Guild snubbed as pharmacy policy shifted inside Department of Health

The Department of Health’s restructuring has redrawn the bureaucratic map around the most politically powerful sector within healthcare. Pharmacy policy has been moved from the Technology Assessment & Access division to the Health Security and Immunisation division, led by First Assistant Secretary Dr Anna Peatt, within the broader Prevention, Primary Care & Medicare division headed by Deputy Secretary Dr Liz Develin.

The Pharmacy Guild of Australia was not consulted and is reportedly frustrated with the Department of Health’s decision. The majority of pharmacy business remains the dispensing of PBS-listed medicines, despite its growing role in vaccination and prevention. Yet the new division is predominantly Medicare-focused and has no corporate memory of pharmacy policy.

The controversy comes as the broader architecture of pharmacy remuneration faces renewed scrutiny. A recent report from the Grattan Institute argued that pharmacy remuneration should be removed from government negotiations with the sector and handed to the Independent Health and Aged Care Pricing Authority, warning that pharmacy policy has become a case study in poor governance.

The current remuneration system is underpinned by the Community Pharmacy Agreements (CPAs), which guarantee a total amount of pharmacy remuneration. Under the current 8CPA that figure is $24.6 billion over five years.

The funding is locked in through the payment adjustment mechanism and is skewed in pharmacies’ favour, guaranteeing a fixed pot of money to the sector. The arrangement reduces the risk of unexpected government spending if dispensing volumes suddenly increase while simultaneously providing pharmacies with certainty over their income.

The stakes are high because pharmacies are central to Australians’ everyday healthcare. The average consumer visits a community pharmacy 18 times a year, more than any other health service.

The roots of the current system date back to the late 1980s, when pharmacy remuneration was determined by an independent tribunal. At the time, the funding formula provided smaller pharmacies with higher payments for each prescription dispensed. In 1989, the tribunal attempted to overhaul the system, deciding that pharmacies should receive the same remuneration regardless of size while significantly reducing overall funding. The decision triggered a fierce backlash from pharmacy owners, with some closing their businesses in protest.

Under mounting political pressure, the government sidelined the tribunal and began negotiating directly with the Pharmacy Guild, leading to the creation of the first Community Pharmacy Agreement (CPA) in 1990. That decision helped establish a model in which one industry body would become an unusually powerful interlocutor in determining the financial settings of an essential component of the health system.

The Pharmacy Guild, often dubbed the healthcare sector’s most influential lobby group, has played a central role in shaping health policy. Representing the financial interests of pharmacy owners and possessing a fearsome reputation for mobilising voters, the Guild has consistently fought to protect the commercial foundations of community pharmacy while arguing that its position is essential to maintaining access to medicines.

That influence became particularly evident during the Federal Government’s Pharmaceutical Benefits Scheme (PBS) reforms introducing 60-day prescriptions. In the lead-up to the reforms, the Pharmacy Guild launched a major lobbying campaign to challenge the policy, declaring the announcement “the biggest fight in the Guild’s near 100-year history”. With a reputation for political effectiveness, it sought to influence key decision-makers and prevent the government’s reform agenda from progressing.

Although the policy was ultimately implemented, the Pharmacy Guild negotiated compensation for anticipated remuneration losses as part of the current 8CPA with the government. The result was a significant political compromise. While patients benefited from lower out-of-pocket costs at pharmacies, the financial impact on pharmacists was largely offset. That meant the government’s expected taxpayer savings have not been fully delivered.

Federal Health Minister Mark Butler has attempted to balance these competing pressures, defending the government’s reforms while avoiding a commitment to the Grattan Institute’s more radical proposal to dismantle the existing pharmacy remuneration model.

With the 8CPA expiring in mid-2029, the future of pharmacy policy is set to become a major political test.

At its core, the pharmacy reform debate is not simply about prescription prices. It is a struggle over control of the medicine supply chain, the allocation of billions of dollars in public funding and the institutional power to determine who benefits from the system.

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