Supermarket pharmacies are commonplace in the US and the UK. So why don’t we have them here?

One of Australia’s supermarket giants has argued it could help drive down the cost of prescription drugs, but a leading medical expert has labelled the idea as “absurd”.

Debate over pharmacies being added to supermarkets was sparked again this week after the Grattan Institute published a new report on the barriers to cheaper medicines in Australia.

The report triggered a wave of criticism, despite pharmacies being commonplace in supermarkets in places such as the UK and US for decades.

On Today, Dr Nick Coatsworth spoke of mistrust surrounding Australia’s major supermarkets as one of the key reasons he did not support the proposal.

“These are the supermarkets, Coles and Woolies, that apparently can’t be trusted to price our milk but can be trusted to price our drugs. It really would lead us down a path that would see the Americanisation of our system,” he said.

He added the proposal “really is bordering on an absurd idea”.

The biggest barrier

Authors of the Grattan Institute report argue the Pharmacy Guild of Australia has too much power over where pharmacies can be opened, how they run, the cost of medications and the services pharmacists can provide.

The report made a number of recommendations to dilute the guild’s power, one of them being to “remove restrictions on where new pharmacies can be established, including allowing pharmacies in supermarkets”.

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Grattan Institute research associate Molly Chapman said distrust of the two main supermarket operators in Australia was the biggest barrier to any change.

“The big supermarkets are in the midst of a reputational collapse,” she said.

“During the pandemic, they were Australia’s two most trusted brands, but they’re both now among the five most distrusted. So, there’s no surprise they’re getting major pushback.”

She added that although pharmacies in supermarkets may seem like a foreign idea to Australians, overseas they are very common.

“We know from countries like New Zealand, England and the US that patients trust supermarket pharmacies and receive high-quality and safe services, often at a lower price.

“Where they’re allowed overseas, we also don’t see supermarket pharmacies dominating the pharmacy sector. That’s true even in New Zealand, which has a more concentrated supermarket sector than we do.”

She said introducing pharmacies into Australian supermarkets was an important reform for the industry and could lead to more affordable prices.

“We know the Pharmacy Guild of Australia – the powerful lobby group representing pharmacy owners – opposes supermarket pharmacies. This opposition means it might be uphill battle to get supermarket pharmacies in Australia.

“But we shouldn’t let that distract us from other important pharmacy reforms that would also deliver cheaper and more convenient medicines for Australians.

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“For example, discounting is currently restricted or banned on most medicines. A decade ago, an optional $1 discount was introduced for some medicines, but it’s in the process of being phased out.

“That policy saved patients at least $40 million a year. Most of the relief went to concession card holders. But by 2029, pharmacies won’t be able to offer a concession patient any discount on any PBS medicine.

“We recommend bringing back that $1 discount and increasing it over time, so that eventually pharmacies can discount any medicine by as much as they’d like.”

Calls for increased competition in the pharmaceutical sector

Coatsworth said he did not see an issue with competition in the pharmaceutical industry in Australia, citing the prevalence of major pharmaceutical chains such as Chemist Warehouse and Priceline.

This is in addition to TerryWhite Chemmart, Amcal, Blooms The Chemist and smaller community pharmacies.

“I think there is competition in the sector, and I think some of these claims that there aren’t are probably a little bit overdone, and we should really see focus on strengthening our community pharmacies rather than looking to dilute them in supermarkets,” he said.

This isn’t the first time the idea of adding pharmacies to supermarkets has been floated. The Grattan Institute published a report called “Making Better Health Care Affordable” suggesting such a move in 2017.

It was then argued supermarkets “could use their already large and well-established supply networks, retail outlets and customer bases to supply medicines at particularly low costs”.

The idea was renewed once again in 2023 when the federal government established the Competition Taskforce, set up as a two-year initiative to look closely at anti-competitive laws, mergers, non-compete clauses and sector-specific barriers (like pharmacy location rules) that elevate living costs for Australians.

Consumer advocacy group Choice has also publicly supported changes to the pharmaceutical industry in Australia, arguing the pharmacy sector here needs the same style of deregulation that occurred in major international markets such as the UK and the US that allowed pharmacies to open in supermarkets.

What comes next

Woolworths, in a submission made to the taskforce, argued a lack retail competition in Australia allowed independent pharmacies to maintain higher retail drug margins. By entering the market, the supermarket said it could pass major savings to consumers.

“Australians are paying too much for prescription and over-the-counter medicines because of the inefficiencies of independent pharmacies,” they said.

“Allowing corporate ownership will permit supermarkets to leverage their existing supply chains, distribution networks, and massive retail scale to lower medication costs for everyday shoppers.”

The Pharmacy Guild of Australia has fought aggressively against the idea of allowing pharmacies in supermarkets, explicitly rejecting corporate deregulation proposals.

The Guild argues community pharmacies are primary healthcare providers, not standard retail shops, and that a professional health environment requires unique clinical governance.

In their formal response to the idea, they said: “Medicines are not ordinary retail products, and community pharmacies should continue to operate as healthcare providers first and foremost.

“Healthcare decisions must remain focused on patient needs and appropriate clinical governance, not shareholder returns.”