The head of the Pharmacy Guild says community pharmacies are shutting down thanks to the influx of Australian-owned discount chains.

Chief executive Andrew Gaudin warns in the long-term, this will reduce access to essential healthcare services - particularly for people outside the main centres.

Discount pharmacies like the Chemist Warehouse and Countdown supermarket stores do not ask for the usual $5 prescription charges.

"They're using their commercial buying power and clout and running a loss-leader model, Gaudin told RNZ's Nine to Noon

"They're absorbing the government's $5 prescription charge. Effectively they're manipulating government policy to buy market share, and drive and squeeze out the smaller, independent [owner-operator] pharmacies."

Prescription copayments were first introduced in the 1980s, and by the 2000s the cost had risen to double-digits.

The then Labour-led government reduced the charge to $3, which rose to $5 in 2013 under the following National-led government.

In recent years, big-box pharmaceutical retailers have started absorbing that cost, essentially making prescriptions free and giving them an advantage over smaller, locally owned outlets.

Gaudin says for a typical pharmacy to absorb the cost it will mean taking a $120,000 hit.

Unable to do so, 70 community pharmacies have closed in the last four years, according to the Pharmacy Guild. Last year alone saw 30 shut their doors.

In Auckland, Seema Rambisheswar permanently closed her Life Pharmacy store in Glenfield Mall just over a week ago, after working there for 22 years and owning it for 14.

"It's quite sad the time has come for me to close," she told Nine to Noon.

The writing was on the wall in 2020, when right after Covid-19 hit, a Chemist Warehouse opened in the same mall. Her landlord, assuming she'd struggle with rent, offered her a smaller venue.

"I said no because if I did that, I'd have to refit a store and defit my existing store… that would just not have been viable."

She says big stores that don't charge the copayment have led customers into wrongly believing that pharmacies who do charge are pocketing the money.

"They have to realise it doesn't. We collect it. We're tax collectors. We collect it on behalf of the government and then we have to pay it back to the government. It doesn't stay in our tills.

"Now that I'm closing, people are [saying], 'We will pay you, please don't close.' But it's too late. I'm at a point of no return…

"They're using the copayment as a loss-leader. People are not looking at the bigger picture… they need to wake up, because long-term there will be problems."

Rambisheswar and Gaudin both say community pharmacies offer a range of services the discounters don't - such as vaccinations, ongoing care and even simple things like advice on the medicines they're dispensing.

Rambisheswar says despite the cost, she sometimes doesn't charge the fee - particularly if the patient needs multiple medicines, each one costing $5.

"We don't want in the long-run for people like that to be hospitalised, then there's a burden on the hospital system and the cost on the government would be higher… We care about our people. We care about our community and we don't want them to be deprived of healthcare."

The Pharmacy Guild is currently in a legal battle with Te Whatu Ora, over former district health boards giving operational licences to two Countdown pharmacies that offer zero-free prescriptions.

The Wainuiomata Countdown was initially denied a licence, a decision overturned by a DHB official who said having free options for patients would increase equity of access to medicines.

A lawyer for Te Whatu Ora says the guild's members are more concerned about having retail competition, not public health.

Rambisheswar says either the copayment needs to either be abolished or made compulsory so there's an even playing field.

"We care about our people. We care about our community and we don't want them to be deprived of healthcare."

Removing prescription charge has dramatic impact on odds of hospitalisation - study

A New Zealand-based study published in January found "prescription copayments are likely to increase overall healthcare costs", with the small fee discouraging people from collecting their medicines, and ending up needing hospital care as a result.

The authors "strongly recommend that the $5 prescription co-payments be removed for those with high health needs and low incomes, or be scrapped entirely".

"[Some people] go without their medicines, and as a result their health problems get worse, so they need hospital care. This is bad for them, their whānau, and the health system," says research lead Pauline Norris.

The study found for every 100 people who received free prescriptions, 33 were admitted to hospital and stayed for 208 days.

For every 100 people who still had to pay the $5 charge, 41 were admitted to hospital and stayed for 326 days.

"New Zealanders are exempted from the $5 charge after 20 items in a year, so revenue is, at most, $100 per person… The cost of one day of hospital care in New Zealand has been estimated at $1000 to over $1500."

Removing the charge reduced the number of admissions for mental health problems, the number of admissions for chronic obstructive pulmonary disease (COPD), and the length of stay for COPD admissions, the study found.

A recent New Zealand health survey found 3.3 per cent of adults reported going without a medicine because of costs. This was more common for Māori and Pacific peoples, and those living in areas of high deprivation.

Gaudin says removing the copayment altogether will not only help smaller pharmacies with a community focus stay in business, but help with the government's stated goal of easing cost of living pressures.

"Not only can we improve health outcomes, have a better service offering and have a more sustainable network of pharmacies, we could also remove a cost of living pressure which would fit neatly with the government's top priority of dealing to that."

-RNZ.