The crucial intersection between politics and public policy is tricky terrain to negotiate. Where does one end and the other start? Can they ever be truly disentangled? Is public policy ever free of the compromise and deal-making that characterises politics?

The reality is that elected political leaders must constantly attempt to reconcile what they want to do, based on either ideology or policy analysis, with what the political system will allow them to do in practice. There will be those urging them on; there will also be resistance. This, then, is the arena of contestation in which public policy operates: politics exists wherever there are relations of power.

Inevitably, there are constraints. Concepts such as evidence-based policy and the public interest test serve to, if not counter, then at least moderate political influence. But political influence is not always clearly visible.

The mandatory disclosure of political donations is a useful guide to political influence (real or attempted), but in many cases the real, raw political fight is off the radar. A case in point is the battle in the early 2000s when Woolworths sought to win the right to operate pharmacies.

The federal government exercises significant control over the operation and viability of community pharmacies through the Pharmaceutical Benefits Scheme. Since 1990, the federal health minister and the Pharmacy Guild of Australia have negotiated five-yearly formal agreements (the Australian Community Pharmacy Agreement) that control the number and location of PBS-approved pharmacies.

The election of the Howard government in 1996 saw a major focus on deregulation under its far-ranging National Competition Policy, and pharmacy was firmly in its sights.

The final report of a national review, titled National Competition Policy Review of Pharmacy, dated February 2000, recommended limited deregulation of the ownership arrangements for pharmacy businesses. The review recommended removing any cap on the number of pharmacies a pharmacist may own, allowing friendly societies to continue to own and operate pharmacies unrestricted, and allowing pharmacists to adopt a corporate structure to carry on their pharmacy businesses.

While most of this came under state government jurisdiction, the Council of Australian Governments established a senior officials working group that examined the national review recommendations and, broadly, supported their implementation.

In the wake of the review, the big supermarket chains, Woolworths and Coles, saw an opportunity and began making plans to move into the lucrative pharmacy sector, but met stout resistance from the powerful Pharmacy Guild. Woolworths was especially proactive, publicly extolling the virtues of one-stop shopping and convenience along with promising cheaper prices.

Woolworths' then-chief executive Roger Corbett proposed putting pharmacists in five supermarkets for an 18-month trial funded by the company.

"This is a real, no-risk opportunity for the government to test a concept that has been proven to be successful overseas," he said. "Deregulation will submit pharmacies to the same competitive forces as any other retail operation."

The Pharmacy Guild, for its part, conducted a high-profile campaign, pointing out the community-based nature of existing pharmacies and emphasising professional, personalised health care in contrast to what it portrayed as the cost-cutting anonymity of the supermarket, replete with illustrations from overseas where pharmacies operated out of "hole in the wall" set-ups in supermarkets. In addition, the guild stressed the contradiction of supposedly providing health care and advice while also selling cigarettes and liquor.

To the general public, the battle was taking place on the health care front - but below the surface the real political campaign was being waged.

Both major political parties were divided. In the government, a powerful free-market ideological coterie saw pharmacy as a protected species that needed to be exposed to competition. The then treasurer, Peter Costello, and his adviser (and later Senator and minister) Mitch Fifield, were in this camp. Within Labor, both state and federally, there was broad support for pharmacy - due in part to the work of the well-connected Michael Beahan, former Senate president, who had been hired by the guild. However, shadow finance minister Lindsay Tanner was unsympathetic.

The Pharmacy Guild produced statistics detailing how often people visited their local pharmacies, and especially those in the over-65 cohort, who were largely Coalition voters. Then a series of posters were devised - blunt messages about how the government was bent on destroying the local pharmacy if it bowed to Woolworths' demands. These were to be displayed prominently within pharmacies.

The posters never saw the light of day, but their existence was strategically leaked. At the same time, the Pharmacy Guild organised a series of roadshows targeting the government's most marginal seats, calling on sitting members in delegations featuring local pharmacists and gaining much publicity in local newspapers and television news.

By 2004, Woolworths changed tack, promising that pharmacies in its stores would be owned and run by a pharmacist, not the supermarket chain itself, but it was losing the fight.

The deputy opposition leader Jenny Macklin said bluntly that Labor opposed pharmacies going into supermarkets, while health minister Tony Abbott said the government was looking at ways to stop Woolworths. He said: "The pharmaceutical benefits scheme has quite extensive rules about how pharmaceutical drugs can be dispensed, about who can dispense them and where they can be dispensed."

The climate had notably changed. Competition policy was no longer front and centre.

John Howard knew better than most what damage the guild's campaign could inflict on his government, and in a late night meeting with guild officials in 2004, agreed to sign a new agreement containing a moratorium clause on pharmacy deregulation.

The public announcement, of course, talked only about health care and public concerns, not politics.