URGENT UPDATE: Blooms the Chemist has suffered a significant legal blow that could reshape the pharmacy industry in Australia. The Supreme Court of New South Wales has ruled against Blooms in a critical case regarding the ownership of a pharmacy in Cronulla, which may have far-reaching implications for major pharmacy chains, including ASX-listed Sigma Healthcare.
The court’s decision, handed down last week, rejected an application from Tran Pharmacy to operate under the Blooms brand, citing that Blooms would maintain an unlawful “financial interest” in the business. This ruling aligns with regulations in NSW that strictly limit pharmacy ownership to registered pharmacists, a measure intended to protect public health.
According to legal experts, this ruling will lead to intensified scrutiny of existing pharmacy agreements and ownership structures across the multi-billion dollar sector.
“The court found that the arrangements between Tran and Blooms conferred influence over and an interest in the profitability and value of the business,”
stated Suzy Madar, a partner at King & Wood Mallesons. She emphasized that this could trigger a thorough evaluation by regulators of how pharmacy franchises operate.
This decision poses serious challenges for Chemist Warehouse, one of the largest pharmacy operators in Australia, which has relied on flexible ownership structures to expand its reach. Currently, Chemist Warehouse operates nearly 500 stores under the Chemist Warehouse brand and is part of Sigma, which has ambitions to strengthen its network further. Sigma will hold its first annual meeting with shareholders on Wednesday, November 8, 2023, in Melbourne, where the ramifications of this ruling may be discussed.
In NSW, pharmacy ownership regulations are particularly stringent, requiring that only registered pharmacists hold shares in pharmacy businesses. The ruling against Blooms reinforces these rules, which have frustrated many industry players. Earlier this year, the Pharmacy Council of NSW denied Blooms’ application, indicating that its financial arrangements with Tran Pharmacy violated ownership laws. The council’s statement praised the court decision, affirming its commitment to maintaining regulatory standards in the industry.
As the pharmacy landscape evolves, the implications of this ruling could be widespread. “We anticipate more vigorous assessments by regulators of existing arrangements,” Madar noted, suggesting that many pharmacy franchise agreements may now be at risk of reevaluation.
The financial stakes are high, as Blooms reported a net profit of $27.5 million last financial year and operates 120 pharmacies nationwide. The company has indicated that the ruling may affect its agreements with other pharmacy partners, which could lead to further disruptions within the sector.
With similar ownership restrictions soon to be implemented in Queensland, the pharmacy industry is bracing for a wave of regulatory challenges. The Pharmacy Guild, which represents independent pharmacies, has actively opposed any moves toward deregulation, emphasizing the importance of professional oversight in medication dispensing.
As this story develops, stakeholders across the pharmacy sector are watching closely. The rulings from the Supreme Court of NSW may not only affect Blooms but could redefine how pharmacy franchises operate throughout Australia. The Pharmacy Council plans to review the judgement thoroughly and its implications, marking a pivotal moment for pharmacy ownership regulations in the country.
Stay tuned for updates as this developing story unfolds and its impact on the pharmacy industry continues to take shape.
