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This is the third and final installment of the ownership saga which recently occurred in New Zealand.
We continue the government's rationale, interspersed with comment from an Australian perspective.
As before, this article should be read in conjunction with my other article series ("The Ides of March") which illustrates the real thinking by government power brokers within Australia.
There is a definite commonality in the strategies of the Australian and New Zealand governments, the only difference is that New Zealand struck first.
This precedent, and what evolves, is sure to be utilised against Australian pharmacists sometime in the future.

The text that is red in colour represents, a continuation of the carefully worded statement released by the New Zealand Department of Health, apparently without any consultation with community pharmacists.
The government has claimed a "mandate" to introduce these massive changes, but it is unsupported in reality. Australian pharmacists should read and understand the rationale, prepare appropriate strategies, and at least be positioned so as not to be caught unawares like our New Zealand "cousins".

"How will the changes help to solve these problems?

The changes will help to solve the problems by:

Innovation - These changes will help the development of innovative practices and assist the development of cheaper services in line with the needs of medicine users.
Capitalisation - More capital is expected to flow into the pharmaceutical services to help to improve the range of services and products provided.
Job satisfaction - The change should allow pharmacists to choose more diverse career opportunities, make more use of their skills and negotiate more flexible conditions of employment. These changes should suit those pharmacists who also have childcare or other responsibilities.
More and better quality advice - Pharmacists' time will be freed up to concentrate on using their clinical skills in primary health care. This will help to reduce medication errors and problems with drug interactions. Nearly 50 percent of New Zealanders visit a pharmacist for advice or medication each year.
More accurate health interventions - These changes will better allow pharmacists to integrate with primary health organisations. This should make it easier for discussions on the best medicines for patients and the integration of medical records to take place.

In addition it is envisaged that pharmacists will become more accessible. In future they will be next to or inside other primary health care services -- such as medical centres -- and other large businesses, such as supermarkets. The distribution of medicine is expected to improve, particularly in rural New Zealand."

Some of the above may come to pass, but there is more than one way to solve a problem.
Surely by giving the existing pharmacy owners political and financial support, the government would generate better quality services, because of self interest and professional pride.
Professional services, while needing to be properly remunerated, are driven by one's own personal standards. Governments typically take advantage of professionals in this way, in settings such as public hospitals.
I would debate the latter part of the above comment that the distribution of medicines will improve in rural New Zealand. This is probably code for "after giving the prime business to supermarkets, pharmacy ownership will be limited to rural areas, because it is not profitable enough for supermarkets to establish in these areas".

"Are the changes safe?

The Government has taken a number of steps to make the proposed regime safer than the existing one. No changes are proposed to the current requirement that each pharmacy must be under the control of a pharmacist. The proposed changes include:

A licensing regime enabling Medsafe to reject unsuitable applications, for example from people who have been convicted under the Medicines Act 1981 or the Misuse of Drugs Act 1975.
If the licensee owns more than one pharmacy they will be required to appoint one of their pharmacists to the position of a "superintendent pharmacist". This pharmacist is legally and ethically responsible for the professional standards of the entity that owns the pharmacies.
Pharmacists will be required to maintain their professional competence under the proposed Health Practitioners' Competence Assurance legislation.
Medsafe will be able to assess the share structure of companies applying for licences and restrict errant owners. Medsafe will also be able to remove licences from unsuitable licensees and prosecute offenders.
The disciplinary mechanisms and penalties will be strengthened in the Health Professionals Competency Assurance legislation.
Pharmacies will be required to have security around the dispensing area so unauthorised people cannot access restricted medicines when the pharmacist is absent."

Previous comment has been published in this series illustrating that what is proposed for the New Zealand model is not really safe. Licences will be issued to "suitable persons" based on the fact that they are not illegal drug users. This by no means covers the range of activities that a "suitable person" could enter into, once given control of a pharmacy. This aspect is supposed to be alleviated by using "superintendent pharmacists", a model which has already been proven to be flawed in UK and US settings.

"Have we had non-pharmacist owners of pharmacies in New Zealand before these proposed changes?

Yes, we currently have 15 existing 'grand-parented' non-pharmacist owned pharmacies providing services in New Zealand. There is no evidence non-pharmacist ownership has jeopardised the quality or safety of these United Friendly Society (UFS) pharmacies.
A "grand-parenting" provision in the Act allows UFS pharmacies, operating when the Act was passed, to continue to operate without meeting the ownership restrictions. These pharmacies were registered under the Friendly Societies and Credit Unions Act 1982.

