Regulation a bitter pill for centres

THE regulation of the pharmacy industry is hurting property owners and driving retailers out of smaller shopping centres.

Government regulation of the pharmacy industry is evident in almost every aspect of pharmacy operation, from who can practise as a pharmacist to the location of the shop and who can own and run the pharmacy.

A large part of a pharmacy’s income is underpinned by government funded- remuneration, and the fixed retail prices of subsidised medicines dispensed on the Pharmaceutical Benefits Schedule (PBS).

For PBS purposes this has led to restrictions on where dispensing pharmacies can locate.

This obviously affects the pattern of pharmacies within retail developments.

A pharmacy has an approval number that allows it to operate within a territorial area of up to one kilometre.

Because only a certain number of approval numbers are granted per territorial area, smaller shopping centres or strip retail developments can lose their pharmacy without the means to attract a new operator to the area.

Burgess Rawson manager, retail asset management, Cameron Hopkins said the regulations governing the pharmacy industry hadn’t been relaxed for more than 12 years.

“Essentially what the Government has done is introduced regulation that restricts competition amongst pharmacies,” Mr Hopkins said.

“It just doesn’t make sense when you have suburbs without a chemist when one moves out. It’s an obvious case of protectionism – it protects the owners of large shopping centres.”

The larger shopping centres labour under a slightly different set of rules related to the number of outlets in the centre.

If you have a shopping centre with more than 30 shops you can have one pharmacy, and the numbers go up incrementally. So, if the centre has more than 300 shops, it can have three pharmacies.

It’s not just the consumers who suffer if a pharmacy moves out of a retail development. The other retail outlets also are affected by the loss of a key tenant, and this has an impact on the overall value of the surrounding retail properties.

It’s understood the Federal Government is going to extend the territorial area of approval numbers to 1.5km. This means a pharmacy can move, taking its approval number with it, anywhere within a 1.5-km radius without providing any particular reason.

A retail centre operator can apply for a new approval number to operate a new pharmacy in an area under the ‘un-met needs rules’, but it’s a complicated and lengthy process.

“Once a chemist is gone another cannot come into the space unless it meets the un-met needs criteria,” Mr Hopkins said. “If you take a pharmacy away from a smaller centre it has lost one of its key retailers.

When the same thing happens to a large centre it can simply put a new pharmacy into that space. This is called backfilling.

“It’s not fair to owners and it’s not fair to tenants, it’s just illogical,” Mr Hopkins said.

Pharmacy 777 managing director Michael Dillon said it was easier to buy an approval number and transport it than to get a new one.

“I know of a pharmacy that moved about 600 metres up the road to the first stage of a new developement,” Mr Dillon said.

“It was less than one kilometre, so it was quite legal, but it meant that the owner of the shopping centre the pharmacy left could not back-fill the space

WA Retailers Association chief executive officer Martin Dempsey said that, in times gone by, a shopping centre relied on an anchor tenant and two prime tenants, which were usually a newsagent and a pharmacist.

These two prime tenants were often sited at opposite sides of a major gateway or entrance to catch pedestrian traffic entering and leaving the centre.

“There’s no doubt the pharmacy is still a vital part of the retail community today,” Mr Dempsey said.

However, pharmacies rely on selling large volumes of goods to remain profitable, so it’s a competitive market.

Lyn Metcalf, who is the branch director at the Pharmacy Guild of Australia WA Branch, said he was unaware of complaints relating to shopping centres losing pharmacies.

“It depends on whether it’s a strip centre – then a pharmacy can move to a different location and another can’t come in,” Mr Metcalf said. “It hasn’t been raised by anyone to me as a concern. Whether or not they go to other groups I don’t know, but certainly they haven’t come through us.”

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