A proposed merger between discount pharmacy giant Chemist Warehouse and Sigma Healthcare risks reducing competition in Australia's pharmacy sector and could result in consumers paying higher prices, the Australian Competition and Consumer Commission has warned.

The competition watchdog has released its preliminary statement of issues into the $8.8 billion deal, outlining a number of "competition concerns" that would deliver substantial changes for the pharmaceutical industry.

"This is a major structural change for the pharmacy sector, involving the largest pharmacy chain by revenue merging with a key wholesaler to thousands of independent pharmacies that in turn compete against Chemist Warehouse," ACCC Commissioner Stephen Ridgeway said in a statement.

The ACCC said the deal would create a "new business model for the pharmacy sector" that "could raise barriers to rivals expanding or entering, which may lessen competition".

"This lessening of competition may lead to reduced service quality for goods and services provided in pharmacies as well as higher prices for consumers," Mr Ridgeway said.

"The transaction may also weaken the competitiveness of the different product and services offered by Sigma's banner pharmacies."

The proposed merger would see the company have end-to-end control of the pharmaceutical supply chain, from product creation, distribution, wholesale and retail sales — which the ACCC said it was particularly concerned by.

"We are focused on how the newly merged company may have the ability and incentive to favour Chemist Warehouse stores or worsen terms to non-Chemist Warehouse banner stores, raising their costs and rendering them less competitive," Mr Ridgeway said.