Pharmacy ownership

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Chapter 6 Pharmacy ownership

LEARNING OBJECTIVES

Upon completion of this chapter you should be able to:

• describe the current ownership arrangements for community pharmacy in Australia
• discuss the National Competition Review of Pharmacy in the context of the current ownership arrangements
• explain the involvement of the friendly societies in community pharmacy ownership
• present an overview of the advantages and disadvantages to the general public of pharmacist-only ownership of pharmacies.

INTRODUCTION

At the present time pharmacy ownership is restricted to pharmacists or corporate entities controlled by pharmacists. These ownership arrangements are detailed in the pharmacy/pharmacist registration Acts and regulations existing in each state and territory. While there have been a number of challenges to the present restrictions on ownership over the years the present arrangements appear entrenched. There may be modest expansion of the ownership provisions in some jurisdictions with new or reviewed registration legislation allowing various corporate models of ownership. However, at this time it would appear that there is little likelihood of any significant movement away from pharmacist ownership, whether as a sole proprietor, as a partner, or through a corporate entity.

In a number of jurisdictions, pharmacies may also be owned by friendly societies. A friendly society is composed of a body of people who join together for a common purpose. Before the availability of insurances and the development of the so-called welfare state, friendly societies played an important role in people’s lives, providing a range of financial and social services not otherwise available to individuals. One area where traditionally friendly societies have been active is in the field of health; in Australia (and New Zealand) this translated into pharmacy ownership. Although the importance of friendly societies is somewhat diminished in contemporary Australian society, the ownership of pharmacies by friendly societies is still reflected in much of the current legislation governing pharmacy practice.

NATIONAL COMPETITION POLICY REVIEW OF PHARMACY

A national review of state/territory pharmacy legislation and certain provisions of Commonwealth legislation relating to the Pharmaceutical Benefits Scheme (PBS) and the National Health Act 1953 (Cth) was conducted by Warwick Wilkinson under the National Competition Policy systematic legislative review process.[1]

The terms of reference examined the restrictions that legislation may impose on three areas of pharmacy practice, namely:

1. pharmacy ownership
2. pharmacy location (in regard to the dispensing of prescriptions under the Commonwealth PBS)
3. pharmacist’s registration.

The review and recommendations were completed in February 2000. In part, the review examined the question of the ownership of pharmacies and interpreted its ownership reference:

[A]s examining not only the core question of who can own pharmacies, but also as considering issues related to the commercial operation of pharmacies as this may be affected by professional regulation in State and Territory Acts. Such factors include how many pharmacies a proprietor may own, ownership structures for pharmacy businesses, third party pecuniary interests in pharmacy businesses, and regulatory authorities registering both pharmacy premises and businesses. All these factors relate to the central question of who may lawfully own or have a proprietary interest in a pharmacy.

Eight recommendations relating to pharmacy ownership were contained in the report. Recommendation 1 recommended that the present legislative restrictions on the ownership of (community) pharmacy by registered pharmacists be retained. Recommendation 2 supported the removal of residential requirements for pharmacy ownership while retaining the requirement for a pharmacy owner to be registered in that particular state or territory. Recommendation 3 supported the retention of different ownership structures permitted by the various state and territory legislation only insofar as it allowed minority shareholding in corporations by prescribed relatives of pharmacists; it did not support minority (or majority) shareholding by non-pharmacists who were not prescribed relatives.

Recommendation 4 was contentious in that it supported the removal of restrictions about the number of pharmacies a person may own or have an interest in. There was a great deal of opposition to this recommendation from within the ranks of pharmacy regulators and professional organisations notwithstanding that the review further recommended that the effects of lifting the restrictions be monitored to ensure it did not lead to undue market dominance by individuals or groups or result in any other inappropriate market behaviour.

Recommendation 5 related to friendly societies and supported the removal of any regulations specific to the establishment of friendly society pharmacies that do not also apply to other proprietors. While Recommendation 6 supported the retention of regulations restricting non-pharmacists from having a direct proprietorial interest in community pharmacies, it did propose at Recommendation (6)(c)(3) that any regulations that prevented commercial considerations for third parties based on a pharmacy’s turnover or profit be removed. Recommendation 7 supported the removal of legislative requirements for the registration of pharmacy premises and the registration of pharmacy businesses (subject to provisions) as the review could see no public benefit in their retention. Recommendation 8 required that legislation relevant to the delivery of pharmacy services provided for an acceptable range of services, and appropriate quality assurance and professional practice standards be adopted by community pharmacies.

