Independent valuations of Australian community pharmacies

The approval, the premises and the Location Rules

Under section 90 of the National Health Act 1953 a pharmacist must be approved by the Department of Health, Disability and Ageing to supply PBS medicines, and the approval is granted for particular premises. The conditions of approval, set by the National Health (Pharmaceutical Benefits) (Conditions for approved pharmacists) Determination 2017, require every dispensing step to occur at the approved premises, prohibit dispensing through remote access, and require the approval number to be used solely for those premises and never shared. On a sale the approval does not pass under the contract: the incoming pharmacist applies for their own approval at the same premises and provides evidence that the relevant state or territory regulator's requirements have been met, and the Department asks for those applications at least 30 days before the anticipated settlement date.

Moving is harder. The Pharmacy Location Rules, made under section 99L of the Act as the National Health (Australian Community Pharmacy Authority Rules) Determination 2018, set the only circumstances in which the Australian Community Pharmacy Authority can recommend a new or relocated pharmacy for approval. The Department states that the Authority is an independent statutory authority established under section 99J with six part-time members, that it cannot override the Rules, and that it can only recommend approval where every requirement of the item applied under has been met. It considers applications at published meeting dates and publishes outcomes within five working days, so the timetable for a move belongs to the Authority rather than the owner. Relocation cancels the approval at the old premises so one can be granted at the new site, under items covering a move of up to 1 km, a move of more than 1 km and no more than 1.5 km, a move within the same town to premises at least 10 km from the nearest other approved pharmacy, and a move within a facility. New approvals broadly require premises at least 1.5 km or at least 10 km from the nearest approved pharmacy, or a place in a facility: a small or large shopping centre, a large private hospital or a large medical centre. Where an application fails the Rules, section 90A lets the pharmacist ask the Minister to approve it, but only where a community would otherwise be left without reasonable access to PBS medicines and approval is in the public interest.

Value is therefore tied to an address, and lease security matters more than in most healthcare businesses. We examine the approval and relocation history, the lease term and options, and any application for a new or relocated pharmacy in the catchment. See premises and lease terms in healthcare valuations.

Dispensing income under the 8CPA and 60-day prescriptions

Dispensing remuneration is set by the Commonwealth under the Eighth Community Pharmacy Agreement (8CPA) between the Minister for Health and Aged Care and the Pharmacy Guild of Australia, which commenced on 1 July 2024 and runs to 30 June 2029. For each PBS prescription the pharmacy is paid the medicine price including a wholesale mark-up, an Administration, Handling and Infrastructure (AHI) fee and a dispensing fee, and the patient pays a co-payment. The PBS publishes those amounts: as at 1 July 2026 the ready-prepared dispensing fee is $9.24, the Tier One AHI fee is $5.12 per dispense for a brand priced under $100, and the co-payment is $25.00 for a general patient and $7.70 for a concessional patient. General co-payments were frozen for a year and concessional co-payments for five years from 1 January 2025, and from 1 January 2026 the optional allowable discount fell to zero for general patients and to a maximum of 60 cents for concessional patients. An Addendum agreed on 12 June 2026 changed the wholesale mark-up from 1 July 2026 and adjusted remuneration to offset it, and the PBS now sets that mark-up at 4.3 per cent of the ex-manufacturer price where the price is over $5.50 and no more than $1,000.

60-day prescriptions let a patient with a stable ongoing condition receive twice the medication on one prescription, so one dispensing event replaces two: the medicine supplied across a year is unchanged and fee income for those medicines falls. The Additional Community Supply Support (ACSS) payment, legislated under section 99AAAA of the Act, offsets part of that: the PBS sets Component 1 at $5.12 for each supply of a section 85 medicine with increased dispensing quantities and Component 2 at $0.13 for each supply of a section 85 medicine, with the Pharmaceutical Benefits Remuneration Tribunal determining eligibility and amounts. Patient mix decides how much of that reaches a given pharmacy, and the PBS reports that concession card holders received 196.7 million of the 226 million subsidised prescriptions dispensed in 2024-25. We analyse scripts by 30-day and 60-day supply, by PBS, private and over-the-counter category and by patient type, and test the current dispensary margin. See government funding exposure and business value.