The one major difference between Friendly Societies and supermarkets is that the former is a "not for profit" organisation and is set up for the genuine welfare of its members.
Compare this to supermarkets that are unashamedly set up to chase profit.
Supermarkets are managed for the benefit of their shareholders, and those shareholders are often major corporates, not capable of possessing a social conscience.
How comfortable would you be with, say, a major Australian Bank being selected as a "suitable person" to own and operate a pharmacy?
Given their paltry service to small customers and their absolute desertion from rural areas (often decimating local economies), they show no concern or social conscience in any way.
They display their return on investor shareholdings as a badge of honour.
"Profit is not a dirty word" they say, as old-aged pensioners are left bewildered as to how they are going to receive their next pension payments and local businesses ponder how they will survive with no local bank.
How would a superintendent pharmacist stand up to the ruthless top management of say, a global bank, if a professional dispute evolved.
Not for long, I suspect.
There is already evidence that supermarket pharmacy owners in the UK have set up a "black book" on what they would describe as "recalcitrant superintendent pharmacists", and the information is exchanged with competitors.
As ownership concentrates through takeovers and mergers of global supermarket interests, where will the professional jobs be, given that if you have been "blacklisted", then you may not have a job at all.

The Pharmacy Guild of Australia, I believe, could run a very effective campaign (prior to an election) illustrating what may happen if a bank became a "suitable person" in Australia. With the universal unpopularity of banks, it would be far easier to contrast a pharmacist-only ownership perspective, given that the landscape is continually being littered with bank victims.
It's worth a thought.

"What do other countries do?

Open ownership is relatively common internationally. The United Kingdom, Eire, Poland, Switzerland, Italy, Holland, Norway, Belgium, Hungary, the Czech Republic, Singapore, Malaysia, and Brazil do not restrict the ownership of pharmacies to pharmacists. In Canada, with the exception of Quebec, Nova Scotia and Ontario, the remaining eight territories allow non-pharmacists to own pharmacies. In the United States, with the exception of North Dakota, all states allow non-pharmacists to own pharmacies.

Similar licensing arrangements to the ones suggested for New Zealand exist in Ireland, the United Kingdom, Norway, Belgium and Holland.

Ownership is restricted to pharmacists in Australia, Austria, Denmark, France, Germany, Luxembourg, Israel, South Africa and Iceland.

Hard evidence on the impact of open ownership is hard to find. Recent studies in Australia have tended to support the status quo (restricted ownership) but they have been limited in scope (a government study looking at competition in pharmacies which ignored other possible regulatory means for ensuring the safe and efficient distribution of medicines) or linked with vested interests (commissioned by the Australian Pharmacy Guild)."

One only has to research respected pharmacy journals in the UK and the US to find the "hard evidence" of the impact of open ownership.
The Australian system has long been recognised, with envy, by other supposedly more mature economies (including the US).
We do have a rational system for introducing drugs into Australia, distributed by a well organised and efficient group of community pharmacists, and we have the cheapest drug costs in the world.
While there is always room for improvement, it must still be better to support and refine a successful model based, on pharmacist ownership.
Is not the Australian success hard enough evidence for the New Zealand government to model?

"Won't the changes lead to increased bureaucracy and costs?

The current system of registration and monitoring is in effect a licensing regime. Current owners are required to adhere to legislative and contractual obligations and run their businesses according to good practice codes:

1. Medicines Act 1981 and the Misuse of Drugs Act 1975
2. Ministry of Health's New Zealand Code of Good Manufacturing Practice for Manufacture and Distribution of Therapeutic Goods Part 3: Compounding and Dispensing
3. Pharmaceutical Society's Quality Standards for Pharmacy in New Zealand
4. Contractual obligations of the Pharmacy Services Agreements under the Ministry of Health dispensing contract.

The provisions in the Medicines Act 1981 currently require wholesalers, packers and manufacturers of medicines to be licensed. The proposed changes will bring retailers under a similar licensing regime and result in a small saving for government. The proposed costs of obtaining a pharmacy license will be in line with the other medicines licensing regimes."

Bureaucrats love increasing areas of control.
Giving them a new licencing system on top of what they already control would constitute a bureaucratic utopia.
A large part of the cost of running a community pharmacy is involved in compliance with government regulations. Reducing regulation and other bureaucratic procedures would allow a reduction in costs, which would ultimately benefit the consumer, through competitive market forces.
This is the area that the New Zealand government should have looked at first.
To its credit, the Australian government did, but the implementation of what is known as the Wilkinson Review, has been painfully slow.
In part, this is because the underlying sentiment of Australian bureaucrats is for open ownership.
Anything that would assist the enhancement of community pharmacy would understandably, make that rationale a difficult one to support.