At the time of writing, and 8 years after the report was presented to the federal government, very little has changed in the regulation of pharmacy ownership in Australia. Pharmacists retain ownership of pharmacies through a variety of ownership structures (with the specific exceptions of friendly societies and a small number of ‘grandfathered’ proprietors— that is, for-profit non-pharmacist proprietors whose ownership arrangements predate current legislation). In the majority of jurisdictions pharmacies may be owned by pharmacists or by incorporated bodies. Such incorporated bodies having ownership structures that may include only pharmacists, or pharmacists together with relatives of pharmacists, depending on the jurisdiction (with pharmacists having a majority shareholding). Also, in the Northern Territory, Aboriginal health services may own pharmacies subject to conditions contained in the Health Practitioners Act 2004. However, what is most notable is that the restrictions on the number of pharmacies a person (or partnership or corporation) may own or have an interest in remains, even though new legislation has been enacted in some jurisdictions since the Review. While there are no limits on the number of pharmacies that may be owned by a person in either the ACT or the Northern Territory, Western Australia currently allows two pharmacies to be owned by a pharmacist, Tasmania and South Australia four, and the other states five. Further, Western Australia also requires pharmacy owners to be domiciled within the state (although this restriction does not appear in the Pharmacists Bill 2006 [WA]).

Although the Council of Australian Governments (COAG) is currently undertaking a project aimed at the national registration of pharmacists (and other health professions) there has been no decision to address pharmacy ownership at this stage. It is not unreasonable to assume that pharmacy ownership will continue to be regulated on a state and territory basis.

STATE AND TERRITORY OWNERSHIP ARRANGEMENTS

The following section provides an overview of the current pharmacy ownership requirements in each state and territory. In addition to the matters outlined below, the applying Acts and regulations may also give meaning to the control of ownership in the event of suspension or cancellation of registration, death of a registrant or bankruptcy in regard to the pharmacy business.

The requirements governing the ownership and other regulatory processes of pharmacies are included in the respective state and territory pharmacy Acts. At the time of writing there are no uniform requirements relating to pharmacy ownership in Australia.

Australian Capital Territory

Pharmacy ownership is prescribed in the Health Professional Regulation 2004 (the Regulation).

A pharmacy, which is defined as a premises where a pharmacist practises pharmacy, may be owned by a pharmacist or a corporation practising as a pharmacist. Such a corporation must have the Pharmacy Board’s written approval to practise and have a constitution that is appropriate to a corporation approved to practise as a pharmacy (s5.6). There are no limits in the Act with regard to the number of pharmacies that can be owned by a pharmacist or a corporation practising as a pharmacist.

The board may approve standards for community pharmacies under the Regulation. The Regulation requires that a pharmacy must be under the direct personal control of a pharmacist, have direct access to the premises and comply with any standard approved under the Regulation. In addition it is in contravention (of the Regulations) to operate a pharmacy inside or partly inside a supermarket (defined as a shop selling food and other household items where the selection of goods is organised on a self-serve basis).

New South Wales

The ownership provisions in New South Wales are prescribed in Part 3 Division 2 of the Pharmacy Practice Act 2006.

Pharmacies are unable to carry on a pharmacy business unless the premises is approved by the Pharmacy Board and all persons holding a beneficial interest in a pharmacy are registered with the board. A pharmacist intending to acquire a pecuniary interest in a pharmacy business must give notice to the board at least 14 days before acquiring such an interest. A pharmacy business may be owned by a pharmacist, a partner in a pharmacists’ partnership or a pharmacists’ body corporate or a member of a pharmacists’ body corporate. A pharmacist (either as an individual, a partner in a pharmacists’ partnership or a member of a body corporate) may not hold a beneficial interest in more than five pharmacy businesses. Further, section 25 requires that a pharmacy business must be carried on under the direct supervision of a pharmacist registered with the board.

