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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