How a pharmacy monopoly pushes up your medicine price and makes pharmacies million dollar businesses

MARCH 15, 2015

Revealed … An audit has exposed a range of tactics the system provides to boost taxpayer
Revealed … An audit has exposed a range of tactics the system provides to boost taxpayer funded incomes under the community pharmacy agreement. Picture: Supplied. Source: News Corp Australia
THEY are the taxpayer funded pharmacy millionaires, 941 chemist shops making more than a million dollars a year from a system that’s hurting consumers and taxpayers.
A shocking audit report has revealed how the taxpayer funded $15.4 billion pharmacy agreement that stifles competition is turning one in six pharmacies into million dollar businesses.
The same system is forcing consumers to pay inflated prices for medicines and sees a $1.10 pack of aspirin cost a patient $13.31.
Taxpayers funding pharmacy monopoly

In control … The Community Pharmacy Agreement sets the price consumers pay for medicines. Picture Thinkstock.Source: ThinkStock
The audit has exposed a range of tactics the system provides to boost taxpayer funded incomes under the community pharmacy agreement and heavily criticised the health department’s management.
It comes at a crucial time as the government commences negotiations with the pharmacy owners union the Pharmacy Guild on the next five year taxpayer funded agreement.
On average Australia’s 5371 pharmacies each earn $650,000 a year from dispensing medicines under the Pharmaceutical Benefits Scheme.
This compares to the $195,000 GPs earn on average from Medicare.
The Pharmacy Guild says this comparison is not valid because it includes wholesaler mark-ups and because pharmacies employ an average of four pharmacists.
A typical practice employs 6 doctors and would earn about $1.4 million from Medicare, a spokesman for the Guild said.

Millionaires’ row … Pharmacist Terry White earns enough to enjoy a life of luxury. Pict
Millionaires’ row … Pharmacist Terry White earns enough to enjoy a life of luxury. Picture: Supplied. Source: News Limited
And the audit report found 941 pharmacy businesses received over $1 million in remuneration. Often chemists own more than one pharmacy.
Melbourne based Chemist Warehouse chief Damien Gance owns discount chemist shops in every state and the wider business extends to 320 pharmacies Australia wide with a turnover of around $2.7 billion.
Terry White lives on millionaires’ row on the Gold Coast. His franchise pharmacy business includes 176 chemists nationwide and last financial year reported total revenue of $55 million.
Mr White refused to comment however the Pharmacy Guild said mentioning Mr White was “an irrelevant and offensive ‘angle’ to your story, which reflects your openly hostile and biased approach to all stories relating to community pharmacy”.
A check of pharmacy sales websites confirms that many pharmacies have become million-dollar businesses under the community pharmacy agreement that enshrines their monopoly-like status.
Raven’s Pharmacy sales is offering a NSW Central Coast pharmacy for sale for $4.7 million, it has a turnover of $5.7 million a year.

Not cheap … Fees, mark ups and additional charges push up the price of medicines. Pictu
Not cheap … Fees, mark ups and additional charges push up the price of medicines. Picture: Supplied. Source: Supplied
Australian Pharmacy Brokers recently sold a chemist in North Queensland that claimed to have an annual turnover of $6.9 million.
Pharmacy Business Sales is offering a chemist for sale in inner eastern Melbourne which boasts “sales approaching $8 million” and is being sold for $8 million.
Business analysts report typically 70 per cent of a pharmacy’s income comes from prescriptions.
Pharmacists can become millionaires because a government Community Pharmacy Agreement gives pharmacy owners monopoly status.
State rules say only a pharmacist can own a pharmacy and a ministerial determination in the Community Pharmacy Agreement bans supermarkets from containing chemists.
Location rules says no chemist can open within 1.5 kilometres from an existing chemist.
In some locations chemists are closer than this because they were established before the rule took effect.
It is these rules that ensure new pharmacy graduates can rarely afford to open their own because chemist shops often sell for over a million dollars.
There are more than 25,000 registered pharmacists but less than 4,000 pharmacy owners.

Laws … Ana Carolina Galaxe and daughter Savannah 2 pictured outside Fairlight Pharmacy
Laws … Ana Carolina Galaxe and daughter Savannah 2 pictured outside Fairlight Pharmacy in Fairlight. No chemist can open within 1.5 kilometres from an existing chemist. Picture: Toby Zerna Source: News Corp Australia
“Removing these location rules would allow new pharmacies, increase competition and thereby benefit consumers,” says Melbourne University Economist Professor Philip Clarke.
Over the last ten years the number of prescriptions dispensed has grown by an average 3.6 per cent a year but payments to chemists have risen an average 7.9 per cent a year, the Australian National Audit office found.
For the first time the Australian National Audit office exposed tactics the system provides to boost taxpayer funded incomes.
These include chemists claiming a $1.50 per script government incentives for substituting cheaper generic medicines when sometimes no substitution is actually made.
The Pharmacy Guild says “pharmacists are required to claim according to strict rules and guidelines, and we reject the insinuation that the premium free dispensing incentive is being abused by pharmacists”.
This Premium Free Dispensing Initiative was meant to cost taxpayers $620 million over five years but the cost blew out to $912 million.
The Department of Human Services caught two chemists claiming government payments for Clinical Interventions when they sold vitamins and probiotics with prescription drugs under a $97 million program.

Bitter pill to swallow … The price of aspirin, paracetamol and anti-dandruff shampoo is
Bitter pill to swallow … The price of aspirin, paracetamol and anti-dandruff shampoo is pushed up by the community pharmacy agreement. Picture: News Corp. Source: News Limited
Chemists were paid $42 million under a Medscheck program to check the medicines of multiple prescription users.
However, “there is no program requirement to provide a written report of the medicine review, and the review is not required to be conducted in collaboration with the patient’s GP or other health professionals,” the audit report says.
The Pharmacy Guild says the patient gets a report.
The Audit office received reports of some employee pharmacists being given a KPI of a certain number of clinical interventions per 100 scripts to generate revenue.
An SMS to a patient telling them their script was ready to pick up was counted as a “clinical intervention”.
It also received claims that some chemists kept a patients repeat script and claimed for dispensing repeats even though the patient never came in to collect them.
Chris Walton the chief executive of the Professional Pharmacists Australia wants the Government to postpone negotiations of the Sixth Community Pharmacy Agreement as a result of the audit.
Consumers Health Forum chief Adam Stankevicius says “the secretive, closed-shop deals of the past, added to pharmacy location and ownership rules have protected high profits, instead of delivering improved patient services, as promised through the pharmacy agreement,” he said.