The Harper review of competition policy will provide an interesting example of government resolve to promote choice, competition, microeconomic reform, and the interests of consumers and citizens ahead of anti-competitive arrangements to shelter particular classes of providers from the sharp forces of the marketplace. The review wants further extension and reinvigoration of the microeconomic reforms set in motion by the Hilmer inquiry in the early 1990s, and which became stalled by the early 2000s. The early reforms put about 2.5 per cent on gross domestic product. A renewed program could do the same again, as well as helping the Australian economy and marketplace adapt to increasing competition and challenge from global economic change. The benefits are seen not only in lower costs, but massively improved choice. But reaction has constituencies too, and experience has shown that reform is hard, and often unpopular. Some politicians, even crusading free marketeers, are not up to the task.
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Harper argues for removal of controls over shopping hours, a more principled (if not necessarily uncontroversial) approach to planning controls, and more competition for taxis, as well as reforms to some of the institutional frameworks by which consumer interests are protected. But perhaps the first test of whether the Abbott government is actually committed to reform will be one of the hardest, with recommendations about removing restrictions over the ownership and location of pharmacies. These would effectively allow pharmacy counters (serviced by qualified pharmacists) in supermarkets. The test will be hard to avoid or delay, if only because a five-year community pharmacy agreement between the government and pharmacists is about to expire.
The pharmacy lobby is notoriously powerful, not least in the councils of the Coalition, which have tended to see pharmacists (and newsagents) as archetypal small businessmen. Their self-interests are often clothed with humbug. One will, for example, soon hear that they are at risk of being crushed by heartless oligopolies, which will, we are invited to infer, dispense with any pretence of friendly service, intimate familiarity with particular customers, general advice about health and possible interactions with drugs, and an array of intelligence-gathering functions on public health issues. To the spectre of small businesses being crushed by big ones will be added claims that arrangements that made safe and secure supplies of drugs available even in small and remote communities – a claimed rationale for some of the anti-competitive arrangements – will promptly fall down. (The Harper team believes that such plainly public-interest results can be obtained more cheaply by tendering, rather than protecting even pharmacists in big cities from legitimate competition. The spectre of the death of the corner shop can be expected to be employed.
The typical pharmacy is an ordinary business, selling a wide range of goods, many with some health associations, if not ones over which the public interest requires particular controls. But the government is a very big player in pharmacy fortunes, and not only because of the clear need to have appropriately qualified people dispensing potentially dangerous drugs. The government, through the Pharmaceutical Benefits Scheme, subsidises many of these drugs and is, thus, a big source of pharmacy income. However, the claim by pharmacies that the protection of these arrangements is yet another reason for insulation from market forces is strongly contested these days, with some observers doubting that the PBS scheme is now working at best effectiveness, or is efficiently providing consumers with drugs at the lowest possible prices. In comparable countries overseas, most prescription drugs are cheaper than in Australia. Bluntly, the case for pharmacy exceptionalism is not strong, and the Harper review arguments seem convincing.
The argument will not be won by logic alone, but by the clamour of interests, and lobbies. When Tony Abbott was health minister in the Howard government, health bureaucrats were told not to fight with pharmacists. It seems doubtful that he has any better appetite, or courage, for conflict now, least of all against key party constituencies. In recent months, this government has thrown in the towel (admittedly against an obstructionist Senate) on virtually every piece of "hard", tough or systemic reform, or saving to the public purse. It is hard to see apparently disarmed and neutered economic ministers, preparing a "dull" budget, girding themselves to fight for apparently abstract matters such as the integrity of markets, choice and consumer interest.