Front of shop, margins and stock

The reported gross margin is really two margins averaged together: a dispensary margin the Commonwealth largely sets, and a front-of-shop margin on medicines sold without prescription, vitamins, skincare and general merchandise that the pharmacy sets for itself. Wholesaler terms, banner fees and supplier rebates then move the blend. Stock dominates working capital, and because pharmacies are typically sold walk in walk out plus stock at valuation, that stock is counted at settlement and paid for at cost in addition to whatever was agreed for goodwill and plant.

Professional services income

Pharmacies also earn from Commonwealth community pharmacy programs administered by the Pharmacy Programs Administrator, which lists MedsCheck and Diabetes MedsCheck, Home Medicines Review, Dose Administration Aids, Staged Supply, Opioid Dependence Treatment, the National Immunisation Program Vaccinations in Pharmacy (NIPVIP) Program and rural support payments including the Regional Pharmacy Maintenance Allowance. Scope of practice then differs by state. NSW Health states that clause 48A of the Poisons and Therapeutic Goods Regulation 2008 authorises appropriately trained pharmacists to administer selected vaccines without a prescription, under the NSW Pharmacist Vaccination Standards. The Victorian Department of Health states that its Community Pharmacist Program is expanding to 23 conditions and services and that pharmacists who have completed an accredited postgraduate Pharmacist Prescriber course can participate. What a pharmacy may lawfully provide should be confirmed for its state at the valuation date. Service income needs trained pharmacists, a consultation room and time away from the dispensary, so we assess it as a separate stream with its own capacity limit and margin.

Ownership laws and the buyer pool

Pharmacy ownership is also regulated by the states and territories, and each cap sits in its own statute. Under the Pharmacy Business Ownership Act 2024 (Qld) an owner must hold a pharmacy business licence, and no person may hold an interest in more than five pharmacy businesses, or six for a qualifying friendly society. The Victorian Pharmacy Authority states that under the Pharmacy Regulation Act 2010 ownership is confined to registered pharmacists, companies whose directors and shareholders are all registered pharmacists and certain pre-1999 friendly societies, and that no pharmacist or eligible company may hold a proprietary interest in more than five separate pharmacy businesses. Section 55 of the Pharmacy Act 2010 (WA) provides that a pharmacist must not own, or hold a proprietary interest in, more than four pharmacy businesses at any one time. In New South Wales the Health Professional Councils Authority states that a financial interest holder must be a registered pharmacist, with limited exceptions, and cannot have an interest in more than five pharmacies in that state. Other jurisdictions should be confirmed with the relevant regulator. A pharmacist already at the cap is not a buyer without first selling, and non-pharmacist capital cannot hold the business outright, which narrows the pool of purchasers.

Goodwill in a pharmacy

Goodwill is everything paid beyond the identifiable assets net of liabilities, and in a pharmacy that means the expectation that customers keep filling their prescriptions at this counter. In a pharmacy that expectation attaches to the approved premises, the location, the lease and the trading systems, all of which pass to a new owner, so it is largely transferable, or commercial, goodwill. Personal goodwill, which depends on an individual and leaves with them, matters less than in a medical practice, where patients follow the doctor. Key-person risk, the dependence of earnings on one individual, still arises where the owner is the pharmacist in charge on a below-market wage.

From earnings to value

HPNA assesses future maintainable earnings, the profit the pharmacy can be expected to sustain, from normalised results. Normalisation removes owner-specific and non-recurring items so that what remains is what a purchaser could repeat. The figure is struck before interest and tax, either before or after depreciation and amortisation, and is then either capitalised at a multiple built from this pharmacy's own risks and prospects, or, where the coming years will not look like the last ones, forecast and discounted. See what is maintainable earnings and how to value a pharmacy in Australia.