Sections 26 and 27 provide for ownership conditions for friendly societies and certain bodies corporate.

Section 29 prohibits a person holding a lease, licence or other security interest from having certain powers in relation to the pharmacy business including: the manner in which the business is carried out; unfettered access to business records; or any profit sharing arrangements.

The Act also allows a pharmacist whose registration is cancelled or suspended to retain his or her ownership in a pharmacy business for a period of up to 6 months or for such further period as approved by the board. For executors, trustees or administrators of estates of deceased persons who carried on a pharmacy business, the Act allows them to have a pecuniary interest in a pharmacy business for a period not exceeding 6 months or for such further period as may be authorised by the board.

Northern Territory

The ownership of a pharmacy business in the Northern Territory is prescribed in Schedule 8 of the Health Practitioners Act 2004 (the Act). Ownership is restricted to a pharmacist registered in the Northern Territory, a partnership where all the partners are pharmacists, or a corporation in which all directors and shareholders are pharmacists. Ownership can also be extended to a friendly society or to an Aboriginal health service by the Minister, subject to conditions as provided for under the Act.

It is worthy of note that the Act differentiates between a ‘pharmacy business’ which means ‘… a business that includes the custody of drugs and medicines, the dispensing of medicines on prescription and the supply of scheduled drugs and poisons to consumers by retail …’ and a ‘pharmacy service’ which means ‘… a service that includes the custody of drugs and medicines, the dispensing of medicines on prescription and the supply of scheduled drugs and poisons to patients and consumers …’. Only ‘authorised pharmacy service providers’ can own a pharmacy service. An ‘authorised pharmacy service provider’ is an organisation that operates either an Aboriginal health service, a pharmacy service that is part of a public hospital, or a pharmacy service that is part of a defence force facility.

The Act is silent in regard to the number of pharmacy businesses which can be owned by a pharmacist, a partnership or a corporation in which all directors and shareholders are pharmacists.

The premises occupied by a pharmacy business must comply with standards set by the Northern Territory Pharmacy Board.

A pharmacy or a pharmacy department must be operated under the direct supervision of a pharmacist registered with the board, and authorised pharmacy business owners must notify the board of a pharmacist appointed as pharmacist-in-charge of the pharmacy business. Also, a pharmacist who owns more than one pharmacy or pharmacy department must appoint a pharmacist to be the pharmacy superintendent of those pharmacies or pharmacy departments; such a person being responsible for the conduct of the entity.

Queensland

The ownership provisions are prescribed in Part 4, Division 6A of the Pharmacists Registration Act 2001. Ownership of a pharmacy business is restricted to a person registered with the Pharmacists Board of Queensland, a corporation whose directors and shareholders are all pharmacists, a corporation whose directors and shareholders are a combination of registrants and relatives of registrants and where the majority of shares are held by registrants. Also a pharmacy business may be owned by the Mater Misericordia Health Services Brisbane Limited, or a friendly society that operated a pharmacy business (either in Queensland or another state or territory) at the commencement of the Act.

A registrant may have a beneficial interest in up to five pharmacy businesses or corporations that own pharmacy businesses. A corporation may own up to five pharmacy businesses and a friendly society may own up to six pharmacy businesses. The Act also requires that a pharmacy business operates under the direct supervision of a registrant.

There is no registration or approval of pharmacy premises required under the Queensland Act although the Act does require notification to the board of a business name.

A registrant who owns a pharmacy business or who is a director or shareholder in a corporation with a beneficial interest in a pharmacy business whose registration is cancelled under the Act, or cancelled or suspended under the Health Practitioners (Professional Standards) Act 1999, may continue to own a pharmacy for a period or periods of time approved by the board. Each period must not exceed 3 months. Also, a person who is the spouse of a registrant and because of that relationship is a director or shareholder of a corporation that owns a pharmacy business who stops being a spouse may retain ownership in the pharmacy business for a period of 1 year or for a longer period as determined by the board. Similarly, executors, administrators or trustees of a registrant’s estate may continue to operate the pharmacy business for a period of 1 year or for a longer period as determined by the board.

South Australia

The ownership provisions in South Australia are prescribed in the Pharmacy Practice Act 2007 (the Act).

