Pharmacy Guild backlash as Lilly bypasses traditional supply chain model

The Pharmacy Guild of Australia and the Pharmaceutical Society of Australia (PSA) have issued a warning over Lilly Australia’s new medicine supply model, arguing that the “Big Pharma-driven” approach could set a dangerous precedent and accelerate the “Americanisation of Australia’s healthcare system”.

The warning comes as Lilly takes its battle over medicine access and pricing beyond the Pharmaceutical Benefits Scheme (PBS), moving directly into Australia’s private healthcare market with a new online platform that gives patients access to medicines that are not currently PBS-funded.

The shift marks a potentially significant change in the way medicines reach Australian patients and one that challenges the traditional role of community pharmacies.

Recent examples of stalled pricing negotiations between Lilly and the Australian Government include Mounjaro (tirzepatide) used to treat type 2 diabetes and obesity; Omvoh (mirikizumab) for ulcerative colitis; Kisunla (donanemab) for Alzheimer’s disease; and Ebglyss (lebrikizumab) for atopic dermatitis.

But Lilly is now building an alternative commercialisation pathway.

The emerging model raises the prospect of pharmaceutical companies selling medicines directly to consumers, bypassing the traditional pharmacy distribution model and opening a new front in the battle over who controls medicine supply.

If Lilly can reduce the price of non-PBS medicines by cutting the pharmacy supply chain out of the equation, the implications could extend far beyond the individual products involved. The significance is not simply the immediate price of a medicine. It is what the model could normalise.

By stealth, Australia could be moving towards an online pharmacy model that strips away the costs associated with bricks-and-mortar pharmacies and the traditional face-to-face dispensing model. That is already the direction taken in other parts of the world: a cheaper, more direct system in which the intermediaries are removed from the supply chain.

The Pharmacy Guild strongly opposes that approach and forbids its members from participating in such arrangements.

At the same time, the traditional pharmacy market is already undergoing profound change. Chemist Warehouse is estimated to account for about 40% of the metropolitan market and could potentially become larger than the Guild itself, adding another layer of complexity to an increasingly contested medicine-distribution landscape.

The implications become even more striking when the size of the medicines involved is considered. The obesity medicines market is already substantial, and its rapid growth has transformed what was once a relatively narrow therapeutic category into one of the pharmaceutical industry’s most commercially significant battlegrounds.

Once PBS rebates from pharmaceutical companies back to the government are taken into account, the scale of the broader medicine market becomes even more difficult to ignore. With rebates now accounting for roughly 30%, the net value of the PBS is itself substantially different from its headline figure.

Taken together, these developments point towards the possibility of a dramatic transformation in how Australians obtain medicines.

The issue is therefore no longer simply about one pharmaceutical company, one online platform or a handful of medicines caught up in pricing negotiations. It raises a much bigger question about whether Australia is beginning to dismantle the traditional boundaries between pharmaceutical manufacturers and patients.

“This model risks replacing that relationship with a transactional supply chain driven by Big Pharma. Today it’s one medicine from one manufacturer,” asserted Pharmacy Guild of Australia National President Professor Trent Twomey.

The PSA has similarly emphasised that any new dispensing model must preserve the clinical role of pharmacists rather than reducing medicine supply to a transaction.

“Pharmacists have a professional responsibility to assess prescriptions, identify potential medicine-related problems, provide appropriate counselling, and help patients use their medicines safely and effectively. Any dispensing arrangement must allow pharmacists to fulfil those responsibilities,” said PSA National President Professor Mark Naunton.

The debate comes against a backdrop of growing discussion about Australia’s emerging two-tier medicine system. But proponents and critics alike are confronting an uncomfortable reality: the two-tier system is not necessarily something Australia is waiting to create.

It already exists. Australians already pay out-of-pocket for more than 16% of the national healthcare expenditure, equating to approximately $44 billion annually or more than $1,600 per person. This covers specialist and GP gap payments, surgical gaps, prescription medicines, imaging and dental care.

Ultimately, the test for this new medicines model will be whether it genuinely improves access to medicines and delivers greater value for consumers.

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