Chemist Warehouse merger and market manipulation

Shopping
1

Dear Choice

RE: the Merger with The Wagner Group and The Chemist Warehouse
I would like to make a complaint to a review of the merger of these two companies.

The following Guidelines the ACCC should consider as to whether a merger should be allowed to proceed are taken from Competition and Consumer ACT of 2010.

Section 50 of the Act prohibits mergers that would have the effect, or be likely to have the effect, of substantially lessening competition in a market.

Section 50(3) requires whether a merger would be likely to substantially lessen competition:
(a) the actual and potential level of import competition in the market
(b) the height of barriers to entry to the market
(c) the level of concentration in the market
(d) the degree of countervailing power in the market
(e) the likelihood that the acquisition would result in the acquirer being able to significantly and sustainably increase prices or profit margins
(f) the extent to which substitutes are available in the market or are likely to be available in the market
(g) the dynamic characteristics of the market, including growth, innovation and product differentiation
(h) the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor
(i) the nature and extent of vertical integration in the marke

These points have not been considered or explored properly in the ACCC assessment as to whether the Merger should have gained approval.

I am a registered nurse and a consumer at the Chemist Warehouse. I personally use a number of medications on a monthly basis. I am experiencing a number of concerning traits that have developed in the business model that the Chemist Warehouse uses since its merger with “Wagners”.

Not all medications are the same even though they might contain the same main active ingredient. Other additives that are used as fillers in the manufacture of the medication vary from manufacturer to manufacturer. This can have an effect on the final product produced and can lead to a different clinical outcome.

I have now found it difficult at the Chemist Warehouse to get the medication my doctor prescribes because I am being manipulated to accept substitute medications (different brands).

The Chemist Warehouse has stopped stocking the brands that used to be readily available to me saying that we only stock
“Wagners”, removing my choice of product, reducing competition and increasing the dominance and profits of this new entity ( Chemist Warehouse).

I am told by the Chemist Warehouse that they could order the other brands for me but that I would need to contact them a number of days before I require the medication, giving them time to order the preferred medication. They stated that I would need to do this every time I need a new script. This is clearly placing further barriers in my way to get my preferred medications.

Under Medicare I am entitled to get the medication my doctor prescribes for me however this is being circumvented for increased profits in this new merger.

6 Likes
2

Welcome to the Community @kiwibrit

Thank you for the excellent post. For clarity the Community is not Choice per se, it is a social media project sponsored by Choice. A number of Choice staff watch the Community, and sometimes contribute.

Your complaint should be, if it has not already been, directed to the ACCC.

As far as the ACCC approval that horse has bolted.

However, it was not a merger per se even if called one, Sigma Pharma effectively bought Chemist Warehouse by my reading.

A salient part of the ACCC statement is
On 7 November 2024, the ACCC decided to not oppose the proposed acquisition, subject to the ACCC accepting a court-enforceable undertaking from Sigma which would place obligations on the merged firm post-acquisition.

The ACCC will release a Public Competition Assessment in due course.

The main tool consumers have is patronising their competitors. I suspect few Chemist Warehouse customers will change chemists because of CW’s sharp pricing.

Perhaps @BrendanMays could ask Choice’s respective investigation team to engage?

6 Likes
3

If CHOICE investigations finds or believes there is a problem, then they could perhaps use one of their newish Super Complaints to the ACCC?

6 Likes
4

The Sigma - Chemist Warehouse deal will add more than 500 CW stores to its exisiting brands. It will likely dwarf the other two major chains Priceline Pharmacies (approx 470 stores) owned by Westfarmers and Terry White Chemmart (approx 550 stores) owned by the EBOS Group.

Sigma Healthcare Limited is an Australian, ASX-listed company with a focus on the pharmacy industry.[1]The company has pharmacy operations in retail, wholesale and distribution. From its head office in Clayton, Victoria, Sigma manages over 1,200 branded and independent pharmacies. Sigma Healthcare owns Australian retail pharmacy brands: Amcal, Discount Drug Stores and Guardian Pharmacy. The company also has a presence in the hospital pharmacy services, contract logistics, dose administration aids and other healthcare service adjacencies.

Not quite a duopoly?

2 Likes
5

A bit of a ramble. Competition in Australia is a curious beast to follow. Using an analogy of Mr Market some days it seems to be working and other days not so much.

