In a landmark ruling, Blooms the Chemist has lost a critical court case regarding the ownership and licensing of a pharmacy in Cronulla, New South Wales. The Supreme Court of NSW sided with the Pharmacy Council of NSW, rejecting an application from Tran Pharmacy to operate under the Blooms brand. This decision could set a precedent for major pharmacy chains, including the ASX-listed Sigma Healthcare, which owns Chemist Warehouse.
The court determined that Blooms would have a “financial interest” in the Cronulla outlet, violating regulations that restrict ownership to registered pharmacists. According to legal experts, this ruling may lead to increased scrutiny of business arrangements within the multi-billion dollar pharmacy sector.
Suzy Madar, a partner at King & Wood Mallesons, highlighted the potential ramifications of the court’s decision. In a statement, she noted, “The court found that the arrangements between Tran and Blooms conferred influence over and an interest in the profitability and value of the business, that amounted to an unlawful financial interest.” As a result, she anticipates a more rigorous evaluation by regulators of existing franchise agreements and financial structures.
This ruling has significant implications for Chemist Warehouse, one of Australia’s largest pharmacy operators, as it navigates its relationships with pharmacists and franchisees. The company has become a retail powerhouse, boasting a market capitalization of approximately $32 billion and operating nearly 900 stores nationwide, including over 500 Chemist Warehouse locations. Following the recent court ruling, Sigma Healthcare is scheduled to hold its first annual shareholder meeting in Melbourne on Wednesday.
The ownership regulations in New South Wales and Victoria stipulate that only registered pharmacists may own pharmacy businesses. New South Wales enforces stricter rules, requiring any individual with a “financial interest” in a pharmacy to be a registered pharmacist. These regulations have historically frustrated Chemist Warehouse, allowing it to establish more outlets in Victoria than in New South Wales. Additionally, Queensland is set to implement similar restrictions starting in November.
Despite the court ruling, neither Blooms nor Sigma Healthcare provided comments on the matter. The Pharmacy Council of NSW expressed its approval of the decision and plans to review its implications thoroughly.
During the court proceedings, Blooms’ legal team argued that the loan provided to Tran for acquiring the Cronulla pharmacy, along with the licensing agreement, did not equate to a “financial interest.” They maintained that Blooms would not be able to control the pharmacy’s operations. The Blooms model is designed to offer brand recognition and group purchasing advantages without creating a full franchise structure.
Blooms operates 120 pharmacies across Australia and reported a net profit of $27.5 million in the last financial year, according to its latest financial statements. The Pharmacy Guild of Australia, which advocates for independent pharmacies, has consistently opposed any attempts to deregulate the pharmacy industry. Current regulations in New South Wales restrict pharmacists to having financial interests in only five outlets, ensuring that only qualified professionals manage the dispensing of medications.
As the pharmacy landscape in Australia continues to evolve, the ramifications of this court decision will likely influence future ownership structures and business practices within the industry, affecting not only established chains like Blooms but also the broader pharmacy market across the nation.
