Over 300 pharmacy licences may be unlawful

The ministry estimates there are 240 entities, operating a total of 308 pharmacies, that have been previously assessed by the ministry as having “negative control” ownership structures

More than one quarter of pharmacies would have unlawful licences under the recent High Court ruling on pharmacy ownership, information from the Ministry of Health confirms.

In June, Justice Cheryl Gwyn ruled that two Countdown Pharmacy licences should be quashed because they did not satisfy the legal requirement that a pharmacy owner have effective control of their pharmacy.

The ruling, which has since been appealed by Countdown, will apply to all pharmacies with a similar ownership structure.

Countdown also applied for a stay on the court order quashing the licences until after the appeal is dealt with, which Justice Gwyn granted on Friday.

Countdown submitted that if the stay was not granted, losing the licences would cause its two pharmacies to close, creating significant disruption to staff and patients and negating Countdown’s right to appeal.

Medsafe group manager Chris James submitted evidence in support of the application for the stay, stating that the ruling will affect a substantial number of pharmacy licence holders besides Countdown. Working through them all would take a significant investment of resources and at least 12 months.

Mr James’ evidence, referenced in Friday’s judgment, reveals for the first time the predicted extent of the ruling’s impact.

The ministry estimates there are 240 entities, operating a total of 308 pharmacies, that have been previously assessed as having “negative control” ownership structures like the Countdown pharmacies. In these entities, the pharmacist owner can veto business decisions but cannot make decisions without approval from the corporate shareholder.

All of the “negative control” pharmacies would be affected, plus a yet-to-be determined number of additional licence holders that may also be covered by a ruling.

There are approximately 1100 community pharmacies in New Zealand.

In her decision to grant the stay on her previous order, Justice Gwyn writes that she accepts “that there is a public interest in the interpretation of ‘effective control’ and ensuring continuity of pharmacy services in the meantime, given that the Ministry of Health has been applying a negative control test since approximately 2008.”

The ruling came after a group of community pharmacy owners, the Independent Community Pharmacy Group (ICPG), sought judicial review of the Ministry of Health’s interpretation of requirements around effective control of pharmacies when granting pharmacy licences, and of two Te Whatu (formerly the Hutt Valley and Tairāwhiti DHBs) contracting decisions to grant funding agreements for new Countdown pharmacies.

The ICPG is now considering its position, including whether to appeal any parts of the decision. ICPG spokesperson Clive Cannons had no further comment to make this morning.

Andrew Gaudin, the chief executive of the Pharmacy Guild, which was involved in the case as an interested party, says the guild is yet to decide what involvement it will have in the appeal process.

“We are watching developments in the case closely,” Mr Gaudin says in an emailed statement.

Countdown head pharmacist Jeremy Armes is pleased that the judge has agreed to grant a stay of execution of the order.

“The stay ensures that we, and other pharmacy operators with similar structures, can minimise disruption to those who rely on pharmacy services as we continue to work closely with the Ministry of Health to ensure compliance with licensing requirements,” Mr Armes says in an emailed statement.

There is not yet a date for when the appeal will be heard.