For years now, supermarket giants Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Limited (ASX: WES) have pushed to have rules around retail chemists relaxed.
They may have just found a new ally, with reports that hospital operator, Ramsay Health Care Limited (ASX: RHC), has backed draft recommendations to open up the pharmacy industry to other retailers.
A competition policy review led by Professor Ian Harper, has recommended removing long-standing ownership and location rules for pharmacies. One of which is that only a registered pharmacist is allowed to own a retail pharmacy, a law that has been in place for 80 years. There are also rules prohibiting new pharmacies from being established within 1.5kms of an existing one.
So far those rules have locked out retailers like Coles and Woolies from entering the pharmacy business.
But the protagonists face a powerful adversary in the Pharmacy Guild of Australia, as well as large corporations such as Sigma Pharmaceuticals Limited (ASX: SIP) and Australian Pharmaceutical Industries Ltd (ASX: API), which own, operate or supply pharmacies.
Ramsay already operates in-hospital pharmacies in 39 of its 69 Australian hospitals but is clearly keen to run more retail pharmacies. In a submission to the Harper review, Ramsay says non-pharmacists should be able to own pharmacies, in much the same way as non-doctors are allowed to own medical or pathology centres.
Pharmacies are already under pressure from the discounters such as Chemists Warehouse and Good Price Pharmacy Warehouse. Sigma has been fighting back though, acquiring Discount Drug Stores and its 121 discount pharmacies in September 2014. API, on the other hand, is rolling out its Priceline (don't dispense medicine) and Priceline Pharmacy stores to compete.
The problem for all pharmacy owners is that if current rules are relaxed, consumers may well be able to buy their pharmaceutical products in their local supermarkets. That could have a similar effect on pharmacies located near supermarkets as it has had on independent fruit stores, butchers and bakers. We'll have to wait for the final report in March to find out.