"Will opening up the ownership of pharmacies to non-pharmacists drive up costs?

The proposed changes may reduce the cost to the Government of providing pharmacy services.

The Commerce Commission can act against any person or company that acquires, attempts to acquire or assists somebody acquire assets of a business where that acquisition is likely to substantially reduce competition in the market place."

As always, the initial changes will demonstrate cost reductions.
As open ownership concentrates through mergers and takeovers, market share for these operators will increase.
With increased market share comes increased prices and increased profits.
Just look at the major Australian banks (and their fees) and Australian supermarkets.
Australian supermarkets control about 85 percent of the retail trade through two major entities and a group of operators who inherited the third player (Franklins), which has had a recent demise.
It is significant in that a survey of retail profits conducted two years ago, it was found that the top 1000 businesses in Australia accrued 87 percent of corporate profits and employed 49 percent of workers.
The remaining SMEs accounted for 13 percent of corporate profits, but employed 51 percent of workers.
When the only comparison of prices is between a small group of major players, there is absolutely no incentive for these players to actively compete against each other.
Trade Practice bodies, such as the ACCC in Australia, do not appear to have been effective in preventing the major concentration of supermarkets accruing to a handful of major corporations.
So how will New Zealand differ?

"Will community pharmacies go out of business?

The Government will introduce the changes over a three-year period so that current owners can diversify their investments before licensed open ownership starts."

What a laugh!
With open government support, supermarkets will be given a legal transfer of the goodwill of all that community pharmacists have accrued to date.
Is this fair trade?
Obviously, the New Zealand government expects community pharmacists to go out of business and has given them three years to think about it.
I sincerely hope that New Zealand pharmacists fight back by amalgamating their resources to tackle competition "head-on" in a no-holds dust-up!

"Will rural pharmaceutical services decline?

More flexibility will mean new means of distribution are likely to evolve. The Ministry of Health will be able to require rural pharmacy services in its pharmacy service contracts.

Providers of rural pharmacy services will continue to be subsidised."

Of course these services will decline!
The clue is that they will need to be continually subsidised.
Perhaps competition will speed up as displaced urban community pharmacists go bush to avoid the supermarket influences, and provide "real pharmacy".
Perhaps Internet and mail order pharmacies will expand to fill the void.
Whatever, it will still remain a depressing sight and there is no way a major supermarket chain would venture into an area that is not profitable.
What would the shareholders think?

Editor's Note:

I started a personal story in the last edition relating to my father, a senior manager who was employed by one of Australia's largest supermarket operators, attempting to lobby governments and pharmaceutical manufacturers to support their bid for pharmacy ownership.
After the inevitable argument (and family split) I suddenly found that my father began to pilot "pharmacy departments" in their Katoomba branch store. It was no coincidence that I was located in my own business, at that time, in Katoomba.
All the goods on offer were heavily discounted by my father in an attempt to transfer market share.

I fought back by blacklisting all the pharmaceutical manufacturers involved in the pilot, and where possible, had any successful over-the-counter formulas manufactured under my own brand.
An alternative brand offering comprising friendly manufacturers was also prepared.
Pharmacists rallied from Lithgow to Penrith, with a few extra dotted in Parramatta, to the common cause.

I approached the local branch of the Australian Medical Association.
To my surprise, they agreed to blacklist any of those manufacturers who were involved in marketing prescription only products, and they extended their influence to four public hospitals, including a major Sydney teaching hospital, that banned, among other items, a major brand of paracetamol.
They did not like the concept of open selling discounted drugs.

For the next three months I began to receive a succession of state sales managers patting me on the head and advising that "I should not rock the boat". For the subsequent three months, the sales manager procession changed to national level.
After six months, I was asked if I would withdraw opposition if they ceased supporting my father's pilot program.

I agreed, and my father was forced to shut down his pilot.

That was in the 1960's, and I believe I was instrumental in holding back that supermarket's campaign for ownership of pharmacies. They have never given up, simply altering their strategy by forcing traditional pharmaceutical manufacturers to supply them with non-scheduled products and lobbying politically to have the schedules downgraded, creating more market share for them to acquire commercially.

My father has since retired, and we are now reconciled.

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