David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

The Select Committee on Red Tape was established in October 2016 to inquire into and report on the effect of restrictions and prohibitions—that's red tape—on the economy and community. It has presented interim reports on the sale, supply and taxation of alcohol, tobacco, retail, environmental assessment and approvals, and pharmacy rules. I introduced the interim report on pharmacy rules in the last session, but there was no time to speak to it, so today I will present the report in some detail.

Community pharmacies are very important in the delivery of primary health care to the Australian community. However, as the committee heard, red tape is hampering pharmacies' ability to deliver efficient and high-quality care. Red tape is also working against the interests of consumers, particularly in relation to the location rules.

Since 1990, the government has negotiated a series of five-year community pharmacy agreements with the Pharmacy Guild of Australia. The sixth of these was to expire on 30 June 2020, but the government has now changed this so there is no expiry. The Community Pharmacy Agreement contains the location rules, which set out the criteria for establishing premises from which pharmacists can supply pharmaceutical benefits. They determine where a pharmacy can be established. They govern whether an existing pharmacy can be expanded, contracted or relocated and prevent the establishment of a new pharmacy within a certain distance from an existing pharmacy. It's claimed that this prevents clusters of pharmacies from developing in prosperous metropolitan areas and thus somehow results in more pharmacy services in regional areas. Supposedly, this leads to more small country towns having a pharmacy. It undoubtedly results in fewer pharmacies in prosperous areas of metropolitan areas, and apparently this is meant to be a good thing.

It's interesting to consider who agrees with that. The Pharmacy Guild of Australia claims it is strongly supported by consumers. This is obviously completely untrue if we are talking about metropolitan consumers. Why would they support fewer pharmacies? It's just as inconceivable as claiming they would support fewer food outlets or clothes shops. The guild also says it's supported by business owners, who have invested $15 billion in the sector. Now, that is undoubtedly true. The Pharmacy Guild represents pharmacy owners, not consumers and not pharmacists. By preventing the establishment of competition to existing pharmacies, the location rules clearly serve the interests of pharmacy owners.

Members of the Pharmaceutical Society don't necessarily agree with the Pharmacy Guild. It represents pharmacists, not just pharmacy owners. Some of these pharmacists would obviously like to open their own businesses. The national president of the Pharmaceutical Society of Australia, Dr Shane Jackson, told the inquiry that the effect of the pharmacy rules is an issue for some members. The Grattan Institute submitted:

Existing red tape is designed principally to protect the interests of pharmacy owners, not consumers.

It said the location rules:

… tend to protect incumbent pharmacies and restrict market entry. Stifling competition between pharmacies results in higher retail drug prices – a cost borne by patients and taxpayers. It also limits the choice of drugs for many consumers.

The institute advocated replacing the pharmacy rules:

… with simpler regulations which focus on ensuring patients have appropriate access to good-quality medicines.

The Australian Medical Association also opposed the location rules, arguing that patient outcomes would improve with specific changes that allowed pharmacies and medical centres to share premises.

The government knows all this. The review of pharmacy remuneration and regulation, also known as the King review, received few, if any, submissions approving all aspects of the pharmacy rules. Its interim report pointed out that two recent reviews have recommended the removal of these rules: they are the National Commission of Audit's 2014 report, Towards responsible government, which found that deregulating ownership and location rules could encourage competition within the sector, leading to more efficient delivery and the development of alternative retail models; and the 2015 competition policy review, or Harper review, which reported that ownership and location rules are anticompetitive and contrary to the objectives of the National Medicines Policy, limiting consumers' ability to choose where to obtain pharmacy services and suppliers' ability to meet consumer demands.

Since the King review delivered its interim report, the Productivity Commission has also published its report Shifting the dial: 5 year productivity review, which recommended changes to the community pharmacy model. In fact, since 2000 there have been seven reviews that considered the pharmacy rules. As the Grattan Institute describes it, pharmacy regulation is an area of 'policy purgatory' in which the Australian government chooses not to implement change. Report after report disappears, with the only explanation being that the pharmacy industry has far too great an influence on its own regulation.

Having said all that, there were other red-tape issues brought to the attention of the committee. One particularly resonated because it was similar to one that came up in the context of an earlier inquiry—that is, the timing of tax obligations. These can have significant implications for cash flow, particularly for small businesses like pharmacies. Although GST is not levied on pharmaceuticals, it is applied through the supply chain. Pharmacies must pay GST and then claim it back. The committee recommends the government investigate options to align the payment of goods and services tax with business practices to enable small businesses to better manage cash-flow issues. The committee made a similar recommendation in relation to small boutique distilleries, which must pay excise before being paid by customers.

The committee notes that the cost of supplying some medicines is not covered by the PBS, the RPBS or any other arrangement. It accepts that policy reasons might account for this. However, the committee does not accept that community pharmacies should be exposed to costs attributable to wholesalers which are passing on costs arising from government imposed obligations. The committee heard there is an immediate need for better digital support for the PBS and RPBS and recommends the Australian government develop a centralised electronic system for the PBS safety net, similar to the Medicare safety net. The committee heard pleas for reductions in paper based systems generally. This includes having electronic prescriptions. The government has a policy aimed at achieving this, and apparently governments and software developers are working together to expedite implementation.

The committee heard once again about problems caused by state variations in relation to the supply of pharmaceuticals and recommends the Australian government, through the Council of Australian Governments, pursue options for uniform regulation legislation. The government's 2013 deregulation agenda aimed to reduce excessive, unnecessary and complex regulation to lift productivity and boost growth. The committee supports this objective but has found that red tape continues to unnecessarily and adversely affect the efficient operation of community pharmacies to the ultimate detriment of consumers. I commend the report to the Senate and seek leave to continue my remarks later.

Leave granted; debate adjourned.