Describing the consumer profile of different types of community pharmacy in Aotearoa New Zealand

Introduction

Within Aotearoa New Zealand, community pharmacies operate as both primary healthcare facilities and businesses. All pharmacies provide medicine dispensing services; however, some provide additional patient care services such as treating minor ailments, providing health education, or collaborating with other health professionals.¹ These services often incur higher costs than they can recoup, as these services do not incur a patient charge, so despite their contribution to the health system, the provision of these services is at the pharmacy’s discretion.¹ The varying strategies employed to remain profitable has resulted in a range of different pharmacy service delivery models.

During the study period, patients typically paid NZ$5.00 as a co-payment for most prescriptions, or NZ$15.00 for specialist and dental prescriptions, for their first 20 prescription items in the calendar year, after which patients no longer have to pay prescription co-payments.² Additionally, patients must pay the drug cost for unsubsidised or partially subsidised medicines.

Most pharmacies are owner-operated, known commonly as independent pharmacies. A subset of this group pay to gain the recognition and support of a franchise; the most recognisable being Unichem and Life pharmacies; however, they retain their autonomy to operate independently. Corporate pharmacies, also known as discount pharmacies, are a recent market entry. They have been able to offer free prescriptions by paying the prescription co-payments on behalf of their patients; however, patients are still required to pay the drug costs for unsubsidised medicines.

By offering free prescriptions, corporate pharmacies have challenged Aotearoa New Zealand’s community pharmacy landscape. Chemist Warehouse St Luke’s was the first to open in November 2017 and the model has proved successful and continued to grow with 16 new corporate pharmacies opening between July 2021 and June 2022 while 30 independent pharmacies closed.^3,4 This has put more focus on retailing to generate revenue, sustain profitability and remain in business.^5,6

The strategy of offering free prescriptions has been followed by several independent pharmacies, and we use the label hybrid pharmacies to identify this service model. Andrew Gaudin, Chief Executive of New Zealand’s Pharmacy Guild, voiced concern that corporate pharmacies are using free prescriptions as loss leaders to generate foot traffic for their retail focus instead of prioritising healthcare delivery for their patients.⁷ Depending on the, now disbanded District Health Board (DHB), pharmacies had to prove their point of difference. In the case of Countdown Wainuiomata, Rachel Haggerty, Director of Strategy, Planning and Performance for the Hutt Valley and Capital and Coast DHB, stated that free prescriptions would increase equity of access to medicines for the area’s Māori and Pacific populations.⁸ However, there is currently no evidence to suggest Māori and Pacific peoples use corporate pharmacies more frequently than other pharmacy types.

The recent decision to remove prescription co-payments from 1 July 2023, aimed at improving equitable access to medicine, has been applauded for levelling price competition within the community pharmacy sector.^9,10 However, as there is no evidence as to how much influence prescription prices have on how people choose which pharmacy to use, it is difficult to anticipate the impact removing prescription co-payments will have on consumer habits.

This research aims to describe the consumer profile of different types of community pharmacy in Aotearoa New Zealand. The research also aims to assess the utilisation of free prescriptions (via corporate and hybrid pharmacies) and serve as a baseline for understanding the impact of significant health policy change with the removal of prescription co-payments from 1 July 2023.

Methods

The pharmaceutical collection, a database that captures data from all prescriptions dispensed in community pharmacies, was used to create a retrospective observational cohort study design, which included everyone who collected a prescription dispensed at a community pharmacy between 1 March 2022 and 28 February 2023.

An individual’s demographic information: age, ethnicity, deprivation quintile, and gender from the Primary Health Organisation (PHO) dataset was linked via an encrypted National Health Index (NHI) capturing 95% of all New Zealanders. A crude proxy for medication burden was determined using the count of prescription items collected in the study period for each person.

The research team created a list of Aotearoa New Zealand’s community pharmacies using Healthpoint, a national directory designed to provide current information on accessing health services.¹¹ Pharmacies were categorised into one of four groups: corporate, mail-order, independent, or hybrid. Pharmacies part of Chemist Warehouse, Bargain Chemist, or Countdown brands were classified as corporate pharmacies. Zoom, PillDrop and Pharmacy Direct pharmacies were grouped as mail-order pharmacies. The remaining pharmacies were classified as hybrid if they advertised free prescriptions, or were labelled independent if not. Pharmacies were contacted regarding prescription co-payments if the information on Healthpoint was ambiguous. Whether pharmacies belonged to a franchise (eg Unichem) was not considered.

Results

Nearly three-quarters (n = 3 796 503) of Aotearoa New Zealands’s population (estimated n = 5 223 100), collected a prescription from one of its 1004 community pharmacies during the year-long study period.¹² The consumer profile of each pharmacy type is displayed in Table 1. Just over three-quarters (76.8%) were users of independent pharmacies.

Discussion

This study set out to understand the consumer profile of different types of community pharmacy service models prior to the removal of the prescription co-payment in Aotearoa New Zealand. Although we hypothesised that people living in areas of high deprivation would be more attracted to free prescriptions offered by corporate and hybrid pharmacies than individuals domiciled in areas of less deprivation, only hybrid pharmacies had a greater proportion of users from deprivation five areas. Hybrid pharmacies are most prominent in Counties Manukau, making up 17.5% of pharmacies in that district; an area where 37% of people live in deprivation five areas.¹³ A study by Evans et al. reported individuals with low incomes were more likely to use an independent pharmacy than a chain pharmacy, which follows a similar model to Aotearoa New Zealand’s corporate pharmacies.¹⁴ Mail-order pharmacy users had a greater medication burden, potentially as these pharmacies do not charge when people get four or more regular medications.^15,16

Our study showed older people making up a greater proportion of independent pharmacy’s users, which is supported by the study findings of Evans et al., potentially due to older people favouring a traditional pharmacy type they are familiar with.¹⁴

Several international studies associate the users of independent pharmacies with a greater medication burden than the users of chain pharmacies, although this was not the case in our study.^14,17

These findings have significant implications for policymakers. Considering the decision to remove prescription co-payments from 1 July 2023, this research shows which user groups have been receiving free prescriptions and will serve as a baseline to show whether removing prescription co-payments may change consumer habits and allows evaluation of the effectiveness of removing prescription co-payments from an equity stance.

Other research has found that although co-payments are a barrier, removing charges is often not enough to improve equity, but tackling the wider issue of health equities for Māori and Pacific people requires health organisations to provide ethical, respectful, and culturally safe interactions.^18,19 This research is limited as we can only describe the differences in consumer profiles; it is unknown if people are choosing their pharmacy type based on purely financial reasons or for other reasons, making the picture more complex.

Establishing how the cost of prescription co-payments influence people’s choice of pharmacy in Aotearoa and the effect of using different types of pharmacies has on people’s health outcomes are areas of future study we are moving on to.

Conclusion

This research provides a snapshot of the consumer profiles for a range of community pharmacy service models in Aotearoa New Zealand, at one point in time, to policymakers and provides the foundation for a before–after study looking at the impact of public policy on consumer behaviour with respect to pharmacy use.

Data availability

The data that support the findings of this study are available from the New Zealand Ministry of Health. Restrictions apply to the availability of these data, which were used under license for this study. Data are available from the authors (www.matui.co.nz), with the permission of The Ministry of Health, New Zealand. Instructions on how to obtain data can be obtained from https://www.health.govt.nz/nz-health-statistics/national-collections-and-surveys/collections. On request, data from national collections can be made available to researchers and the public.

Conflicts of interest

The research team has no conflicts of interest to declare.

Declaration of funding

JN was supported by a University of Otago Doctoral scholarship.