Bitter Pills To Swallow
Newcastle Herald
Monday November 20, 2006
YOU'LL remember the pharmacists' pious arguments in their frantic defence of their government-protected monopoly when Woolworths wanted to install pharmacies in its supermarkets.
Pharmacists, pharmacists assured us, were professionals driven by ethics, not greed; they were business owners who put the community before business; they put the interests of their customers above all else.Supermarkets were rapacious mega businesses that wanted nothing but the customers' money.Seldom has hypocrisy been stripped so naked.Just two years later we learn that pharmacists, the very same ethical pharmacists, have been accepting secret kickbacks from drug companies in exchange for recommending the companies' products. Picture the man in the white coat with his right arm extended towards old Mrs Smith assuring her that a particular medicine is best for her and his left arm extended behind him to the medicine's manufacturer.The kickback is not part of a product's profit margin. For pharmacists the profit margin of medicines in the Pharmaceutical Benefits Scheme (PBS) is guaranteed by the Federal Government, an extraordinarily generous arrangement that spares pharmacists the perils of business and competition.The Government negotiates agreed prices for medicines supplied under the PBS then pays the difference between that price and your contribution. The pharmacists' share of the agreed price is set and assured.State and national rules take the protection of pharmacists from the uncertainties of business to a level enjoyed by no other monopoly in Australia: only a pharmacist can own a pharmacy; a pharmacist can own only a limited number of pharmacies; and pharmacies have an exclusive territory.It's this protection of pharmacists from competition that explains the eye-popping figures I found in the Productivity Commission's submission to the National Review of Pharmacy in 1999. These figures are at least seven years old and, given the increasing exposure of other retailers to competition, are probably higher now.The commission reported that the average pharmacy operating profit margin was four times higher than the average for all retailers, 8 per cent against 2 per cent; pharmacy profit per employed person was $8500 compared to the all-retail average of $3300; and pharmacies' return on assets was 17 per cent against the retail average of 7 per cent.But this was not enough for the pharmacists who argued with such dripping sincerity that we were better off having them recommend medicines than buying them in a supermarket for, conservatively, 25 per cent less.They wanted a sly sling for recommending a drug company's medicine over another's "Aah yes, Mrs Smith, your haemorrhoids, you'll find this will give you much more comfort than the other brand" and if you listen carefully you'll hear two cash registers ringing, one behind the counter and one out of sight out the back.Have you ever been surprised by how little price difference there is generally between the main-brand medicine and the generic copies? The reason is that we pay for the generic manufacturers' kickbacks to the ethical pharmacists.If these pharmacists were not breaking the letter of their PBS agreement with the Government they were breaking the spirit of it. To accept the agreed margin then to take an undisclosed kickback at the public's expense is despicable.We pay for the pharmacist's guaranteed profit margin on PBS products, we pay dearly for protecting his monopoly, and we pay for his secret slings.Such is their threat of a dishonest campaign against the Government that in the just-announced PBS shake-up we're paying pharmacists $1.1 billion over four years as compensation for losing the backhanders while continuing to guarantee protection from supermarkets.Why should we be forced to deal with such grubby, greasy hands?jcorbett@theherald.com.au
© 2006 Newcastle Herald
