Memorandum to Cabinet Social Policy and Health Committee Amendments to the Medicines Act 1981

PROPOSAL

1. This paper seeks agreement to implement one of two options for modifying the
   restrictions on the ownership of pharmacies which are currently in the Pharmacy
   Act 1970.

EXECUTIVE SUMMARY

2. The Pharmacy Act 1970 will be repealed when the proposed Health
   Professionals' Competency Assurance Bill (HPCA) is passed in 2002. This provides
   an opportunity to review the existing provisions regarding pharmacy ownership
   and allow pharmacies greater flexibility to respond to the changing needs of the
   health sector.
3. The public policy objective is to ensure the safe and efficient distribution
   of medicines and provision of advice and promote the Government health
   objectives without unnecessarily restricting the ownership and operation of
   retail pharmacies.
4. There are two options for achieving the desired objective.
5. The first option, restricted multiple ownership, restricts non-pharmacists
   from holding more than a minority interest in pharmacies, but allows pharmacists
   to hold a majority interest in multiple pharmacies. The same registration and
   auditing process could assess each pharmacy against each of the current
   requirements. As such no further regulations would be required to control the
   distribution of medicines.
6. The second option, licensed open ownership, allows licensed non-pharmacists
   to own pharmacies. This system relies on formalising the current monitoring and
   auditing of pharmacies into a licensing regime. The change required to formalise
   the current registration and monitoring of pharmacies is that the Medsafe
   (Ministry of Health) would need to be become a formal licensing authority with
   the ability to check the background of people applying for a licence.
7. The Ministry of Health and all other government agencies consulted
   (officials) advise that option two, licensed open ownership, will greatly
   facilitate the integration of primary health care and has the potential for
   savings for Government and consumers. The restrictions on who can own pharmacies
   are out of date and overly prescriptive. Furthermore non-pharmacist owned
   pharmacies are currently operating without unduly impacting on consumer safety.
   Lastly, optometry is the only other industry in New Zealand with restriction on
   non-professionals owning retail outlets. The optometry profession support the
   removal of their restrictions that will occur with the passage of the HPCA.

BACKGROUND

8. Cabinet agreed to repeal the Pharmacy Act 1970, when the HPCA is passed (CAB
   Min (01) 15/1). Under generic provisions that relate to all health
   professionals, the HPCA will include provisions relating to the regulation of
   pharmacists. However, the ownership restrictions contained in the Pharmacy Act
   1970 will remain only if there is a deliberate decision to incorporate them in
   either the new or existing legislation.
9. Current pharmacy ownership provisions relate to medicines and provision of
   advice. It would therefore be more appropriate for any restrictions to be
   included in the Medicines Act 1981, which contains controls on the supply and
   safety standards for medicines, rather than the HPCA, which will contain
   provisions relating to the safe practice of health professionals.
10. The ownership restrictions contained in the Pharmacy Act 1970:
    1. prohibit non-pharmacists from having more than a 25% ownership interest in a
       pharmacy
    2. prevent a pharmacist owning more than one pharmacy
    3. restrict drug wholesalers from holding an interest in a pharmacy business
    4. prohibit pharmacies advertising that they operate in conjunction with any
       other business
    5. prohibit direct public access between a pharmacy and any other place of
       business, including a medical practice.
11. In repealing the Pharmacy Act 1970 issues a) and b) above need to be
    addressed, namely:
    1. restricting non-pharmacists from owning pharmacies
    2. multiple ownership.
12. Irrespective of the decisions on multiple ownership and open ownership there
    are a number of provisions that will better ensure the safe distribution of
    medicines.

COMMENT

13. In considering the options for pharmacy ownership to be included in the
    Medicines Act 1981 there are two key policy issues:
    1. Safety - protecting the public from the risk of inappropriate use of
       medicines
    2. Flexibility to respond to new approaches to service delivery - Service
       delivery is increasingly focused on integration both within various primary care
       providers and between primary and secondary care providers.

