How Australia’s pharmacy sector became a political power play

Australia’s $25 billion community pharmacy funding system is facing renewed scrutiny over allegations that decades of political influence have created a model that protects pharmacy owners more than it serves patients.

A report from the Grattan Institute argues 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 controversy is significant 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. While intended to support access, the model contributed to the growth of numerous small and inefficient pharmacies operating across Australian high streets.

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.

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 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 Eighth Community Pharmacy Agreement (8CPA) agreement with the Federal Government. As a result, while patients have benefited from lower out-of-pocket costs at pharmacies, the financial impact on pharmacists was largely offset, meaning the Federal Government’s expected taxpayer savings have not been fully delivered.

Federal Health Minister Mark Butler has attempted to balance 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.

The controversy extends beyond government funding into broader concerns about competition and ownership. Pharmacy location rules determine how close a new pharmacy can open to an existing pharmacy and restrict relocation opportunities. State regulations also limit individuals from holding a financial interest in more than six pharmacies.

However, questions remain about the effectiveness of these safeguards. As of 2025, 182 franchisee pharmacies are owned by Chemist Warehouse co-founders Jack and Sam Gance, Mario Verrocchi and their respective families under the merger with Sigma, highlighting the increasingly complex nature of pharmacy ownership structures.

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

Supporters of greater competition argue that allowing pharmacies into major retailors could reduce prices and improve convenience. Critics, however, warn that the supermarket model dominated by Coles and Woolworths, demonstrates how large-scale retail competition can ultimately reduce diversity, eliminate smaller operators and create new forms of market power. The argument is that supermarket pharmacies may lower prices initially, but once independent pharmacies disappear, consumers will face fewer choices and less competition in the long term.

At its core, the pharmacy reform debate is not simply about prescription prices. It is a struggle over control of the medicine supply chain and whether future policy will prioritise voter value or continue to support the interests of powerful lobby groups.

In reimagining healthcare across the entire patient journey, Health Industry Hub^TM is the only one-stop-hub uniting the diversity of the Pharma, MedTech, Diagnostics & Biotech sectors to inspire meaningful change.

The Health Industry Hub^TM content is copyright protected. Access is available under individual user licenses. Please click here to subscribe and visit T&Cs here.