Lobby Land: the Pharmacy Guild’s powerful influence over health policy

Oct 9, 2020

The Pharmacy Guild has been called the ‘most powerful lobby group you’ve never heard of’ and for three decades has had a stranglehold on funding for community pharmacy in Australia.

The Guild has a low public profile but is one of the most powerful and successful lobby groups in Canberra, wielding its power via a rolling series of five year Community Pharmacy Agreements (CPAs) with the federal government. The current agreement, the seventh since 1990, was signed by Minister for Health Greg Hunt in June this year and is worth around $25 billion (over five years).

These agreements effectively guarantee pharmacy owners a monopoly over the dispensing of PBS medicines and also provide them with generous protections from competition.

Anticompetitive practices

One of these protections is to restrict ownership of pharmacies to registered pharmacists, shutting out other players, such supermarket chains, from the pharmacy market.

This is a protection from competition not provided to any other health provider, creating the anomalous situation where a pharmacist can own a medical practice but a doctor is barred from owning a pharmacy.

Other anti-competitive measures outlined in the CPAs include location restrictions which prevent new pharmacies from opening within a certain distance of an existing pharmacy (usually 1.5 kilometres in cities and 10 kilometres in regional areas).

Expert views

The political influence of the Guild is well known across the political spectrum.

Former Labor adviser, Dr Lesley Russell has raised concerns about the influence of the Guild on the development of health policies.

Former Liberal adviser Terry Barnes has commented on the Guild’s “fearsome reputation for mobilising voters” and said that it wields “disproportionate market power and political influence.”

Former ACCC Chair, Professor Graeme Samuel has described the Guild’s lobbying tactics as “political blackmail” and argued that “Pharmacists have been protected for so long, they’re the most powerful union in Australia.”

Calls for reform

Evidence for the Guild’s influence in Canberra is its ability to convince successive governments to ignore calls for reform of pharmacy funding and regulation from a steady stream of inquiries and reviews.

These include:

  • the 2000 the National Competition Policy Review of Pharmacy (the ‘Wilkinson Review’) which stated that “location controls are an anti-competitive layer of regulation….which…insulate pharmacies from new competitors in their catchment areas, ….restrict free and effective competition in the community pharmacy industry;
  • the 2005 Productivity Commission Review of National Competition Policy Reforms which reported that “in the area of pharmacy regulation, restrictions potentially impose increased costs on consumers, taxpayers and the wider community”;
  • the2014 Report of the National Commission of Audit which supported “…opening up the pharmacy sector to competition, including through the deregulation of ownership and location rules”;
  • the 2015 Competition Policy Review (the ‘Harper Review’) which stated that community pharmacy was one of the priority “areas for immediate reform action” and that “Governments do not need anti-competitive regulation to ensure pharmacies meet community expectations of safety, access and standard of care”; and
  • the 2018 Senate Select Committee Inquiry into the effect of red tape on pharmacy rules, which recommended “….that the Australian Government reconsider its commitment to the Pharmacy Rules and investigate options to enhance competition in the delivery of pharmaceuticals listed on the Pharmaceutical Benefits Scheme, with priority given to consumers rather than pharmacy owners.”

Consumer groups and other health organisations have also been calling for reform, including the Consumers Health Forum of Australia which has argued “….there is a serious case…….for the location rules to be removed to allow for competition, innovation and new pharmacies. The requirement for a pharmacy to be owned by a pharmacist is an anachronism.”

The Grattan Institute has also supported regulatory reform recommending the ‘cautious’ removal of the ownership rules which it argued “appear much more effective in protecting the commercial interests of pharmacy owners than in serving the public interest.”

These calls have been supported by other medical and health bodies, including the Royal Australian College of General Practitioners, the Australian Medical Association and the Australian Healthcare and Hospital Association, which stated that “Anti-competitive restrictions associated with the provision of services funded under Agreements should be subject to an independent, rigorous and transparent public interest test.”

Governance issues

A further indication of the lobbying power of the Guild is that the CPAs have been allowed to sidestep the accepted standards required for other government programs.

The Evaluation Report of the fifth CPA found that almost all stakeholders apart from the Guild had significant concerns about its governance and administrative processes.

These concerns were echoed bythe Australian National Audit Office (ANAO) Report on the Administration of the Fifth Community Pharmacy Agreement (5CPA) which found that the evaluation framework for the agreement did not allow the Department of Health to determine whether the agreement had delivered against its objectives.

The Review of Pharmacy Remuneration and Regulation

In 2017 current Minister for Health, Greg Hunt, was handeda blueprint for reform of the community pharmacy sector by the independent Review of Pharmacy Remuneration and Regulation (the ‘King’ Review).

This review was the most comprehensive inquiry ever conducted into the pharmacy sector in Australia. Its final report outlined a broad and future-focussed vision of community pharmacy sector and included 44 recommendations addressing pharmacy funding, regulation and service delivery.

These recommendations included removing the restrictions on pharmacy ownership and location which, like other previous inquiries, it found were anti-competitive and had no demonstrable consumer benefit.

However, after strong lobbying from the Guild, the government accepted only four of 44 recommendations in its Response to the Final Report, none of which constituted major reforms.

In May this year Minister Hunt signed another five year agreement with the Guild which committed another $25 billion in public funding, including a 13% increase in out-of-pocket medicine costs, and locked in the anti-competitive location and ownership restrictions until 2025.

Limits to power

While the Guild’s influence is significant it is not absolute, in particular in areas where the interests of pharmacy owners conflict with those of doctors. In 2018 they lost a two year battle with medical peak bodies over the rescheduling of codeine‐containing products in order to reduce misuse and dependence problems. The government’s decision to resist pressure from the Guild on this issue has proved correct with recent research showing that it has resulted in around a 50% reduction in codeine poisonings.

The Guild has also met resistance from the medical profession in its bid to expand pharmacists’ role beyond the dispensing of medicines into the provision of services that have traditionally been the domain of GPs, such as vaccinations, screenings, and wound care. So far the government has supported a limited expansion of pharmacists’ roles but has been cautious about moving too far in this direction.

However, recently the tables were turned when the Guild managed to derail a proposal to allow doctors to provide consumers with two month prescriptions, based on evidence that this would improve health outcomes and save both time and money.

Although this proposal came from the government’s own Pharmaceutical Benefits Advisory Committee and was supported by both doctor and consumer groups, the Minister backed down from initial support for the move after lobbying from the Guild.

This may be the latest example of the Guild’s ability to affect government decision making but it won’t be the last.

Now it has secured another five years of CPA funding, this powerful vested interest group can focus its considerable resources on consolidating its hold over pharmacy funding and continuing to influence the future direction of health policy.

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