Safety

14. It is proposed that the safe distribution of medicines is ensured through
    three mechanisms:
    1. requiring pharmacies are under the supervision and control of a pharmacist
    2. requiring the appointment of a superintendent pharmacist
    3. requiring security arrangements for medicines when the pharmacist is absent
15. Officials, the Pharmacy Guild and the Pharmaceutical Society all recommend
    that section 41 of the Pharmacy Act 1970 should be reinstated in the Medicines
    Act 1981. Section 41 requires a pharmacy to be under the immediate supervision
    and control of a pharmacist when open to sell medicines.
16. In addition, officials and the industry recommend that a new clause is
    inserted to the Medicines Act 1981 requiring that every pharmacy be able to be
    secured to prevent unauthorised persons (such as night staff and cleaners)
    having access to the dispensing area or any restricted medicines when the
    pharmacist is absent.
17. I also recommend that another a new clause is added to the Medicines Act
    1981 requiring that any company or individual owning more than one pharmacy
    appoint a pharmacists to the position of 'superintendent pharmacist'. If the
    pharmacist in charge of a pharmacy is not the superintendent, then legally they
    act "under the direction" of the superintendent. That is, the superintendent is
    legally and ethically responsible for the whole of the company's pharmacy
    business.
18. If safety concerns arise Medsafe (the licensing authority) has three avenues
    of pursuit:
    1. the individual pharmacist in charge of the pharmacy
    2. the superintendent pharmacist
    3. the company that owns the pharmacy.
19. The superintendent system provides a lower level resolution, has the
    potential to save court costs for both parties, and ensures that a member of the
    company can always be held accountable for the safe distribution of medicines in
    all pharmacies owned by the company. This system is used successfully in the
    United Kingdom.

New Approaches to Service Delivery

20. The Government has made a public commitment to improve primary care and
    facililate the integration of primary and secondary care services (e.g. NZPHD
    Act 2001 s 3 (4)). The policy decisions on multiple pharmacy ownership and open
    pharmacy ownership need to allow service providers to integrate with other
    service providers and allow pharmacy service providers the flexibility to be
    innovative in delivering services and meet the objectives of the New Zealand
    Health Strategy.

PHARMACY OWNERSHIP

21. There are two issues to be resolved with regard to pharmacy ownership.
    Whether ownership should be restricted to one pharmacy; and whether
    non-pharmacists should be able to own the majority share in a pharmacy.

Multiple Ownership

22. The restrictions on owning more than one pharmacy were enacted to ensure no
    single pharmacy owner could gain monopoly control of the market. Since those
    restrictions were imposed on pharmacists in 1970 the Commerce Act 1986 has been
    established. The Commerce Act 1986 safeguards against anti-competitive behaviour
    in a comprehensive but less prescriptive manner.
23. The Commerce Act 1986:
    1. prohibits firms that have a substantial degree of power in a market from
       taking advantage of that power for anti competitive purposes
    2. prohibits mergers or business acquisitions that substantially reduce
       competition
    3. provides for the imposition of price controls on goods and services if
       competition is limited and it is in the public interest to do so.
24. Allowing the Commerce Act 1986 to safeguard against anti-competitive
    behaviour instead of a prescriptive limit on the number of pharmacies owned has
    the potential to ensure anti-competitive behaviour does not occur while allowing
    the efficiency gains of multiple ownership.
25. Officials, the Pharmacy Guild and the Pharmaceutical Society agree that
    restrictions in the Pharmacy Act 1970 on pharmacy owners owning more than one
    pharmacy should end when the HPCA is passed.

Open Ownership

26. The Pharmacy Act 1970 currently prohibits non-pharmacists from having more
    than a 25% ownership interest in a pharmacy. Officials consider that this
    provision is overly restrictive and may be impacting negatively on the
    Government's health goals.
27. The Ministry of Health has consulted extensively with the pharmacy retail
    industry on this issue. This paper presents the stance of both groups. There are
    two options for pharmacy ownership.
    1. Restricting Non-pharmacist Ownership - Retaining the provisions restricting
       non-pharmacists from owning pharmacies (Pharmacy Guild and Pharmacy Society
       preferred option) or
    2. Licensed Open Ownership - Improving the existing system of registering and
       monitoring pharmacies by establishing a licensing regime and allowing
       non-pharmacists to be owners (Ministry of Health, Treasury, Ministry of
       Consumer Affairs, Ministry of Economic Development, Ministry of Women's Affairs,
       Police, Te Puni Kokiri, Ministry of Foreign Affairs and Trade, Ministry of
       Justice and Pharmac and some pharmacists preferred option)

