Futile attempts to regulate the sale of codeine pain killers such as Panadeine or Nurofen Plus despite addiction risks, and the lack of debate on the issue in the run-up to next month's election, serve to show the strength of the pharmacy lobby. It's also an example of a wider impasse on structural reforms that's put a brake on the the nation's productivity.

Changing the rules on codeine sales would be a small step compared with the broader overhaul of the industry that economists say would boost competition and spur the kind of efficiency gains that the economy needs. Pharmacy-ownership restrictions, along with protection within the taxi, shipping, medical and legal industries, have been cited as priorities for reform by an independent government-chartered group.

Despite an increasingly tight July 2 election campaign, neither side in politics is carving out regulatory change as a wedge issue. While voters haven't experienced a recession for 25 years, economists are increasingly worried that the drivers for growth are diminishing. With commodity prices in retreat and national income sliding, one way to reverse the trend is by bolstering competition in industries like pharmacies.

'Totemic' issue

"Pharmacies are totemic - if you could do them then you could do almost anything else and that would help revive productivity that's crucial to increasing national wealth," said Saul Eslake, an independent economist who has studied the nation's economy for more than three decades. "It's the archetypal example of an industry that has been able to use its extraordinary political clout to insulate itself from reform."

RBA officials have stressed that, as the nation's trading strength fades, further wealth increases will now require a boost to productivity growth, which has slowed this century compared with gains in the 1990s widely attributed to reforms started in the previous decade. RBA governor Glenn Stevens highlighted the issue in August, saying the to-do list for restructuring remained substantial.

Election promises

Yet reform has barely rated a mention in an election campaign so far dominated by the Turnbull government's pledge to cut company taxes, and the Labor party's health and education spending promises. The Turnbull government, which is tied with Labor in the most recent Newspoll, has steered clear of flagging any significant structural economic changes.

The Pharmacy Guild of Australia has demonstrated its political force before. During the last election almost three years ago, it ran a "Pharmacy Under Threat" campaign against the then-Labor government's plans to accelerate reductions in generic drug prices, garnering 1.2 million signatures backing its view.

This time around, there's no sign of leaders challenging the status quo. Indeed, Turnbull this month wrote a pre-election letter to all of the nation's pharmacists to reassure them: "The established consumer pharmacy model continues to serve Australians well," he said.

Call for change

A government-commissioned review of the nation's competition policies wasn't as agreeable when it released the final findings last year. Among recommendations it called for were:

• removing bans on non-pharmacist ownership, which prevent supermarkets and large international chains like the UK's Boots from owning them in Australia; and
• curbing location rules preventing new pharmacies opening within 1.5 kilometres of an existing chemist

The pharmacy industry is "a very robust market, in which there are varieties of models," said Pharmacy Guild spokesman Greg Turnbull, who's unrelated to the prime minister. He said there is already "ferocious competition" among pharmacies. "Some are discount models, some are what we call service models that become health-care hubs and offer a whole range of services, which no supermarket is ever going to offer."

Rising revenue

Chemists enjoy the right to distribute taxpayer-subsided prescription drugs, which are drugs covered by the Pharmaceutical Benefits Scheme. The Australian National Audit Office calculated that payments received from the government had more than tripled to $2 billion in 2013 from 20 years earlier, even after adjusting for inflation. Over the same period, curbs on competition contributed to there being fewer pharmacy businesses in Australia than in the early 1990s.

The guild last year successfully lobbied to delay plans to stop over-the-counter sales of codeine-based painkillers, arguing that it would penalise millions of Australians who use the medication responsibly. The guild has said making codeine-based products prescription-only would increase costs to the health system, citing a report that warned of an extra 8.7 million visits to doctors a year.

Yet in Europe and the US, codeine products can only be issued with a prescription; in Greece, possession is the equivalent of carrying narcotics.

'Strong' opposition

"There's good precedent for societies functioning well without over-the-counter codeine," said Matthew Frei, an addiction medicine specialist and clinical director at Turning Point Alcohol & Drug Centre in Melbourne. "But regulators are up against some strong groups in the community and in industry," such as the guild, he said. In the past 10 years, Frei said people addicted to codeine-based painkillers have gone from being "not much of an issue" to a "significant proportion" of his centre's addicts.

Eslake, the economist, isn't holding his breath for change. "The chances of either side of politics tackling the industry is equivalent to Kim Jong Un unilaterally renouncing North Korea's nuclear weapons," he says.

Bloomberg