Who’s in charge?

The evidence doesn’t support media claims that certain entities own hundreds of pharmacies, the VPA has warned

In its latest circular, the Victorian Pharmacy Authority has a special focus on pharmacy ownership – and the perceptions about it.

“Disappointingly, there have been recent media reports or statements claiming that certain entities own hundreds of pharmacies without evidence to support the claims,” said VPA chair David McConville in his message to readers.

“The Authority reminds stakeholders that only registered pharmacists, companies of pharmacists and eligible friendly societies may own pharmacies in Victoria.

“The Authority will continue to ensure that legislated ownership provisions are upheld. This is supported by comprehensive licence application assessment processes, pharmacy ownership audits and franchise reviews.”

In its special focus article, the VPA points out that “media, consumers and even some pharmacists will see a prominent brand and assume that the franchisor or ‘head office’ has ownership over the individual pharmacies or franchises”.

It says that it is aware of media reports and statements claiming certain entities own hundreds of pharmacies.

“However, these claims are not supported by evidence.”

It noted that Section 5(1) of the Pharmacy Regulation Act 2010 (Act) limits who may own or have a proprietary interest in a pharmacy business to registered pharmacists, pharmacist companies or eligible friendly societies.

“Further, section 5(2) of the Act states that a registered pharmacist or pharmacist company must not own or have a proprietary interest in more than 5 separate pharmacy businesses in Victoria.”

A breach of Section 5(1) carries a penalty of up to 240 units (about $40,000) in the case of a natural person, or 1200 penalty units (about $200,000) in the case of a company.

Franchise agreements also came under scrutiny.

The VPA warned that it carries out comprehensive reviews of pharmacy franchise agreements and other complex commercial arrangements to ensure these are compliant.

“This process has identified several cases where franchise agreements gave a third party the right to control aspects of the operation of the pharmacy business,” it said.

“Section 11 of the Act (Undue influence) makes void any provision of a commercial arrangement concerning a pharmacy that gives any person other than the person licenced to carry on the pharmacy business: a) the right to control the manner in which the pharmacy business is carried on; or b) the right to access books of accounts or records kept in respect of that business, otherwise than for the purpose of determining whether or not the conditions of the relevant document are being complied with; or c) the right to receive any consideration that varies according to the profits or takings of the business.

“This section prevents the use of commercial arrangements to remove control of a pharmacy business from the licensee.

“The process involves conducting detailed reviews of the arrangements and inviting the franchisor/third party providers to a meeting to discuss the areas of non-compliance.

“In all cases, such arrangements have been brought into compliance with the ownership and undue influence provisions of the Act.

“Established commercial arrangements continue to be reviewed for compliance with the Act on a risk basis.

“Any new commercial arrangements must be compliant with the Act before the Authority will issue a licence to a person to carry on a pharmacy business pursuant to the arrangements.”

The VPA also notes its recent reminder to licensees regarding the outcomes of several pharmacy business ownership audits.

“In cases where the pharmacy was operating under a commercial arrangement for which the Authority had not yet completed a detailed assessment, licensees were advised that a condition will be imposed on the licence,” it warned.

“This ‘commercial arrangement’ condition details the action the Authority may take if, after further investigation, the commercial arrangements are found to contravene the Act.

“The ‘commercial arrangement’ condition is a standard licence condition which has been imposed since 2017 on new licences when an applicant wishes to operate a pharmacy business under arrangements which have not yet undergone a detailed assessment for compliance with the Act.

“It is removed from a licence when the Authority is satisfied that the pharmacy business commercial arrangements comply with the Act.

“The Authority is currently consulting with stakeholders to identify further improvements to the pharmacy ownership audit program.”


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1 Comment

  1. Paul Sapardanis

    The question needs to be asked if ALL franchises are in breach of the ownership regulations. Where a franchisor profits from compulsory ranging by the franchisee then is this not a breach?

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