Ownership of a pharmacy business is restricted to a pharmacist or pharmacists registered with the Pharmacy Board of South Australia or a corporate pharmacy services provider that complies with section 3(5) of the Act. Such corporations are a company limited by shares having the sole object of providing pharmacy services. Only non-pharmacists who are prescribed relatives of a pharmacist may participate as a director of a corporate services provider and share in the distribution of profits. A registrant may have a beneficial interest in a maximum of six pharmacy businesses, which is clarified by the following statement in section 38(4) of the Act:

In determining the number of pharmacies at which a natural person provides pharmacy services, pharmacies at which the person provides pharmacy services as a natural person and pharmacies at which bodies corporate in which the person occupies a position of authority provide pharmacy services must be taken into account.

The Pharmacy Practice Regulations 2007 (the Regulations) at section 12 require that a person must declare an interest in a prescribed business. Also, if that person is the prescribed relative of a registered person, the relationship of the person to the registered person must be declared.

The Friendly Society Medical Association Incorporated is authorised to carry on a maximum of 40 pharmacy businesses.

Pursuant to section 24(1)(d) the Act requires that premises where a pharmacy business is carried out must be registered with the board. The register of pharmacies must include the address of the premises, the full name and nominated contact address of the person who carries on a pharmacy business at the premises, and information as might be prescribed by the Regulations. The registration of premises is an annual registration expiring on 31 December.

A pharmacy business must be carried out under the direct supervision of a pharmacist registered with the board.

Tasmania

The ownership provisions in Tasmania are prescribed in the Pharmacists Registration Act 2001 (the Act). Ownership of a pharmacy business is restricted to pharmacists registered with the Pharmacy Board or a body corporate where all directors and shareholders are registrants or where shareholders are relatives of a registrant with the majority shareholding being held by the registrant.

A registrant or a corporation may hold a beneficial interest in a maximum of four pharmacy businesses.

A pharmacy business must register their business premises with the board.

A pharmacy business must be carried out under the direct supervision of a pharmacist registered with the board.

Victoria

The ownership provisions in Victoria are prescribed in Part 6 of Health Professions Registration Act 2005. Ownership of a pharmacy business is restricted to pharmacists registered with the Pharmacy Board or corporations registered under the Corporations (Victoria) Act 1990 (Vic) where all the directors and shareholders are registered pharmacists and where all the shares and beneficial and legal interest in the shares are held by registered pharmacists, or a company registered under the Corporations (Victoria) Act 1990 (Vic) as a friendly society (subject to a number of additional conditions).

A registrant or a corporation may hold a beneficial interest in a maximum of five pharmacy businesses.

The board has to approve separately the premises and the carrying on of a pharmacy business at the premises prior to the establishment of a pharmacy business. The board may also impose any condition it thinks appropriate on the approval of premises or a pharmacy business or pharmacy department.

A pharmacy business can only be carried out under the direct supervision of a pharmacist registered with the board.

The Act authorises an executor, administrator or trustee of a pharmacist’s deceased estate to carry on the pharmacy business for a period of 6 months or for a further period permitted by the board. Similarly, a person appointed or authorised in the case of bankruptcy or who assumes the administration of a property under a bill of sale or security interest may carry on the pharmacy business for a period of 6 months or for a further period permitted by the board.

Western Australia

Currently, the ownership provisions in Western Australia are prescribed in the Pharmacy Act 1964 (the Act). However it should be noted that the Pharmacists Bill 2006 currently before the Western Australian Parliament preserves the ownership provision of the current Act in that ownership of a pharmacy business is restricted to persons licensed to practise as a pharmaceutical chemist, a corporation or a friendly society.

It is a requirement that pharmacy businesses are registered under the Pharmacy Act Regulations 1976. A registrant or a corporation may hold a beneficial interest in a maximum of two pharmacy businesses.

A pharmacy business must be carried out under the direct supervision of a pharmacist licensed by the Pharmaceutical Council of Western Australia and domiciled in the state.

REVIEW QUESTIONS AND ACTIVITIES

Endnote

1 Wilkinson W. National competition review of pharmacy. Canberra: Council of Australian Governments, 2000.

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