Pharmacy & Healthcare

When purchasing a pharmacy, the key legal considerations include:

• Ownership restrictions – Ensuring you meet eligibility requirements under state pharmacy ownership laws, whether that is in your individual capacity or your proposed ownership structure. 
• Regulatory approvals – Whether the pharmacy is approved under the Pharmaceutical Benefits Scheme (PBS) and ensuring that the relevant state regulatory authority and the Department of Health and Aged Care are notified and approve of the transfer of ownership.
• Lease agreements – Securing an adequate term of the lease and reviewing the lease for any unique transfer conditions.
• Stock and asset transfer – Confirming what’s included in the sale (fixtures, fittings, estimate of inventory and goodwill).
• Other agreements – Ensuring that any other agreements that are necessary for the continued operation of the pharmacy are transferable (i.e. franchise agreement or equipment lease). 
• Employees – Handling employee transfers and obligations under the Fair Work Act and ensuring any key employees continue employment following settlement. 

Before purchasing a pharmacy, thorough due diligence is essential to assess risks, ensure compliance, and confirm the viability of the business. From a legal perspective, we suggest reviewing all contractual agreements to ensure they are enforceable and do not contain unfavorable terms. This includes:

• Contract Terms – Examining the sale agreement, supplier contracts, and any service agreements tied to the business.
• Lease Terms – Assessing the pharmacy’s lease agreement for critical provisions such as rent obligations, renewal options, redecoration and make good obligations, assignment conditions, and any restrictions on business operations.
• Equipment Lease Agreements – Reviewing any existing equipment lease arrangements to confirm their terms, transferability, and associated costs.
• Licensing Compliance – Ensuring the pharmacy holds all necessary permits and licenses required to operate legally, including State pharmacy registration, and PBS approval (if applicable).
• Other Agreements – Identifying and evaluating any additional agreements essential for the continued operation or profitability of the pharmacy, such as franchise agreements (if applicable) or agreements with compounding labs, wholesalers, aged care facilities or service providers.

A Heads of Agreement (HOA) is a preliminary document outlining key terms before entering a binding sale contract. It can cover:

• Sale price and deposit terms
• Maximum stock price
• Asset or share sale structure
• Lease transfer conditions
• Conditions precedent (such as regulatory approvals)
• Proposed timeline for the transaction
• Employee arrangements

While not always binding, it provides clarity and helps streamline the transaction process.

• Regulatory approvals  – Issues with PBS and State regulatory approvals are often a cause of delay when selling a pharmacy. To minimise these delays, it is essential to ensure that the contract and all supporting documents contain consistent and accurate information.
• Poorly drafted sale contract – A generic or poorly drafted sale contract may fail to cover essential aspects of a pharmacy transaction causing disputes leading up to, during or preventing settlement. Engaging a lawyer experienced in pharmacy sales is crucial to ensure a smooth sale process. 
• Failure to properly transfer the lease – The landlord may refuse assignment or impose unfavorable terms on the incoming tenant. Engaging with the landlord early in the process and providing adequate information will prevent unnecessary delays. 
• Employee entitlements – Mishandling employee entitlements such as accrued leave, redundancy pay, and long-service leave can lead to disputes and additional financial liabilities. Ensuring that the sale contract clearly sets out who is responsible for what will allow for a smooth transition and prevent further legal involvement.
• Restrictive covenants – Overlooking non-compete clauses that may prevent you from opening another pharmacy nearby is crucial to consider in the initial stages of the sale process. It is important to consider your next move when looking at selling your pharmacy.

In Australia, only registered pharmacists or approved entities (e.g., pharmacist-owned companies, partnerships or trusts) can own pharmacies. Each state has different pharmacy ownership laws, so checking local regulations is crucial.

A PBS approval number does not automatically transfer upon sale of a pharmacy. The buyer must apply for a new PBS Approval Number through the Department of Health and Aged Care and meet all of their requirements. The seller’s PBS approval number will be deactivated on settlement when the buyer’s PBS approval number is activated.

PBS location rules regulate where new pharmacies can open and where existing ones can relocate to maintain community access while preventing oversupply. If you plan to open a new pharmacy, move a pharmacy or sell to a buyer intending to relocate it, consulting a lawyer experienced in PBS location rules is essential to ensure compliance with these regulations.

Opening a new pharmacy requires approval from the Australian Community Pharmacy Authority (ACPA) to ensure compliance with PBS location rules. These rules regulate pharmacy locations to prevent oversupply while maintaining community access to essential pharmaceutical services. Applicants must demonstrate that the proposed site meets regulatory criteria before PBS approval is granted.

In addition, approval from the relevant state pharmacy regulatory authority is required to ensure that the pharmacy premises is registered and in compliance with state-specific regulations before commencing operations.

Relocating a pharmacy requires approval from the Australian Community Pharmacy Authority (ACPA) to ensure that the new proposed site continues to comply with PBS location rules. The authority assesses factors such as community needs, accessibility, and distance from existing pharmacies. Failing to secure approval before relocating could lead to a loss of PBS dispensing rights.

In addition, approval from the relevant state pharmacy regulatory authority is required to register the new pharmacy premises and ensure compliance with state-specific regulations before the pharmacy can begin trading.

Any expansion or contraction of a pharmacy’s premises must be approved by both the Department of Health (to ensure continued PBS compliance) and the relevant state pharmacy regulatory authority (for premises registration requirements). Even if the pharmacy remains at the same location, changes to the physical space can impact operational compliance, including storage, workflow, and health and safety standards. Seeking legal advice early in the process can help prevent delays and regulatory issues when making any changes to your pharmacy space.