1. a) Restricting Non-pharmacist Ownership

28. This option is not supported by some pharmacists. Moreover, apart from the
    Pharmaceutical Society and Pharmacy Guild, the Ministry of Health is not aware
    of any other organisation or individual that supports this option.
29. Reasons for maintaining the provisions restricting non-pharmacists from
    owning pharmacies are based on the uniqueness of pharmacy. Unlike other health
    occupations, in addition to selling services, pharmacists sell products
    (medicines/drugs) which are potentially unsafe if used inappropriately. Those
    supporting the present ownership provisions suggest that preventing
    non-pharmacists from owning pharmacies provides a better guarantee of safe
    behaviour within pharmacies both in relation to the services provided and the
    products sold.
30. All pharmacists are subject to the Pharmaceutical Society's Code of Ethics
    and associated disciplinary process. Ownership restrictions therefore provide an
    indirect means to address any errant ownership concerns through the pharmacists'
    disciplinary processes. Officials do not consider that ownership restrictions
    are an appropriate mechanism to ensure safe distribution of medicines and
    inhibit the delivery of integrated health services
31. Officials believe the restrictions on non-pharmacists owning pharmacies are
    excessive when viewed in light of other controls on pharmacy owners and other
    developments in the pharmacy retail industry.
32. Other health services without ownership restrictions have not been affected
    by having non-professional owners. Optometry is the only other industry in New
    Zealand with this sort of ownership restriction and this will be removed, with
    the support of the profession and industry, with the passage of the HPCA. The
    Pharmacy Guild argue that pharmacy is different because the supply of medicines
    is unique to their profession. However, even within the pharmacy industry there
    is no evidence that non-pharmacist ownership has jeopardised the quality or
    safety of:
    1. the services offered by 15 existing 'grand-parented' United Friendly Society
       pharmacies
    2. pharmacies within public and private hospitals
    3. medicine manufacturing businesses, wholesalers, medicine packing businesses,
       (who also deal in and stock large quantities of drugs).
33. Officials consider that the issue of the control and safe distribution of
    medicines is addressed in the Medicines Act 1981 and other existing legislation.
    Under the Medicines Act 1981 it currently is, and will continue to be, illegal
    for a pharmacy owner to sell or give away medicines improperly. In addition,
    other controls ensuring the safe distribution of medicines include the:
    1. Misuse of Drugs Act 1975
    2. Ministry of Health's New Zealand Code of Good Manufacturing Practice for
       Manufacture and Distribution of Therapeutic Goods Part 3: Compounding and
       Dispensing
    3. Pharmaceutical Society's Quality Standards for Pharmacy in New Zealand
    4. contractual obligations of the Ministry of Health Pharmacy Services
       Agreements
    5. Code of Health and Disability Services Consumers' Rights
    6. Consumer Guarantees Act 1993.
34. There have been other developments in the pharmaceutical sector since the
    introduction of the Pharmacy Act 1970. The following measures have improved the
    safety of medicine distribution:
    1. The information consumers receive with pharmaceuticals has substantially
       improved
    2. Pharmacies are now required to be registered with the Pharmaceutical Society
    3. Monitoring of pharmacy standards has improved since compliance the became a
       requirement of Ministry of Health/Pharmacy contracts.
35. In the future, the HPCA will also establish more comprehensive mechanisms
    for ensuring the competency of pharmacists.
36. If an additional safeguard is required, in addition to the Acts and controls
    above, they should be provided through safety regulations such as the Health and
    Disability Services (Safety) Bill rather than through ownership restrictions.
37. Officials consider that continuing the current ownership restrictions
    presents a barrier to achieving government health goals of improved access to
    medicines and the provision of integrated health care services. The current
    provisions in the may be inhibiting the populations' access to medicines by
    maintaining cost and transport barriers.
38. The 1996 New Zealand Health Survey revealed that ten percent of adults who
    received a prescription for an item in the last year did not collect the
    medicine. Thirty seven percent of these people did not collect the prescription
    medicine because of the cost. Licensed open ownership of pharmacies, has the
    potential to allow a more competitive pharmacy retail market that may reduce the
    costs consumers pay for non or partially subsidised subscriptions.
39. Allowing non-pharmacists to own pharmacies will also allow large retail
    chains to own and subsequently locate a pharmacy in or near their retail outlet
    and allow one entity to own integrated multiple health service providers.
    Co-location of pharmacies with businesses that are frequented by low income
    people (such as supermarkets) or co-location of pharmacies with other health
    service providers will reduce time and transport barriers that could impact on
    the uptake of medicines by those population groups most in need.
40. Some pharmacists perceive that there may be advantages to prescribing rights
    being extended to many pharmacists in the future. Due to the need to separate
    the medicines prescriber from the person gaining the financial returns from
    prescriptions this development would only be possible if non-pharmacists can own
    pharmacies.
41. Lastly, the current restrictions are not facilitating the development of
    accessible pharmacy services. Since 1988 there has been a gradual decrease in
    the number of pharmacies and pharmacists in the health sector. This signals that
    access to medicines and appropriate advice to consumers may be a problem in the
    future. It is interesting to note, however, that proportionally the number of
    female pharmacists is growing.

