      The below is an excerpt from the Executive summary of the Department’s post implementation report:

      “The PIR concludes that the policy objectives of the Rules are consistent with the broad objectives of national health policy, in particular, the National Medicines Policy which has timely access to medicines as one of its four key pillars. In addition, there is a net benefit to the retention of the Rules, particularly for consumers in rural and remote areas, although it is acknowledged that further easing of the Rules may have additional benefits.”

      There have been ongoing review and reforms to the location rules to aim to address unintended consequences of them in joint agreement by the Department of Health and the Pharmacy Guild to help promote equity of access to PBS medicine benefits – a key pillar of national medicines policy.

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

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