UPDATE: In a significant ruling, the Supreme Court of NSW has sided against Blooms the Chemist, one of Australia’s largest pharmacy networks, jeopardizing its business model. The court ruled against an application from Tran Pharmacy to register a pharmacy under the Blooms brand in Cronulla. This decision could reshape the multi-billion dollar pharmacy landscape, impacting major players like Sigma Healthcare and its subsidiary Chemist Warehouse.
The court’s decision, announced last week, determined that Blooms would maintain an unlawful “financial interest” in Tran Pharmacy, contravening strict regulations that dictate pharmacy ownership in New South Wales. Legal experts caution that this verdict will trigger heightened scrutiny of pharmacy franchise agreements across the country.
“Critically, 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,” stated Suzy Madar, a partner at King & Wood Mallesons, highlighting the potential ripple effects. The Pharmacy Council of NSW, which had opposed the registration, is expected to intensify its oversight of existing pharmacy arrangements.
The implications of this ruling extend to Chemist Warehouse, which is a cornerstone of Sigma’s operations, contributing to its ambitious $32 billion growth on the ASX. With nearly 900 stores nationwide, including over 500 under the Chemist Warehouse brand, Sigma’s expansion strategy is now under scrutiny. The company is set to hold its first annual meeting with shareholders since the merger in Melbourne on Wednesday, where investors will likely seek clarity on these developments.
Under current regulations in NSW and Victoria, only registered pharmacists can own a pharmacy business, a rule that has long frustrated Chemist Warehouse. The court’s decision could further complicate the already challenging landscape for pharmacy chains, as these regulations are stricter in NSW compared to other states. As Queensland prepares to implement similar ownership restrictions starting in November, the industry is bracing for changes.
Blooms, which operates 120 pharmacies across Australia, reported a net profit of $27.5 million in its latest financial statements. The Pharmacy Guild, representing independent pharmacies, has consistently advocated for maintaining stringent regulations to safeguard public health. In a statement, the Pharmacy Council of NSW expressed satisfaction with the ruling and announced plans for a detailed review of its implications.
During the hearings, Blooms’ legal team argued that the financial arrangements with Tran did not constitute a “financial interest.” However, the court disagreed, emphasizing that the loan and licensing agreements provided Blooms with an improper stake in the Cronulla outlet.
As the pharmacy industry grapples with this landmark ruling, stakeholders are urged to closely monitor further developments. The decision not only affects Blooms and Sigma but also sets a precedent that could reshape pharmacy operations across Australia. The urgency of revisiting compliance strategies is now more critical than ever as regulatory bodies prepare for more aggressive evaluations of existing pharmacy agreements.
Stay tuned for more updates on this developing story as the pharmacy landscape continues to evolve under increased regulatory scrutiny.
