Healthy Skepticism Library item: 2162

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Publication type: news

Bryden-Brown S.
Drug giants underwrite chemists
The Weekend Australian 2001 May 193

Full text:

Pharmacies may be playing to drug wholesalers’ scripts, reports Sarah Bryden-Brown

NEXT time your pharmacist recommends a certain type of vitamin, ask whether it’s because it’s the best product for you or because its manufacturer may have guaranteed your pharmacist’s mortgage.
Pharmacists have accepted $1.5billion in loans or bank guarantees from the three big drug wholesalers and manufacturers — Sigma, Australian Pharmaceutical Industries and FH Faulding. In return, the pharmacists must purchase 90 per cent of their stock from them.
All three companies will go guarantor for a pharmacist who wants to buy a business. API will also lend money.
Sigma NSW business development manager Vince Battiato said pharmacists who have loans guaranteed by the company must use it as their primary wholesaler.
``The same scheme exists for all three wholesalers,’‘ he said.
The hidden connections have shocked the Australian Medical Association and the Australian Competition and Consumer Commission.
``We are horrified at the potential ethical problems this presents,’‘ AMA vice-president Trevor Mudge said. ``Customers are expecting the pharmacist to say, `take this cold remedy because it is the best, not because it is owned by the provider of my mortgage’.’‘
Pharmacists have ranked consistently among the top two professions for their honesty and ethical standards, according to Bulletin-Morgan polls.
The ACCC’s Sitesh Bhojani said he was concerned consumers were not being properly informed and even misled. If pharmacists were being forced to purchase 90 per cent of their stock from one manufacturer, he said, it could be a breach of the Trade Practices Act.
One pharmacist who owns a chemist funded by Australian Pharmaceutical Industries in country NSW said all three companies enforced the 90 per cent rule.
``Sigma offers a deal whereby if you spend around $100,000 a month they’ll give you 10 per cent off the price of your purchases. API have a similar deal,’‘ he said.
Victor Ing purchased his Emu Plains chemist in NSW 11 years ago with a bank loan.
``That’s one of the reasons I went with a bank instead of a drug wholesaler, so I can buy from any one of the three wholesalers,’‘ he said.
``Being independent means you can source a much wider range and not be tied to one.’‘
NSW Pharmacy Board registrar Ian Dean said pharmacists were obliged under the Pharmacy Act to be in control of their pharmacies.
The board was not opposed to loans or guarantees for pharmacists, but a deal to buy 90 per cent of stock from one company could put them in breach of the act.
Mr Dean estimated Faulding, API and Sigma have combined bank guarantees of $1.5billion for pharmacies around the country.
He said: ``The reality is, if you have just borrowed a million dollars from Faulding you will buy from Faulding.’‘
In 1990, the number of pharmacies was limited after negotiations with the federal Government and the Pharmacy Guild of Australia.
In NSW, there were 2200 pharmacies 10 years ago; now there are 1750.
Prices of pharmacies have risen now that it is a protected market, making it more difficult for pharmacists to raise enough collateral to satisfy banks’ lending requirements.
When Victorian Pharmacy Guild president Bill Scott was asked if it was a conflict for drug wholesalers such as Sigma to underwrite pharmacists, he said: ``Yes and no. However, I should tell you I am also a director of Sigma.’‘
Faulding and API did not return calls.