Consumers still have a choice, albeit sometimes only 2 in a practical sense, or in the remote bush lucky to have one. Regardless some consumers have values that support all offerors regardless of personal cost to keep the local alive, friendship, better services, or whatever. Others prioritise ‘value shopping’ where they feel (rightly or wrongly) they are getting the most for their dollar, with many in-between.

At a personal level I prefer to support a local business if they can compete or be close enough, but a time honoured aspect of many businesses is that staying independent and local is often impossible in the face of modern commerce and the forces dictating economy of scale. Ask many young Australians their goals and a common thread is to start a business, build it up, and sell it to a multinational (or the highest bidder); ask a young American and the goal is more likely to be dominating the world market for the category.

With that underlying premise the business of mergers, acquisitions, and franchising models are healthy in Australia, regardless of the health of individual businesses. A personal opinion is the best we can hope for is an end-game where by choice or force the business models in our faces give more than lip service as well as reasonable, not monopolistic prices. How that intersects with capitalistic ‘shareholder value’ is a tension.

OT but Australia has a healthy business community at the macro-level noting some categories are overwhelmed by the few. Our prime examples include Colesworths and especially the KMart and Bunnings brands, all owned by a small number of corporate entities having brands competing among themselves. Insurance is dominated by few underwriters having many brands each, all competing with themselves; is that competition or window dressing? For the point an example, Bunnings sells paint for $50 and the Mitre10 up the road sells the same paint for $65. Service for this consumer, similar although fewer and more friendly faces at the mitre10. Is that enough over the long term?

Anecdotal evidence is more prefer ‘the deal’ than ‘service’ overall when it comes to buying most products yet are more measured in selecting service providers. A chemist sells both products and a service. If it anything to go by, our local CW is always busy. It probably caused our highly respected local to ‘sell out’ to become a Terry White, as did a Priceline. A few years back the CW was a smallish independent but joined CW and from appearance has done Very Well as a result. CW is a franchise operation as are most of them. We went from 3 to 2 brands but still 3 chemist shops; are 2 Terry Whites within a city block in a smallish town competing against a CW survivable? Time will tell.

Back to market manipulation, what about Coles reducing brands in favour of its house products for comparison? Is there a difference between that and Sigma selling its own brands via CW and displacing others products? Mr.Market will have an opinion over time.

4 Likes
6

NOT a duoperly but by far the most dominant player who crosses manufacturing and retail of pharmaceuticals.
AS TAX PAYERS we fund through medicare the right to chose between what our doctor prescribes and generic brand medications and the point is that these medications are NOT the same chemically. Zgeneric brands can give a less than ideal theraputic outcome for patients these are facts. SIGMA is taking away our choice and we as tax payers are paying for it. I SAY NO! TO THIS.

4 Likes
7

One can go to a Chemist and ask for the ‘name brand’. If it is not in stock do chemists, CW or otherwise, decline to order it in?

Accepting that not all generics are the same, and generics can vary from the original named brand, if the customer is happy with a generic, do customers specify which generic ever, or often?

Some related topics are

2 Likes
8


 it’s a sad story how a ‘success’ focussed CEO and a trucking company helped prepare the arena for the potential train wreck looming :rofl: Given the people involved, it’s almost amusing to try defining ‘success’ 
 almost 


1 Like
9

There’s also another issue. My chemist recently couldn’t fill a script for a brandname unflavoured product because the TGA has replaced this on the PBS with a flavoured and sweetened generic brand. An additional problem is when I looked into the sweetener used there are doubts about it’s safety. This raises the questions of whether the TGA is complicit in provision of generic rather than brand name medications as well as the extent to which it is independent.

1 Like
10

Is it completely removed or can you buy it but have to pay a brand premium?

IMG_6744
IMG_67441290×1641 500 KB

3 Likes
11

Reply from ACCC, which still leaves more questions than answers.

Thank you for writing to us with your concerns about the Merger with The Wagner Group and The Chemist Warehouse. We hope the information we have provided below is helpful.

The Wagner brand was sold to Chemist Warehouse in July 2017.

