Influential pharmacy lobby comes out against Chemist Warehouse deal
The Pharmacy Guild, one of the country’s most influential industry groups, says the proposed reverse takeover of Sigma Healthcare by Chemist Warehouse poses “significant questions and risks” to patient care, community pharmacy ownership, and competition in the sector.
In its first intervention into the deal, the details of which are expected to be announced by Monday, the Guild said the tie-up could also jeopardise the future of a government program known as the community service obligation wholesaling, which makes it commercially viable for drug wholesalers to supply PBS medicines to 5800 chemists across the country.
Chemist Warehouse plans to merge with Sigma but The Pharmacy Guild has warned against the deal.
The Guild called on the federal and state governments and the competition regulator to “urgently consider and address” these risks, and warned against what it described as the increased corporatisation of local pharmacies.
On Wednesday, ASX-traded Sigma halted the trading of shares ahead of disclosing details of the creation of an $8 billion pharmacy giant with the reverse listing of Chemist Warehouse, which is controlled by the billionaire Gance and Verrocchi families. About $350 million of fresh equity will be raised via Goldman Sachs, to help fund the enlarged Sigma.
While the founding families and their franchisees, many of whom are also family, will be issued Sigma shares, not everyone is happy about the implications of the transaction – one of the largest drug wholesalers in merging with its biggest customer and the largest pharmacy chain.
“For many decades, the community pharmacy model has guaranteed patients access to vital and life-saving medications without putting profit over patient care,” a Guild spokesman said.
“Fundamental to this outcome is pharmacist-owned community pharmacies combined with a limit on the number of community pharmacies owned, due to the duty of care and clinical governance responsibilities associated with medicines, medicine administration, counselling and patient care.”
The spokesman said with oversight, franchising can “legitimately and conveniently” support many pharmacies, but it has long fought against large corporate interests like the supermarkets coming into the sector.
A year ago, it threatened a political campaign against Woolworths after it made an offer for Australian Pharmaceutical Industries, the owner of Priceline pharmacies, as it sought to wrestle the business away from Wesfarmers. Woolworths’ aspirations of opening dispensaries in store, which never happened, date back to 2003.
The Guild pointed to the strengthening of community pharmacy ownership laws and greater regulatory oversight in Queensland and NSW that support Australians’ access to medicines through the community pharmacy model.
Chemist Warehouse is one of Australia’s most successful retailers, with more than 500 stores posting more than $3 billion in annual turnover. But its growth has not been without controversy, having built the business via a combination of direct pharmacy ownership and partnerships. Some in the industry said this was to circumvent pharmacy ownership laws.
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