Fewer Chemists Would Be Cheaper
Sydney Morning Herald
Monday November 10, 1986
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
- Adam Smith, 1776
Scratch a small-businessman and you find a socialist; scratch a professional and you find a unionist; scratch a chemist and you find a person whose only ambition is to protect the public from the unnecessary use of medicines.
And how do they save the public from this fate? Why, by keeping the price of prescriptions high, of course. The guardians of the chemists' cartel are fighting a rearguard action to prevent the outbreak of price competition in the wake of the Federal Government's change to the Pharmaceutical Benefits Scheme, which has raised the cost of a prescription from $5 to a maximum of$10 and an expected average cost of about $7.30. The Government has removed the long-standing prohibition on the discounting of prescription prices below the $10 maximum.
The chemists are quick to point out that the Government's motive in encouraging discounting is pure self-interest. It is hoping that price-cutting will mean that the net increase in cost to the vote-casting consumer under the changes is minimal. But the chemists' motives, of course, are pure as the driven Valium. The fact that they would benefit from the maintenance of retail prices is quite incidental. And the Pharmacy Guild has demonstrated its concern to discourage the over-use of drugs by whacking up its recommended retail mark-ups on prescription medicines which fall outside the PBS list.
The chemists have been joined in their efforts to discourage price competition by the Pharmaceutical Board of NSW, a State Government statutory body responsible for registering and disciplining pharmacists. The board is composed of nine members, five of whom are elected by pharmacists. The pharmacy school at Sydney University has a rep, and so do the friendly societies.
The board has issued a statement warning pharmacists that "discounting of prescription item prices may constitute professional misconduct and may involve pharmacists practising such discounting in disciplinary proceedings". It's bluffing, of course. The inference could be drawn that discounting equals misconduct, but the operative word is "may". There's a big difference between the prices a chemist charges and the way he discharges his professional duty, which the board must know.
But let's have a look at the board's arguments. It's concerned that discounting would have two - would you believe - "unintended consequences". First, the consumption of some drugs may be increased unnecessarily as a result of patients' shopping around for cheap drugs, particularly psychotropic drugs such as sedatives. Come off it, chaps. We're talking about drugs which are available on prescription. A patient can consume only as much of the drug as his doctor is willing to prescribe.
In any case, the board seems to be forgetting its arithmetic. The situation is that the change to the PBS has raised the average price of a prescription from $5 to about $7.30. It would take a discount of almost 32 per cent merely to reduce the price of drugs to what it was a week ago. And for a body which professes such concern about the public's health, it's surprising that it seems to have overlooked the possibility that the rise in the price of drugs will encourage some people to endanger their health by not using the prescriptions their doctor gives them.
This is a possibility which has not escaped the Pharmacy Guild. In its negotiations with the Government over the changes to the scheme, it used the argument that the higher prices would cause a fall in the number of prescriptions filled to support its case for an increase in the chemist's dispensing fee. The Government agreed to raise the fee from $2.46 a prescription to a neat $3.
The board's second feared consequence of discounting is that it may lead to a reduction in the time spent by chemists in giving professional advice and, eventually, to fewer pharmacies. Whether the amount of advice given by chemists would decline significantly is debatable. The public will have its own views on how much advice it gets at present, how valuable that advice is and whether it is prepared to pay a premium to get it. The beauty of a freer market in prescription prices is that those people who want advice could go those chemists who provide it (and possibly pay a higher price), while those people who don't could go to the no-frills discounters.
As for the possibility of discounting leading to fewer pharmacies, now we're getting down to it. I have no doubt widespread discounting would lead to the closure of many marginal chemist shops. And I have no doubt this is one of the main reasons so many chemists fear discounting. A contraction in the number of chemist shops would be hard on the people forced out of the industry, but the question we're supposed to be discussing - according to the representatives of the chemists themselves - is what is in the interests of the public.
Australia has a very high number of chemist shops: one per 2,800 people, compared with one per 5,000 in Britain and the US, and one per 12,000 in some European countries. The Government-controlled dispensing fee has been set higher than it otherwise would be because of the large number of chemists and their lack of economies of scale. This is why they are so vulnerable to discounting. We don't need a struggling chemist on every corner; a prospering one on every second corner would leave us with all the service we need.