After COVID, the battle for the future of the pharmacy begins

Under decades-old rules, only registered pharmacists can own a pharmacy, and current ownership regulations mean that entrepreneurs must get approval to open a business or change its location. Strict rules prevent pharmacists from opening up a new outlet within 1.5 kilometres of an existing store.

The nation’s pharmacy guild and small business owners insist the rules are there to protect the integrity of patient care, while the Australian Medical Association has long argued they are anti-competitive and should be relaxed.

The Pharmacy Guild of Australia, the powerful lobby group representing the nation’s community pharmacy network, has not said outwardly whether it opposes the idea of a big supermarket purchasing API – but it did have some questions for Woolworths about its offer this month.

“Why is a company with interests in the alcohol, tobacco, gambling and nightclub industries wanting to move into healthcare?” a spokesman for the guild asked. “How does it [Woolworths] hope to convince Australians that it is serious about their health and welfare?”

The tight rules have meant that while supermarkets have expressed interest in the pharmacy market before, they have had little success in achieving access, despite Woolworths previously making an attempt in the early 2000s.

Woolworths chief executive Brad Banducci told this masthead earlier this month that the supermarket operator would not be looking to put pharmacies in its stores if it was successful in its bid for API. The company has insisted it will maintain the community pharmacy model and pharmacists would operate their stores separately from Woolies.

Independent pharmacy owners still see risks in the idea of retail giants getting close to the sector. Reynolds says independent pharmacists are already being forced to focus more on corporate retail offerings, alongside healthcare, to remain sustainable against discount brands like Chemist Warehouse.

“It’s this sort of balance between having that appropriate pharmacy care and what you have at the front of the shop,” he says.

If a major retailer was to buy in, that could be another challenge for small business owners which are finding it harder and harder to compete against ‘banner brands’.

“It definitely will be a threat — as is today with [discount providers like] Chemist Warehouse.”

Independent operators are also wary about whether retailers would put more focus on traditional metrics like sales, which could impact patient care.

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“Whereas I think there is this ethos now among pharmacists that even if something is not profitable, we still do it [for patients],” Reynolds says.

The Australian Medical Association (AMA) recently released a discussion paper arguing ownership rules should be reformed, with this opening up the possibility of prescription medications being issued at doctor’s surgeries.

“The AMA welcomes steps to improve access to vital medicines for all Australians, however any model must ensure that convenience does not undermine patient safety. The AMA has no details about plans from major retailers to enter the pharmacy space,” said chief executive Dr Omar Khorshid.

However, he noted supermarket pharmacies exist successfully in other parts of the world.

“Supermarket pharmacies are common in the US, UK and mainland Europe. In the UK, supermarket pharmacies have led to lower prices for medicines without compromising the advice provided by pharmacists.”

Analysts who watch API’s stock say it’s clear why the supermarkets would be interested in an asset like Priceline.

“Health and wellness is a large, fast-growing category and Woolworths believes it would be a compelling addition to its everyday needs ecosystem,” Macquarie’s team wrote in a note to clients.

UBS analysts highlight that opposition from the pharmacy guild could also scupper Woolworths’ chance at a takeover. The guild declined to comment further for this story.

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However, the group has actively campaigned against global retail giants to protect the pharmacy name. Last year it lodged a trademark dispute with Amazon, seeking to block the retail behemoth from registering the words “Amazon Pharmacy” in Australia.

“Under Australian state and territory law, only a pharmacist can own a pharmacy and consumers are entitled to be sure when they deal with a pharmacy that it is a pharmacy and not a business entity purporting to be a pharmacy,” a spokesperson for the guild said at the time.