Pharmacists planning to open a new pharmacy or relocate an existing PBS-approved pharmacy must first make an application to the Australian Community Pharmacy Authority (ACPA) for a recommendation to supply PBS medicines from the proposed premises.
The requirements for applications to the ACPA are outlined in the Pharmacy Location Rules (Rules). The Rules set out strict requirements which must be satisfied for the ACPA to make a positive recommendation for approval to the Department of Health and Aged Care (Department). One of the general requirements for every application (regardless of the Rule) is that the Applicant has, at all relevant times, a legal right to occupy the premises.
To have a ‘legal right to occupy the premises’, the Applicant must have a recognised legal right (usually by way of a lease, sublease or licence) from the owner of the premises to use the premises for the purposes of a pharmacy.
For an Applicant to satisfy the ‘legal right to occupy’ requirement, they must submit evidence of a binding agreement with the landowner. This is usually a signed lease however a legal right can also be established via a sublease or licence (or a title search if the Applicant owns the land). It is not sufficient to provide a letter of intent or draft agreement, particularly if such document is not binding or subject to conditions outside of the Applicant’s control (such as owners approval or termination of an existing lease of the premises).
In addition to establishing a legal right, the Applicant must also satisfy the ACPA that the right exists “at all relevant times”. This means the Applicant must have the legal right to occupy the premises both on the date the application is submitted and the date the application is considered by the ACPA. Therefore, a condition which has not been satisfied on the date the application is lodged but is satisfied prior to the date the ACPA considers the application, will likely result in the application being not recommended for approval or deferred. That is particularly so given Applicant’s cannot submit supplementary material to the ACPA after an application is lodged unless requested to do so by the ACPA.
Often times, documents granting a legal right to occupy premises are prepared by the landlord’s solicitor. As the landlord is unlikely to be concerned with the regulatory approval process, there is a risk that at least the draft documents may not be suitable for the application process and put the Applicant at risk of an application not being recommended for approval or agreeing to an arrangement that is not suitable for their circumstances.
Given the certainty and long-term commitment of a lease together with the uncertainty of the regulatory approval process, Applicants are often hesitant to sign a binding legal right to occupy until a positive recommendation has been obtained. This is at odds with the requirements of the Rules.
So how does an Applicant comply with the requirements of the Rules without committing to a long term lease? The Applicant should consider requiring the lease (or similar) to:
- be conditional on a positive recommendation from the ACPA and/or approval being issued by the Department of Health and Aged Care;
- contain a clause giving the Applicant a right to early termination of the lease; or
- not commence until the Applicant is granted approval from the Department.
The regulatory approval process is complex. Before applying, Applicants should obtain advice from professionals with expertise in not only leasing but also pharmacy approvals. The absence of thorough advice may result in an application not being recommended for approval and/or the Applicant committing to terms of the lease which are inappropriate for its circumstances.
If you would like more information about applications to the ACPA, please contact us by email at hello@vitalitylawaustralia.com.
This article is intended to be for general information only. It does not constitute legal advice nor does it establish a relationship of client and lawyer. Specific circumstances or changes in law may vary the accuracy or applicability of the information published. We recommend seeking specific legal advice particular to your circumstances before taking any action, or refraining from taking any action, on any issue dealt with in this article.