Supermarket giants could find a new ally for their push to break open the lucrative pharmacy industry in private hospital operator Ramsay Health Care, which wants rules that limit ownership of retail chemists scrapped.
The $12 billion private hospital operator has set itself on a collision course with the powerful pharmacists’ lobby by welcoming draft recommendations made in September by the competition policy review. The review, which is being led by Professor Ian Harper, recommended removing long-standing ownership and location rules.
“Utilising our global experience in acquiring and integrating hospitals, we will continue to canvas opportunities in new and existing markets,’ says Ramsay Health Care chief executive Chris Rex. Photo: Bloomberg
Ramsay has backed the recommendations to open up the sector to greater competition and called for a fresh review of the pharmacy sector by “a respected, neutral umpire like the Productivity Commission”. “Our ability to operate retail pharmacies in our hospitals has been held back by Commonwealth, state and territory legislation,” Ramsay said in its submission.
One rule covering the industry, which Ramsay points out has been in place for 80 years, is that only a registered pharmacist can own a retail pharmacy. This locks out large companies like the Wesfarmers-owned Coles and Woolworths from selling prescription medicines under the $9 billion Pharmaceutical Benefits Scheme.
The review, led by Professor Ian Harper, recommended removing long-standing ownership and location rules. Photo: Andrew Meares
Pharmacists are also protected from each other, under rules that prohibit new pharmacies from being established closer than 1.5 kilometres from an existing outlet.
The chemists’ lobby, The Pharmacy Guild of Australia, as well as large corporations such as wholesaler Sigma Pharmaceuticals, have pushed back against the Harper review draft recommendations, saying the arrangement serves the community.
The Guild said the panel presented no evidence that the restrictions limited consumer choice and were costly for taxpayers.
Ramsay operates in-hospital pharmacy services in 39 of its 69 Australian hospitals, but is keen to run retail pharmacies in its facilities to service patients and visitors.
Underlining the financial incentive, Ramsay said, “some of the most successful pharmacy sites in Australia are in profitable private hospital co-locations”.
It said non-pharmacists should be able to own pharmacies in the same way that non-doctors could own medical centres or pathology operators.
“To give pharmacists monopoly control of pharmacy businesses is counter-intuitive, discriminatory and blatantly unfair,” the company said.
The review panel is expected to deliver its final report in March.
As for the location-based restrictions that it also opposes, Ramsay highlighted the potential for any changes to rules governing pharmacists to become a political hot potato.
Pharmacists and the Guild have not been afraid to campaign heavily against policies they do not like in the past.
“So entrenched are [location rules] that it will take a supreme act of political courage to abolish them – but that is no reason not to do it,” Ramsay said.
The threat of reforms that would open up pharmacists to greater competition comes at a delicate time for the sector.
The Guild will this year negotiate the terms of the sixth Community Pharmacy Agreement with new Health Minister Sussan Ley. The agreements, which last for five years at a time, set out how much money pharmacists get paid from taxpayers for selling drugs listed on the $9 billion pharmaceutical benefits scheme.
The sector is faced with declining revenue as big selling brand-name drugs come to the end of their patent life and are replaced with cheaper generic versions.
The Guild will emphasise this in their negotiations with the minister to push for more funding or enhanced roles in the provision of healthcare.