A new analysis from one of Australia’s leading independent think tanks has ignited fierce debate over pharmaceutical pricing, claiming that closed-door negotiations between the federal government and a powerful industry lobby have forced taxpayers and patients to overpay billions of dollars annually for prescription medications. The Grattan Institute’s new report pulls back the curtain on decades of opaque policy making, arguing that the Pharmacy Guild of Australia — the national body representing the majority of Australian community pharmacy owners — has leveraged its significant political influence to lock out patient representatives and hide critical cost data from public scrutiny during funding and policy negotiations.
Lead researcher and Grattan’s Health Program Director Peter Breadon argues that this closed negotiating model is a global outlier. “Unlike almost every other developed nation, Australia’s negotiations for pharmacy funding exclude all stakeholders outside the Guild and the government, and proceed almost entirely without public, evidence-based cost data,” Breadon explained in the report. “This poor governance structure has only delivered bad outcomes for everyone except pharmacy owners themselves.”
The report’s economic modelling estimates that Australian pharmacies collect nearly $3 billion annually in excessive dispensing fees, driven by a lack of market competition and restrictive industry rules that block widespread discounts for consumers. Under Australia’s Pharmaceutical Benefits Scheme (PBS), which subsidises most prescription medications for the public, the nation’s 6,000 community pharmacies fill 335 million prescriptions each year at a total taxpayer cost of $3.8 billion. Breadon’s analysis found the average dispensing fee — charged to cover the cost of verifying prescriptions, preparing medications, and providing patient counselling — currently sits at $9.24 per script, a figure that cannot be justified because the Guild has repeatedly blocked efforts to measure the actual cost of dispensing services.
“No one knows the real cost of filling a prescription in an Australian community pharmacy, and that is no accident,” Breadon said. “Fees should be set independently, tied to actual operational costs, not the outcome of closed-door bargaining. Unjustified inflated fees need to be scrapped entirely.”
The report also takes aim at the existing Community Pharmacy Agreements, which the institute says include overly generous funding terms that shield pharmacy owners from revenue declines while inflating profits at the expense of taxpayers and consumers. Breadon added that while regulatory rules already allow pharmacies to discount medications priced below the PBS maximum co-payment — a policy that has delivered $319 million in annual savings for patients in 2025 — a web of complex industry regulations prevents pharmacies from passing additional savings on to consumers for other prescription drugs. Simplifying these discount rules alone could deliver an extra $48 million in annual savings for Australian patients, the modelling found.
To fix the systemic flaws, the Grattan Institute is calling for a full overhaul of the negotiating framework: the federal government should open negotiations to independent, evidence-based fee-setting, the same model used for other Australian health care sectors. If wholesale reform is not pursued, Breadon said, patient representatives should at minimum be included at the negotiating table, with all cost data released to the public to justify final funding decisions. “The Australian government spends billions of dollars on community pharmacy services every year,” Breadon said. “Fairer fee structures and stronger competition will ensure the system works for patients, not just pharmacy owners.”
The Pharmacy Guild of Australia has pushed back forcefully against the report’s claims, with National Vice President Simon Blacker arguing the organisation has a long track record of advancing affordable access to medications for Australians. Blacker highlighted the Guild’s recent collaboration with the federal government to cut the PBS general co-payment to $25 starting in January 2026, a reduction that will bring the co-payment to its lowest level since 2004 — only the second cut to the co-payment in the PBS’s entire history.
Blacker also reaffirmed the critical public health role that community pharmacies play across Australia, noting that increasingly, specially trained pharmacists are able to diagnose, treat, and prescribe for a wide range of common acute and chronic health conditions — a expanded scope of practice that Blacker says should be supported by a national consistent prescribing framework. Both the Grattan Institute and the Pharmacy Guild have acknowledged the essential role community pharmacies play in guaranteeing access to medicines, health advice, and frontline care for Australian communities, leaving the debate focused on governance and pricing rather than the core value of local pharmacy services.