2. Licensed Open Ownership

42. The Pharmacy Act 1970 currently prohibits non-pharmacists from having more
    than a 25% ownership interest in a pharmacy. The Ministry of Health, The
    Treasury, Police, the Ministry of Justice, Ministry of Economic Development,
    Pharmac, Ministry of Consumer Affairs, Ministry of Women's Affairs, Te Puni
    Kokiri, Ministry of Pacific Island Affairs, Ministry of Foreign Affairs and
    Trade, and some pharmacists support allowing licensed non-pharmacists to hold
    any percentage interest in pharmacies.
43. The proposed system relies on formalising the current monitoring and
    auditing of pharmacies into a licensing regime. Medsafe (Ministry of Health)
    would become the formal pharmacy licensing authority with the ability to check
    the background of people applying for a pharmacy licence.

Benefits

44. The potential gains resulting from the licensed open ownership include:
    1. facilitating the integration of well-capitalised pharmacy services with
       other primary health care providers in line with the Primary Health Care
       Strategy
    2. improved mechanisms for ensuring the safe distribution of medicines
    3. savings for the Government/taxpayer in the form of lower dispensing fees
    4. a more competitive pharmacy retail market that may reduce the costs
       consumers pay for unsubsidised or partially subsidised medicines
    5. improved pharmacy services in remote areas
    6. more diversity in the delivery of pharmacy services
    7. the addition of the retailing expertise and experience of established
       organisations in New Zealand and international pharmacy chains
    8. the removal of the cost of running the Pharmacy Authority (a District Court
       judge appointed by the Minister of Health, who approves applications to run a
       pharmacy which are otherwise contrary to the ownership restrictions)
    9. the flexibility to allow prescribing rights to extend to pharmacists in the
       future
45. These potential savings from licensed open ownership are likely to be
    significant and long lasting.

Costs

46. Licensing would impose a small additional cost on pharmacist owners, and
    create a small administrative burden. It should be possible to automatically
    grant licences to existing pharmacy owners and start the formal licensing
    process from that point. The Ministry is not seeking any additional funding to
    cover the costs of the licensing regime.

