Serious Concerns Over True Intentions of Review

Nearly two weeks on from the release of the Interim Report of the Pharmacy Remuneration and Regulation Review and after being briefed by the Panel, the Guild remains very concerned about the Review’s true intentions for the future of community pharmacy.

There is no doubt this Review is causing uncertainty in the sector and nowhere is this more evident than in relation to dispensing, the core clinical function of any community pharmacy.

The Interim Report acknowledges the Treasury advice that “the most profitable pharmacies are only earning normal rates of returns on their investments” and then proceeds to suggest a total dispensing remuneration benchmark of $9.00 to $11.50 and to model a flat $10 per script dispensing fee, that would replace all current dispensing related fees (other than the Extemporaneously Prepared Fee).

Such an approach would constitute a serious reduction in core pharmacy revenues. The Interim Report itself estimates that, at $10 per script, it would produce fiscal savings to the Government of nearly $1.5 billion if extrapolated over the life of the Sixth Community Pharmacy Agreement (6CPA). This is considerably more than the entire 6CPA budget for patient services.

Given that the 6CPA estimates total government dispensing remuneration at $11.8 billion between 2015 and 2020, this constitutes a 13 per cent reduction in nominal terms and a much higher real reduction, given the flat fee would only apply from mid-2020.

If such a reduction were to occur, it is likely that a large number of community pharmacies – including the 15 per cent that the Report acknowledges are currently not earning any taxable income – would not be able to continue operating as viable businesses.

The Interim Report blithely infers that many pharmacies are too small and, by implication, sub-economic1 in terms of the model that it seemingly wishes to pursue. So much for the loyal patients and hard-working staff in these pharmacies, let alone the owners who have invested their livelihoods into these small businesses, which are often the lifeblood of their local community.

In its statement of Strategic Vision and Intent at the beginning of the Interim Report, the Panel states that it has “Considered options for constructive community pharmacy reform”, “Recognises that … regulation must be sufficient but not excessive” and “Options have been deliberately left out because the Panel has not found compelling evidence for change”.

This is the bar the Panel has set itself: “constructive pharmacy reform”; regulation that is “not excessive”; and the need for “compelling evidence for change”.

The Interim Report then proceeds to suggest a dispensing remuneration range that appears to be based on the views of one analyst in a piece published in pharmacy media in 2015.

This is not “compelling evidence”. Nor is it “constructive pharmacy reform”, when it could put at risk the ability of so many pharmacies to maintain high quality service and support to their patients.

The Interim Report also proposes that every pharmacy be required to hand over their detailed accounting information every year to the government in order to calculate the cost of dispensing for an efficient pharmacy.

This regulated accounting approach mirrors that which applies to large monopoly utility and telecommunications providers. To my knowledge, it is unprecedented in terms of being applied to small businesses or health care professionals such as doctors or pharmacists.

The safe dispensing of a medicine to a patient along with the associated professional pharmacist advice and support is very different to shipping gas down a pipeline, transmitting power across an electricity grid, or communicating voice and data down a copper wire. We are talking about the health and wellbeing of patients, each with their own individual needs and circumstances.

Requiring every pharmacy to prepare and hand over detailed financial accounts so the government can determine whether they are efficient or not, certainly fails the Panel’s own test that “regulation should not be excessive”.

It should also send shock waves through the wider health system. Surely, a nation that prides itself on Medicare and the PBS as the world-leading hallmarks of universal health care is not going down the route of measuring the wellbeing of patients in units of efficient cost based on an obscure and undefined regulated accounting methodology.

If that is not enough to keep you awake at night, ask yourself does any government (or consumer for that matter) really want what is happening in electricity markets to occur in health?

[1] The Interim Report cites five pharmacy sizes. 58% of pharmacies with turnovers less than $2 million are considered to be “micro” while another 38% with turnovers between $2 million and $10 million are considered to be “small”. The Report then says it is concerned that current remuneration and regulations have “facilitated the development of a large number of very small pharmacies.”

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