Prescription drugs could soon be $1 cheaper as the federal government attempts to increase competition by allowing pharmacists to offer a discount.
The optional discount is part of an in-principle agreement the government has reached with pharmacists, worth $18.9 billion over five years, to dispense medicines listed on the pharmaceutical benefits scheme.
Pharmacists currently must charge set fees for prescription drugs - $6.10 for concession patients and $37.70 for general patients.
The government says the proposed change, which would give pharmacists the option to provide a $1 discount, is aimed at increasing competition.
But in a move that will lock competition out of the sector the government has granted pharmacists a five-year extension on location rules, which prohibit new pharmacies opening within a certain distance of an existing one.
Health Minister Sussan Ley concedes the location rules "could work better" and will be investigated as part of an independent, two-year review of the pharmacy sector along with remuneration.
She admitted some patients, especially in rural areas, would miss out because not all pharmacists would offer a discount.
"Some will, some won't", she told reporters in Canberra on Monday.
"It's important that we introduce competition into the pharmacy sector."
The changes will come into effect on July 1 after they pass the Senate with likely Labor support.
The optional $1 discount, which would come out of the coffers of pharmacists, potentially could save taxpayers $360 million over the next five years, the government says.
The Pharmacy Guild of Australia won't support a co-payment discount but says any decision is a matter for government.
Ms Ley also announced $1.2 billion to boost the services pharmacists provide, which could include wound and chronic disease management.
The Australian Medical Association says the move is concerning because pharmacists do not have the same medical training as GPs.
AMA president Brian Owler says it's frustrating that funding to pharmacists had been extended, while GPs and specialists are being hit with an indexation freeze subject to the government's Medicare review.
Labor health spokeswoman Catherine King said the government's offer of cheaper prescription drugs was a "lie", given it was still committed to hiking the price of those drugs by $5 for general patients and 80 cents for concession card holders.
The pharmacy agreement will form part of the government's proposed pharmaceutical benefits package, which is still being negotiated.
It's understood the package is expected to find total savings of $5 billion to $6 billion over the next five years.
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