Separate to this transaction, the ACCC considered Sigma Healthcare Limited’s proposed acquisition of Chemist Warehouse, deciding on 7 November 2024 not to oppose the merger after accepting a court-enforceable undertaking from Sigma.

As part of this review, the ACCC also considered whether the acquisition would impact the supply of pharmacy retail products, including generic medicines.

The ACCC found that there were multiple channels available to suppliers and manufacturers of these products to reach consumers, including through alternative wholesalers and direct to pharmacy arrangements. For products other than PBS medicines, non-pharmacy retailers were also key alternatives.

To keep up-to-date on public announcements from the ACCC, you can subscribe to our email alerts.

Yours sincerely

1 Like
12

You can read the Undertaking using the following link.

It may offer some further clarity??

2 Likes
13

The undertakings by Sigma and Chemist Warehouse are not about consumer protections but is an agreement that protects Franchisees and consumer information.
It Allows for the local chemist to walk away from the merger without penalty. I am disappointed the the regulator /watchdog (ACCC) didn’t put in place conditions that would guard against market dominance and market manipulation, they have obfuscated their duty to the consumers

1 Like
14

Pharmacist said that specific brand was removed from the PBS.

15

Yes, I have stopped buying from Coles for this reason but I suspect Woolworths will end up the same. I use Aldi as much as possible but it surprises me how they are the most “trusted” as they near copy known brands to appear the same but are totally different. Tressemee shampoos for example. They also sold My Dog small containers in bulk packs like the other 2 big stores at a cheaper price BUT the grams per container were 20% smaller which was not noticed by many consumers. Pretty un trustworthy I would say

16

Have you searched the schedule to see if it is still a listed brand? Or one available through an Authority prescription?

If available through an Authority prescription, your Doctor or Specialist will need to provide the reason to get an authorisation.

To search the schedule see the following

When you find the drug you can then click on it and it will then list the possible variations (brands) and whether there are restrictions (authority needed).

An example

Initial search result for amoxicillin

IMG_6745
IMG_67451290×2384 353 KB

On click of the 875/125 g type (this just part of the result and you can see the list by using the link that follows the screenshot)

IMG_6746
IMG_67461290×2379 457 KB

If a brand has a premium/brand charge attached you will see this indicated and the extra amount payable (amount indicated with the green B symbol) e.g.,

IMG_6747
IMG_67471290×1152 201 KB

3 Likes
17

I am a registered Nurse and understand the system. My earliest post pointed out that a medication listed or not listed on the PBS can differ in their chemical composition even though they are considered by the TGA to be the same medication this is because the main active ingredient is the same, where they can differ can cause a altered theraputic outcome. This is from the use of “fillers” or “coloring” in the medication. The size of the tablet can also throw up some issues.
Every department in the health industry, hospitals, doctors, nurses use a book call MIMS which is a bible for medications. Big Pharma is widely known to be dishonest. In medicine we rely on best evidence as a matter of best practice, and then review the evidence


My issue is that my choice as a consumer is being eroded

2 Likes
18

Yes. I did check the PBS. The brand I use is no longer on it.

2 Likes
19

I totally agree with you. For a few reasons I’m also beginning to distrust the TGA

20

I understand your worry about concentration and removal of choice. Reading the document, to me it appears they, the ACCC, did consider consumer protections, that they did consider market dominance. In the document the ACCC noted they had undertaken consultations with a number of parties to ascertain the market concerns.

Sigma responded that they felt there was no issues, the ACCC however was given the undertaking. The undertaking is not one that is the end of the matter, if the ACCC feel that what Sigma is doing is uncompetitive they can terminate the undertaking and take other actions.

If Chemist Warehouse (CW) is the only available pharmacy and anyone felt that they, CW, were not treating them fairly then that person can make a complaint to the ACCC to place their grievances with the Authority. If it is a group of people then they could submit a group complaint. As people make complaints it is more likely as numbers of complaints increase that the ACCC will consider other actions to take.

In the meantime until the ACCC possibly take further action:

If CW not the only available pharmacy in the area, then a person is not required to use them and can go to another pharmacy. By supporting another business this will improve competition, Sigma PBS goods sold through other pharmacy outlets are protected by the Sigma CSO agreement (and protected in the undertaking) for 5 years at the time of the agreement.

IMG_6750
IMG_67501290×2075 384 KB

3 Likes