Chemists Must Take Reform Medicine

by Steve Lewis - The Australian

Pharmacy Guild House is located right in the middle of Canberra's lobbying district, nestled conveniently between the head offices of the Liberal and Labor parties and just minutes from Parliament House. It's an imposing edifice from the outside, but it's what happens within its gilt-edged interior that should worry every taxpayer.

The Pharmacy Guild is the representative lobby for most of the country's 5000-plus retail chemists. For years it has used its political influence to extract extraordinary concessions from both sides of politics, hiring lobbyists such as former Liberal director Lynton Crosby to ensure its arguments are well-received on Capital Hill. John Howard, in particular, has been a tireless advocate of community pharmacy in cabinet meetings. But it appears the PM's love affair with community pharmacy is on the wane.

For several months the guild and its media-savvy national president John Bronger have been in overdrive, trying to stitch up another cosy five-year deal with the federal Government, protecting the guild's quasi monopoly against "rapacious" mega retailers such as Woolworths, who've been trying to convince Canberra to relax strict location rules.

Along with newsagents, retail pharmacy remains the biggest closed shop still operating in Australia. Present rules prevent Woolworths and other would-be retailers from offering pharmacy services, despite the obvious convenience that would flow to consumers.

This is not about to change in the short term. But the Government is about to extract some savings as part of a new five-year community pharmacy agreement, due to come into effect on July 1. You can hear Bronger and his pharmacy mates squealing already.

Last month, cabinet debated plans to extract sizeable savings out of pharmacy by cutting back a range of margins and fees that drug wholesalers and chemists apply all the way along the supply chain. Meanwhile, the Government is working out ways to rein in the extraordinary growth of the Pharmaceutical Benefits Scheme, which costs taxpayers $6.2 billion a year and has been following a growth trajectory of 10 per cent-plus annually.

Under the PBS, a multitude of medicines covering all sorts of ailments are heavily subsidised. So instead of paying hundreds or even thousands of dollars for wonder medicines to control arthritis or diabetes or heart disease, the punter pays less than $30 a script. And just $4.60 if they hold a Health Care Card. That, of course, masks the price the Government pays to the pharmacist to dispense the drug every time a customer walks through the door.

At last, it appears the Government is fed up with a raft of below-the-counter deals and backhanders to drug wholesalers that have enabled many chemists to enjoy lucrative discounting practices. (Cabinet ministers have laid their hands on some interesting documents that reportedly expose these dubious arrangements.)

Health Minister Tony Abbott has been told by ministerial colleagues to negotiate the fine detail of this agreement. The talks won't be for the faint-hearted.

Essentially, the Government will argue that, while it has protected community pharmacists from Woolworths and Coles Myer, it is determined to extract savings from the billions of dollars in annual turnover – an extension of the mutual obligation argument, if you like. The Government argues that it wants to achieve significant savings but of the kind that don't overwhelm the majority of chemists. It is also determined to achieve structural reforms to ensure the sustainability of the PBS.

It will be a ding-dong tussle with one of the most aggressive lobbying outfits around, one that can use its vast retail network to run the mother of all scare campaigns against those bastards in Canberra. A leaked copy of some guild lobbying notes highlights its determination to avoid any real reform of the sector.

For instance, it argues that proposed changes to the way medicines are priced and sold through the PBS "would cost pharmacy a minimum of $27,000 per annum . . . and undermine the viability of between 10 and 15 per cent of community pharmacies throughout Australia".

"Moreover, the guild considers any further savings that might be under consideration by Government at pharmacy's expense [during the fourth agreement] to be unnecessary and entirely inappropriate given the significant savings already achieved," the guild document says. There is barely a mention of structural reform or taxpayer efficiency. Instead, it reads like the rallying cry from one of the last bastions of closed-shop protectionism left in the economy.

Abbott and his colleagues should ignore it and get stuck in to make the sector more transparent and accountable for the billions of taxpayers' dollars it turns over every year.