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Pharmacy Review: change ahead or business as usual?


On 22 June 2017, the last day of the winter session for the Australian Parliament, the Independent Review of Pharmacy Remuneration and Regulation released its Interim Report. The release did not receive much coverage in the mainstream media, even though the Report canvasses significant changes for pharmacists and consumers. It has, however, drawn a strong response from key stakeholders.

Background

Since 1991, every five years the Australian Government concludes a new Community Pharmacy Agreement (CPA) with the Pharmacy Guild of Australia (the Guild, representing community pharmacy owners). The CPA establishes rules about how community pharmacies will provide medicines under the Pharmaceutical Benefits Scheme (PBS). The most recent, the Sixth Community Pharmacy Agreement (6CPA), commenced on 1 July 2015 and provides around $18.9 billion in remuneration for community pharmacies and wholesalers. In light of a March 2015 Australian National Audit Office (ANAO) report criticizing aspects of the negotiation and administration of the Fifth CPA, the 6CPA provided for a panel of three independent reviewers to examine key matters agreed in the 6CPA. These include government-funded pharmacist remuneration, wholesaler payments and community pharmacy programmes, and the Pharmacy Location Rules. These rules operate by restricting pharmacies from opening near existing pharmacies, or inside supermarkets. The rules are somewhat contentious, with reports such as the 2015 Harper Competition Policy Review recommending their removal.

What does the Report say?

The Review consulted extensively, invited submissions and commissioned a number of research reports to inform its position. The 224 page Report outlines the Review’s findings, and presents a number of reform options rather than draft recommendations. Key suggestions likely to be of interest to pharmacists and consumers include:

  • ending variations in PBS medicine pricing between pharmacies, including removing the optional one dollar discount on prescriptions (on the grounds that consumers in metropolitan areas were more likely to benefit from this discount than those in remote areas)
  • requiring complementary medicines to be clearly separated for pharmaceutical medicines in the store layout
  • preventing pharmacies from selling homeopathic products
  • requiring community pharmacies to provide financial accounting information to the Australian Government, and using this information to set government payments for dispensing PBS medicines
  • multiple options for Pharmacy Location Rules including removing them in urban areas, removing them and replacing them with a statutory authority that decides where new pharmacies can open, or modifying the existing rules
  • investigating the feasibility of a 24-hour ‘pharmacy hotline’ providing medicine information to consumers
  • reducing the scope of future CPAs and including the Consumers Health Forum of Australia (CHF) (representing consumers) and the Pharmaceutical Society of Australia (PSA) (representing pharmacists) as parties to the negotiations and
  • improving access to PBS medicines for Indigenous Australians.

Stakeholder reaction

The CHF has welcomed the possibility of being included in ‘future negotiations about government payments to pharmacy owners and the services they provide’, and saw the Report as generally positive for consumers. However, it did express concern about restricting pricing variations between pharmacies and abolishing the one dollar discount, fearing these could lead to increased out of pocket costs for consumers.

The Guild has described the Review as ‘fundamentally flawed and inherently damaging’. While welcoming some options in the Report (including the abolition of the one dollar discount which it has never supported), the Guild criticized many others including requiring pharmacies to provide financial information to the Government, changes to dispensing fees, allowing the CHF to participate in CPA negotiations and potential changes to location rules.

The PSA expressed support for including the PSA in CPA negotiations, trialing the operation of community pharmacies by Aboriginal Health Services, and removing homeopathic products from pharmacies. However, the PSA did share the Guild’s concerns around changes to dispensing fees.

What happens next?

Prior to the Report’s public release, the 2017–18 Budget included a package of measures agreed with the Guild, including a Government ‘commitment to the continuation of the community pharmacy location rules beyond the life of the 6CPA’ (subject to the passage of yet to be introduced legislation), and an agreement that the ‘Government will work with the Pharmacy Guild to ensure that the response to the Pharmacy Remuneration and Regulation Review maintains the community pharmacy model and secures a viable community pharmacy sector.’

This commitment would appear to rule out certain options in the Report, especially those relating to removing the location rules. The Review Chair, Professor Stephen King, has acknowledged the Government’s decision and stated that options to remove or replace the current location rules will not be included in the Final Report. It appears that the rules continue to enjoy bipartisan support.

A spokesman for Health Minister Greg Hunt has reportedly said the Government will consider reviewing the optional one dollar discount on prescriptions, and ‘the Government will respond on all other matters when the final report is delivered.’

Since the release of the Report, the Review has invited further submissions (now closed) and met with key stakeholders. The next step for the Panel is to develop its Final Report to the Minister. With the reform options in the Interim Report drawing sometimes strong and often conflicting reactions from key stakeholders, this may not be an easy task.

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