Logistics

1. Establishing a licensing regime

47. Allowing non-pharmacists to become owners of pharmacies will mean non-
    pharmacists will become the owners of the medicines held in their stock. The
    requirements of the Quality Standards for Pharmacy in New Zealand and the
    accompanying Pharmaceutical Society's disciplinary proceedings would not apply
    to non-pharmacists under existing legislation. Although, when open to sell
    medicines, the pharmacy will have to be under the control of a pharmacist the
    non-pharmacist owner will own the medicines that are in his/her stock. Further
    controls will be needed on pharmacy owners to ensure they do not act
    inappropriately with these medicines.
48. Further controls could be applied through improving the existing
    registration and monitoring regime to a licensing regime.
49. The current registration and auditing regime is effectively a licensing
    regime. Current owners are required to adhere to legislative and contractual
    obligations and run their businesses according to good practice codes:
    1. Medicines Act 1981and the Misuse of Drugs Act 1975
    2. Ministry of Health's New Zealand Code of Good Manufacturing Practice for
       Manufacture and Distribution of Therapeutic Goods Part 3: Compounding and
       Dispensing
    3. Pharmaceutical Society's Quality Standards for Pharmacy in New Zealand
    4. d)contractual obligations of the Pharmacy Services Agreements under the
       Ministry of Health dispensing contract.

50. .The change required to formalise the current registration and monitoring of
    pharmacies into a licensing regime is that Medsafe would become a formal
    licensing authority with the ability to check the background of people applying
    for a licence.
51. .Currently a pharmacy cannot be deregistered directly. The licensing regime
    has the added advantage that it allows the licensing authority (Medsafe) to
    apply a low level resolution (removal of a license) more closely to the area
    where the owner committed wrong (owning a pharmacy).
52. .The provisions in the Medicines Act 1981 currently require wholesalers,
    packers and manufacturers of medicines to be licensed. A similar arrangement for
    retailers would enable Medsafe to reject applications by unsuitable people, for
    example, people who have been convicted under the Medicines Act 1981 or the
    Misuse of Drugs Act 1975. It would also provide a mechanism for removing a
    licence from errant owners.
53. If owners were required to apply for a licence before being allowed to
    operate, this would place very strict and enforceable controls on the possession
    and sale of pharmaceuticals. As such, the following comprehensive requirements
    on licensees within the Medicines Act 1981 could apply to retail pharmacy
    owners:
    1. the applicant for a licence must indicate the description of the medicines
       for which the licence is being sought
    2. the licensing authority (Medsafe) can request appropriate information,
       documents, samples and other material accompany the application
    3. the applicant must have sufficient knowledge of the obligations of a licence
       and of the hazards associated with the medicines before an application is
       approved
    4. the premises and equipment the applicant proposes to use must be suitable
       and adequate for the purpose for which the licence is sought
    5. adequate arrangements must be made in the pharmacy for the making,
       maintaining and safe keeping of medicines that are sold
    6. the licensing authority (Medsafe) can suspend the licence for a period to
       allow investigation and, after investigating the evidence, cancel the licence.

54. In addition, any entity owning more than one pharmacy would be required to
    appoint one of their pharmacists to the position of a superintendent pharmacist.
    This pharmacist is legally and ethically responsible for the professional
    standards of the entity that owns the pharmacies.
55. Some additional disciplinary avenues may be needed. Allowing Medsafe the
    authority to fine errant owners up to $40, 000 would provide Medsafe with the
    option to impose a penalty without taking the ultimate sanction of revoking the
    licence.
56. In addition, the authority may require the mandate to forbid the principal
    owners of the pharmacy who acted inappropriately to own, hold an interest in, or
    operate, a pharmacy for a stated period such as five years. This restriction
    will refer to the broad definition of 'interest' as defined under section two of
    the Pharmacy Act 1970 so as to cover off possible avenues through which errant
    owners may attempt to own pharmacies.

2. Transition period

57. Lifting the restriction on non-pharmacists owning pharmacies may result in a
    sharp increase in competition and changes in the value of some pharmacies. A
    transition period of three years before the changes are executed would allow
    current owners to better prepare for the competition and possible change in the
    value of their business.
58. This transition period could be constructed to allow a gradual transition to
    open ownership. One option is to:
    1. maintain the requirement that 75 percent of each pharmacy be owned by a
       pharmacist in the first year following the passing of the HPCA
    2. reduce the proportion of a pharmacy required to be owned by a pharmacist to
       49 percent in the second year, and
    3. allow non pharmacists to own 100 percent of pharmacies in the third and
       subsequent years.

