Opinion & Commentary

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Prescription item No 1: dispensing with the closed shop

David Gadiel | The Canberra Times | 15 December 2008

Consumers are paying millions of dollars more each year for non-prescription medicines than if the federal government abolished anti-competitive rules that can masquerade as a safety issue.

The Pharmacy Guild of Australia has a track record of pulling the wool over the eyes of governments. The quality of its high level political lobbying and professional advocacy must rank as the gold standard for similar groups nationwide. Pharmacies, for example, charge higher prices for many goods that could be safely sold by supermarkets because regulations prevent competition from other retailers.

Penetrating the intricacies of pharmacy protection is like peeling an onion. Remove a layer of monopoly and privilege, and there is another. Each is prima facie evidence that Australians may pay more for many prescription and non-prescription medicines than if pharmacies were obliged to compete more effectively with each other and with pharmacy services from possible alternative points of sale—like supermarkets.

Pharmacies benefit from protection in both state and commonwealth jurisdictions. The commonwealth’s Pharmacy Restructuring Program inhibits new pharmacies from gaining approval to dispense drugs under the commonwealth-funded Pharmaceutical Benefits Scheme. Rigid commonwealth location restrictions create local monopolies and there is an explicit ban on pharmacies locating in supermarkets. State-legislated ownership criteria limit pharmacy proprietorship to pharmacists.

Under poison scheduling regulations, jointly administered by the commonwealth and states in the interests of public safety, pharmacies have a monopoly over the sale of prescription and many ‘over-the-counter’ (OTC), non-prescription medicines that are classified as ‘poisons’. Pharmacies also benefit from generous public funding that supports their accreditation, quality of care initiatives, staff training, IT systems and so on.

In 2001, the National Competition Commission argued that “competition restrictions (in pharmacy) had no parallel in other professions and for which no public interest justification could be established”.

The Pharmacy Guild claims the Australian system yields public health benefits deriving from high standards of professionalism untainted by external commercial interest, as well as protection against misadventure through appropriate selection of medicines and effective advice on their use.

Under Australia’s complex and restrictive poison scheduling arrangements, Schedule 2 ‘pharmacy only’ medicines must be purchased from a pharmacy. In the case of Schedule 3 medicines, consumers must also receive advice from a pharmacist. Other unclassified OTC medicines are in an ‘open seller’ category—sold by pharmacies and by non-pharmacy retail outlets. In 2005-06 expenditure on ‘open sellers’ was $1.4 billion, of which 79% were sold in supermarkets at prices much lower than in pharmacies.

There are inconsistencies in Australia’s scheduling arrangements. The distinction between S2 and ‘open seller’ often depends on pack size rather than chemical entity. For example, analgesics are the medicines most commonly purchased in supermarkets, but larger packs classified as S2 can be bought only in pharmacies. Yet consumers can purchase unlimited quantities of smaller packs where they want.

An economic evaluation by the Guild in 2005 claimed that the professional advice associated with purchases of S2 and S3 medicines delivered net economic benefits of $2.7 billion in 2000-01. Entirely ignored was the excess consumer cost of shopping for medicines in pharmacies. If consumers were free to choose where they bought the $1.5 billion non-prescription medicines now pharmacy-controlled, it’s likely most would replicate their ‘open seller’ buying patterns and switch to supermarkets.

The United Kingdom and France simply use a pharmacy medicine classification for non-prescription pharmaceuticals. The Netherlands and the United States restrict  only the sale of prescription medicines (for safety or therapeutic reasons). Many drugs that Australia classifies as S2 are available in US supermarkets.

Australia should follow suit and reassess pharmaceuticals classified as S2 ‘pharmacy only’. In 2003, small packs of the analgesic, ibuprofen, were relegated to ‘open seller’. In 2004, the same occurred for some nicotine replacement therapies. These items are now widely available (in a variety of recognisable brands) at considerable savings from supermarkets. As per usual, the Guild warned of grave threats to consumer safety. The real threat that deregulation of poison scheduling poses is to the restrictive and anti-competitive arrangements that burden consumers.

There are no high quality studies showing that morbidity and mortality attributable to analgesics and the like are significantly different between Australia and countries that use less restrictive non-prescription scheduling. Furthermore, there is doubt whether advice from pharmacy staff is always needed. Even if justified, its availability and quality has been called into question.

Following the Guild’s 2005 evaluation (that relied upon the uneven accessibility of pharmacy advice) and without evidence of a properly measurable economic benefit, the commonwealth decided to retain arrangements for S2 and S3 medicines but to review them again in 2009. It’s time the self-serving pharmacy club was disbanded.

David Gadiel is the author of Harmacy: The Political Economy of Community Pharmacy in Australia, released by The Centre for Independent Studies.