Federal budget’s pharmacy shake-up – insurance impacts

One of the initiatives in the federal budget made changes to the Pharmaceutical Benefits Scheme (PBS). Giuseppe Carollo (pictured above) is concerned that the changes will have a negative economic impact on pharmacies, their insurance and the health industry.

“The key issue is a change around the dispensing timeline from 30 days to 60 days,” said Carollo, head of pharmacy insurance for Carollo Horton, part of Honan Insurance Group. He described his firm as one of the biggest pharmacy insurers in the country with thousands of clients.

“I’ve never seen so many pharmacists getting involved on LinkedIn and Facebook, in videos and discussions, it’s such a hot topic,” Melbourne-based Carollo said.

30 days is now 60

The government’s change to the PBS – which provides subsidised, more affordable medicine – targets people with chronic illnesses like diabetes and heart disease. The new medicine dispensing timeline impacts more than 300 drugs. From September, the change will allow Australians to buy 60 days’ worth of medicine for the price of a single prescription.

According to an ABC News report, the government expects the change to save Australians $1.6 billion over the next four years because of fewer GP visits for repeat prescriptions.

However, Carollo said the move to 60-day prescriptions is a “step change” from the standard 30 days, which, he said, is typical in most countries. The impact on the pharmacy sector itself is very significant, he said, because “the whole Australian pharmacy industry” was predicated on a maximum prescription duration of 30 days for all medicines.

Economic impacts for pharmacies

“The boxes of the medicine, everything, is designed around 30 days, including the framework regulation and all the pharmacy industry codes,” he said. “So there’s far-reaching impacts.”

He said the first impact is the economic hit.

Carollo said that until this PBS change, people would visit a pharmacy every 30 days with their prescription. After a quick check and a few questions they would receive their next box of medicine. He estimated that for each of these visits, pharmacists receive about $10 from the government for dispensing the medicine. Carollo said the economic blow from getting half the visits for certain drugs and “less foot traffic” could mean pharmacies cut back on services, or even close.

Medicine shortages, fewer transactions and more risk?

Stock availability, he said, is another issue. Carollo said this could lead to “major medicine shortages” partly because supplier stock levels have not yet rebounded to pre-pandemic levels.

Carollo gave Insurance Business a layman’s example: If most clients are going to start buying double the amount of stock, $100,000 worth of medicine currently on the shelves is going to have to be increased to $200,000 worth.

“So immediately, they’re going to need to have more boxes on the shelves and they’re also then going to have less transactions but more risk in that there could be more professional indemnity claims,” he said.

Other insurance implications, said Carollo, will come from claims for damaged stock.

“If a pharmacy business makes an insurance claim for damaged stock, the time it takes to replace the stock could impact the business’s income even more than the initial impact of the claim,” he said.

Professional indemnity exposures

The other concern – for pharmacies and their customers – could be around professional indemnity exposures from customers getting confused about the drugs they should be taking, Carollo said.

“For example, if someone’s got 60 days’ supply at home but after the 40-day mark their doctor changes their prescription to a lower-strength product, that person still has that [earlier] supply at home,” he said. “Sometimes they will assume they can keep taking the other one and get confused.”

Carollo said this raises concerns that people could accidentally overdose or take the wrong medicine. As a result, he said, insurers may need to prepare for potential claims that, in turn, could lead to increased premiums.

No surprises

As for the rest of the government’s budget initiatives, Carollo said he wasn’t surprised.

“I think there’s been so many leaks out before the budget now that whenever you get the budget readout, it is what you expected because they’ve tested the waters in advance,” he said. “I am happy to see a little bit of a surplus, which I think is probably good for the overall Australian economy at this point.”