3. Restricting Certain Types of Owners

59. Officials recommend that a section be included in the Medicines Act 1981
    allowing Medsafe the authority to exclude people who are not fit and proper from
    obtaining a license. This will give Medsafe the freedom to exclude people with
    previous drug convictions.
60. Concerns have been raised that a medicine prescriber who owns a pharmacy
    could increase profits by increasing prescriptions. This risk is partly
    mitigated by:
    1. capitation
    2. the fact that medicine prescribers can seldom direct patients to a
       particular pharmacy, monitoring of prescribing patterns
    3. two sections in the Medicines Act 1981 restricting proprietors or managers
       of pharmacies from giving any medical practitioner any commission on
       prescriptions.
61. There are still concerns, however, about medicine prescribers owning
    pharmacies. It is recommended that the Medicines Act 1981 restrict medicine
    prescribers, and companies majority or minority owned by medicine prescribers,
    from owning pharmacies. This restriction will refer to the broad definition of
    'interest' as defined under section two of the Pharmacy Act 1970 so as to cover
    off possible avenues through which prescribers may attempt to own pharmacies.
62. The range of health professionals able to prescribe may expand further in
    the future. To future proof against these developments the Medicines Act 1981
    the restrictions should cover 'medicine prescribers' rather than listing each
    the health professional group.
63. Some pharmacists perceive that there may be advantages to allowing
    pharmacists to prescribe. Due to the need to separate the medicines prescriber
    from the person gaining the financial returns from prescriptions this
    development would only be possible if non-pharmacists can own pharmacies.
64. Officials and the industry agree that the Medicines Act 1981 should not
    restrict wholesalers from owning pharmacies.
65. The current provision restricting non-pharmacists from owning pharmacies
    probably reflects a time when wholesalers could negotiate profitable deals with
    certain pharmaceutical companies and then control supply, however, the large
    price reductions negotiated by Pharmac have reduced the surpluses pharmaceutical
    companies make on medicines. This has reduced the ability of pharmaceutical
    companies to offer wholesalers or pharmacies incentives for supplying a
    restricted range of medicines. In addition, the reduced range of fully funded
    options available in some medicines now determines demand at a
    prescriber/pharmacy level more than wholesaler arrangements.
66. Lastly some pharmacy wholesalers currently have an interest in pharmacy.
    This interest has not proved detrimental to the safety of consumers or caused
    anti-competitive behaviour in pharmacies.

International Comparisons

67. Open ownership is relatively common internationally. The United Kingdom,
    Eire, Poland, Switzerland, Italy, Holland, Norway, Belgium, Hungary, the Czech
    Republic, Singapore, Malaysia, and Brazil do not restrict the ownership of
    pharmacies to pharmacists. In Canada, with the exception of Quebec, Nova Scotia
    and Ontario, the remaining eight territories allow non-pharmacists to own
    pharmacies. In the United States, with the exception of North Dakota, all states
    allow non-pharmacists to own pharmacies.
68. Licensing arrangements similar to the regime suggested under option two in
    this paper exist in Ireland, the United Kingdom, Norway, Belgium and Holland.
69. Ownership is restricted to pharmacists in Australia, Austria, Denmark,
    France, Germany, Luxembourg, Israel, South Africa and Iceland.
70. Australia has recently reviewed its restrictive ownership provisions in
    light of competition policy and decided to maintain the restrictions on
    non-pharmacists owning pharmacies and continue to allow multiple ownership of
    pharmacies. However, the review did not include analysis of the capability of
    other possible regulatory means for ensuring the safe and efficient distribution
    of medicines. In addition, the review did not analyse how the restrictions would
    impact on primary health care strategies. As such the same policy decision may
    not be applicable to the New Zealand setting.

