Harmacy: The Political Economy of Community Pharmacy in Australia

David Gadiel
10 December 2008 | PM89
Harmacy: The Political Economy of Community Pharmacy in Australia

The regulatory environment that governs community pharmacy has created one of Australia’s most protected industries. It is a beneficiary of government largesse and central regulation and control in state, territory, and commonwealth jurisdictions. Entry barriers, ownership restrictions, exclusive rights to sell certain types of medicine scheduled as ‘poisons,’ and an exclusive agency relationship in distributing pharmaceuticals listed on the Pharmaceutical Benefits Scheme, have led to community pharmacy acquiring considerable market power.

During the term of the National Competition Plan (1995–2005), Australia’s pharmacy network attracted the scrutiny of three major reviews initiated by the Council of Australian Governments. These were the Wilkinson Review on ownership, location, and entry restrictions; the Galbally Report on poison scheduling; and a cost–benefit analysis, conducted by the Pharmacy Guild, on pharmacy’s control of non-prescription ‘poisons’ sold as ‘over-the-counter’ medicines.

With skilful networking and political lobbying, however, community pharmacy has proved resilient to change. The welfare loss from restrictions on where consumers may shop, the inflated prices they consequently pay, and the inefficient use of labour and capital associated with local or quasi-monopoly profits are likely to be a considerable economic burden. By contrast, pharmacy deregulation has delivered considerable benefits to consumers in the United Kingdom and uncompetitive pharmacy arrangements in continental Europe are being reviewed.

Whilst there may be benefits in regulating pharmacy quality standards, there can be none for restricting entry and ownership. The cost of reform, however, would weigh on what is a small but well-organised industry, and gains would be diffused. One option could be to facilitate adjustment with the aid of compensation arrangements. The commonwealth will have the opportunity of reassessing the value of privileges enjoyed by community pharmacy when, in 2009, it commences negotiations on a new Community Pharmacy Agreement with the Pharmacy Guild of Australia.

David Gadiel is an independent economist who has worked in many areas to do with the economics of health.

Latest Publications

The Kinship Conundrum: The Impact of Aboriginal Self-Determination on Indigenous Child Protection
Jeremy Sammut
08 December 2014 | PM144

This report argues that mainstreaming revolution in Indigenous policy should be extended to Indigenous child protection policy, and that Aboriginal exceptionalism—typified by the operation of Aboriginal Child Placement Principle (ACPP)—must cease. To help ‘Close the Gap’ in social outcomes between Indigenous and other Australians, Indigenous and non-Indigenous children should be treated the same, including by using adoption (or permanent guardianship)…

READ MORE
An Ounce of Prevention? A Toolkit for Evaluating Preventive Health Measures
Helen Andrews
26 November 2014 | PM143

Preventive health is a broad umbrella that includes such disparate services as vaccines for schoolchildren, blood pressure screenings, ad campaigns to discourage binge drinking, and special taxes on tobacco products. What all these programs have in common is an intention to spend money now in order to save money later—catching costly health problems before they arise or when they are…

READ MORE
Regulating for Quality in Childcare: The Evidence Base
Trisha Jha
05 November 2014 | PM142

The National Quality Agenda (NQA) endorsed by all states and territories in 2009 regulates childcare systems across Australia. It mandates increased minimum standards in various aspects provision of care and a ratings system with the goal of improving quality. The NQA mandates substantial and costly reforms to staff-to-child ratios and carer qualifications of care. This report details that the costs…

READ MORE
Complex Family Payments: What it Costs the Village to Raise a Child
Trisha Jha
06 August 2014 | PM141

In 2013–14, $32 billion was spent on family payments, amounting to 7.7% of total federal expenditure in that year, and 22% of total federal spending on social security and welfare. Family Tax Benefits (FTB) and child care fee assistance are the two areas in which spending is the most significant and, in the case of child care assistance, the most…

READ MORE
Lessons from Singapore: Opt-Out Health Savings Accounts for Australia
David Gadiel, Jeremy Sammut
28 July 2014 | PM140

Singapore’s distinctive health funding and service provision arrangements have delivered comparable First World standards of care and health outcomes at much lower cost. A new vision for funding health in Australia based on the Singapore model could be achieved by applying the principle of choice for those who wish for an alternative to Australia’s taxpayer-funded, universal health care system. This…

READ MORE