OTHER PROPOSED AMENDMENTS

71. There are some additional sections within the Pharmacy Act 1970 not related
    directly to multiple ownership or non-pharmacist ownership that officials and
    the industry agree should be transferred to the Medicines Act 1981:
    
    
    1. Section 49 (1) which restricts pharmacists, proprietors or managers of
       pharmacies from giving or offering to give any medical practitioner or any other
       person any commission on prescriptions or supplying medical practitioners with
       prescription forms with the name or address of the pharmacy
72. The industry and officials also agreed that the following sections from the
    Pharmacy Act 1970 should not be transferred to the Medicines Act 1981:
    
    
    2. Section 48(1) which restricts the use of signs and advertisements that
       are likely to cause any person to believe that the pharmacy business is carried
       on in conjunction with, or as part of, any other business carried on in the
       building in which the pharmacy is situated

    3. Section 48(2) which restricts a proprietor from permitting access
       directly between the pharmacy and other places of business or running a pharmacy
       where a customer has to walk though another place of business to gain access

    4. Section 49 (2) which restricts any proprietor of a pharmacy from
       providing any means of access directly between the pharmacy and any premises
       occupied by a medical practitioner.
73. Given the other requirements placed on pharmacists with regard to the
    dispensing of pharmaceuticals, it is difficult to determine the consumer
    benefits or safety concerns arising from the above three restrictions. These
    restrictions are, or will soon become, critical barriers to the development of
    closer links between pharmacists and other members of the primary health care
    team.

CONSULTATION

74. A discussion document on the proposed HPCA was released in November 2000.
    The Pharmaceutical Society and the Pharmacy Guild supported the retention of
    ownership by pharmacists. The Retail Merchants Association of New Zealand, did
    not dispute the ongoing necessity for instore pharmacies to be managed by
    licensed pharmacists, but asked that the current ownership provisions in the
    Pharmacy Act 1970 not be reinstated.
75. The two options have been developed in conjunction with the Pharmaceutical
    Society and the Pharmacy Guild. The Pharmaceutical Society and the Pharmacy
    Guild support option one. Some pharmacists support option two.
76. The Treasury, Police, the Ministry of Justice, Ministry of Economic
    Development, Pharmac, Ministry of Consumer Affairs, Ministry of Women's Affairs,
    Te Puni Kokiri, and Ministry of Foreign Affairs and Trade support option two.
77. The Department of Prime Minister and Cabinet, the Department of Labour, the
    State Services Commission, and the Ministry of Pacific Island Affairs were also
    given the opportunity to comment on this paper

FINANCIAL IMPLICATIONS

78. Option two of this paper will result in a small increase in costs for
    pharmacy owners. Pharmacies currently pay an annual registration fee of $675 per
    annum to the Pharmaceutical Society. In addition the Ministry of Health, DHB's
    (formerly the HFA) contribute $500 each to the cost of audits every four years.
    In order to cover the costs of running a licensing regime pharmacy owners will
    be required to pay an additional $250 a year to obtain a license to own a
    pharmacy.
79. The Ministry of Health is not seeking any additional funding to cover the
    cost of the licensing regime. Any additional cost faced by the Ministry as a
    result of this regime will be recovered from the license applicants.

LEGISLATIVE IMPLICATIONS

80. The recommended amendments to the Medicines Act 1981 are consequential to
    the repeal of the Pharmacy Act 1970. The majority of the existing provisions of
    the Pharmacy Act 1970 will be covered by new provisions in the Health
    Professionals' Competency Assurance Bill.

HUMAN RIGHTS ACT 1993

81. The recommendations in this report are consistent with the Human Rights Act
    1993.

REGULATORY IMPACT STATEMENT

82. A regulatory impact statement and compliance cost statement is attached.

PUBLICITY

83. A press release will be prepared when the legislation is ready for
    introduction to the House.

ON 13 AUGUST 2001, FOLLOWING REFERENCE FROM THE CABINET EDUCATION AND
HEALTH COMMITTEE (EHC), CABINET:

CAB (010) 25/12

AMENDMENTS TO THE MEDICINES ACT 1981

Background

1. noted that the Health Professionals' Competency Assurance (HPCA) Bill
   is currently being drafted and that this Bill will repeal the Pharmacy Act 1970;
2. noted that much of the content of the Pharmacy Act 1970 will be
   reflected in the HPCA Bill, but that there are some provisions specific to
   pharmacies which, if they are to be retained, are better included as amendments
   to the Medicines Act 1981;

General Issues

3. agreed to amend the Medicines Act 1981 to include the current section
   41 of the Pharmacy Act 1970 which provides that pharmacies must always be under
   the supervision and control of a pharmacist when open to sell medicines;
4. agreed to carry over section 49 (1) of the Pharmacy Act 1970, which
   restricts pharmacists from giving any prescriber or any other person any
   commission on prescriptions or supplying prescribers with prescription forms
   with the name or address of the pharmacy, to be included in the Medicines Act
   1981;
5. agreed to amend the Medicines Act 1981 to add a new provision, not
   currently in the Pharmacy Act 1970, requiring every pharmacy to be secured such
   that no person can have access to the pharmacy area and the prescription
   medicine stock when there is no pharmacist present;
6. agreed that sections 48 and 49(2) of the Pharmacy Act 1970, which
   currently restrict pharmacies from having direct access to or from any other
   businesses, advertising or operating in conjunction with another business,
   should not be included in an amended Medicines Act 1981, and will therefore be
   repealed;

Pharmacy Ownership

7. noted that any person, including a person who is not a pharmacist,
   may currently manufacture medicines, pack medicines or sell medicines by
   wholesale if they have a licence to do so issued under the Medicines Act 1981;
8. noted that the current pharmacy ownership restrictions in the
   Pharmacy Act 1970 are that:
   8.1  no individual, apart from a pharmacist, may own a pharmacy, and no
   individual pharmacist may own more than one pharmacy;

   8.2  a company may own a pharmacy if at least 75% of the share capital is
   held by a pharmacist(s), effective control is invested in that pharmacist(s),
   and no member of the company holds an interest in another pharmacy;

9. agreed that the current restrictions on multiple pharmacy ownership
   not be reinstated in the Medicines Act 1981;
10. agreed that a clause be added to the Medicines Act 1981 requiring
    that any entity owning more than one pharmacy appoint a superintendent
    pharmacist as legally and ethically responsible for the professional standards
    of the entity that owns the pharmacies;
11. agreed to repeal the current restrictions on non-pharmacist ownership
    and amend the Medicines Act 1981 to introduce a licensing regime for pharmacies,
    which would replace the registration of pharmacies under the Pharmacy
    Registration Regulations 1972 and create improved powers for controlling
    pharmacy owners;

Licensing Regime

12. agreed to the introduction of a licensing regime to:
    12.1  allow the licensing authority (Medsafe) to exclude people they believe
    to be unfit to own a pharmacy, to be included in the Medicines Act 1981;

    12.2  allow Medsafe the ability to place fines of up to $40,000 on errant
    owners;

    12.3  allow the licensing authority to forbid the principals of the pharmacy
    in error to own, hold an interest in, or operate, a pharmacy for a stated period
    such as five years, and include section 2 of the Pharmacy Act 1970 defining
    interest';

    12.4  restrict medicine prescribers and companies owned by medicine
    prescribers from owning pharmacies, to be included in the Medicines Act 1981;

    12.5  transfer section two of the Pharmacy Act 1970, which broadly defines
    "interest", in the Medicines Act 1981 to cover off possible avenues through
    which errant owners and medicine prescribers may attempt to own pharmacies;

    12.6  include a transition pathway to open ownership by:

    12.6.1  maintaining the requirement that 75 percent of each pharmacy be
    owned by a pharmacist in the first year following the passing of the HPCA Bill;

    12.6.2  reduce the proportion of a pharmacy required to be owned by a
    pharmacist to 49 percent in the second year;

    12.6.3  allow non-pharmacists to own 100 percent of pharmacies in the third
    and subsequent years.

Financial Implications

13. noted that any additional costs incurred by the Ministry of Health
    will be funded from registration and audit fees recovered from pharmacies and
    the appropriation impact will be included in subsequent Budget Baseline Updates
    if required;

Drafting Instructions

14. invited the Minister of Health to issue drafting instructions to
    Parliamentary Counsel Office to give effect to the decisions set out in this
    minute;

Further Work

15. noted that the Minister of Health will prepare briefing material for
    the government caucuses on the decisions set out in this minute;
16. invited the Minister of Health to report as soon as possible to EHC
    and Cabinet on the longer term role of pharmacies in the development of primary
    healthcare, and the associated implications for health funding arrangements.