7CPA: not everything is as it seems

George Tambassis signs off on the 7CPA

Is the 7CPA merely a case of community pharmacy retaining the ‘status quo’? Or does it offer the opportunity for a broader future? Bruce Annabel and Mal Scrymgeour investigate

Portuguese writer Jose Saramago was late coming to prominence. When we say prominence, it immediately becomes clear that prominence is a relative term because he is an obscure character at best.

The one notable contribution he made to mankind was his quote “Not everything is as it seems, and not everything that seems, is”.

It’s a quote he could have written to describe the seventh community pharmacy agreement (7CPA).

Many in the industry hold the view that the 7CPA is a status quo deal. It’s not. It’s an arrangement that has the capability to help pharmacy overcome the challenge of a “deep and sustained global recession” and other SARS-CoV-2 related issues.

One of which, in a bizarre twist, was the virtual elimination of the flu, thanks to social distancing and high vaccination uptake.

In other words, the issues the industry faces are multi-faceted, with different thinking required to resolve them.


All agreement negotiations are difficult. This one was certainly no exception. It was made particularly difficult with the impasse over the government’s 60-day extended dispensing policy of up to 143 chronic medications.

If implemented, pharmacy would have lost significant income and, in some cases, impacted viability although saving health consumers money during difficult times.

At one stage, the Minister threatened to have remuneration determined by the Pharmaceutical Benefits Remuneration Tribunal (PBRT) which would have been disastrous.

The arrival of SARS-CoV-2 changed the political environment resulting in the withdrawal of the 60-day extended dispensing policy. It’s worth noting that both this policy and the $1 co-pay discretionary discount have been left out of the 7CPA.

In a positive move, the Minister invited the PSA into the negotiations to play an important role in negotiating the professional service element and, it turns out, just as well they did. So, it was a little odd that Part 1, signed by only the Guild and the Minister, contained all the remuneration arrangements including services.

Wholesalers ran their own negotiation, obtaining a net funding increase in recognition of the job they did holding the supply chain together during the March/April period of peak virus chaos.

Things that remain the same

1. Funding skew
Similar to prior agreements, the total finding pool is heavily dominated by supply remuneration of $14,652m (excluding patient contributions), thus maintaining intact the PBS distribution system, compared with professional services $1,200m.

Patients are expected to contribute $9,451m representing 37% (including below co-pay dispensing) of the total outlay, a proportion that continues increasing.

2. Dispensing remuneration
The dispense fee and AHI at 30 June 2020 was $11.48. This increased on 1 July by 54c (4.7%) to $12.02.

This increase, apart from 1 July CPI indexation, actually amounts to no increase, with the rest funded by folding in the Premium Free Incentive (PFI) and Clinical Interventions (CIs)—worth $150m and $20m respectively in 2018/19. 

Therefore, dispense remuneration in the 7CPA is a status quo, though with a few notable points:

  • The agreement has shifted the PFI into the script price.
  • Pharmacies with high PFI substitution rates are sharing some of that income with low substitutors.
  • Applies to CIs as well because a lot of pharmacies didn’t perform them or didn’t bother recording and claiming.

The real coup for pharmacy was the Minister delivering dispensing income status quo, not a cut, and leaving the 60-day extended dispensing off the table. Pharmacists and owners therefore have a lot to celebrate having dodged a bullet.

Regarding below patient co-pay safety net script dispensing (recording fee $1.29 and Additional Patient Charge $4.39) pharmacists may earn up to $17.70 in fee income. That provides ample remuneration to advise and help patients while generating a good dispensing return. That is the case even without the Additional Patient Charge and is well above the cost of dispensing a script.

3. Professional services
Year 1 funding (2020/21) is dominated by medication adherence (DAAs) and medication management programs (HMR, RMMR, QUM and MedsChecks) totalling $202m of the $268m year 1 allocation.
Increased funding of Aboriginal and Torres Strait Island and Rural Support programs makes up the majority of the balance.

Community DAA opportunity is raised via “doubling the base cap during the first financial year and uncapped for Aboriginal and Torres Strait islanders” so pharmacists may lift their relevance to patients and payers. 

These give those patients valuable reasons to return plus the returns earned are the highest of any pharmacy service. Historically some pharmacists have shunned these services for a variety of reasons, perhaps enjoying relatively easy dispensing incomes, which must be overcome.

4. Location regulations
Location regulations remain untouched.

Things that are different

1. Dispensing income
Risk share compensation, beginning at 32c/script in 2017/18, was to disappear 1 July 2023 and has now been incorporated into the AHI.

Interestingly the government disavowed itself of the $4.39 Additional Patient Charge pharmacists may include in below co-pay script dispensing stating “the Additional Patient Charge is not commonwealth initiated”. But, it’s certainly valuable, helping cover the cost of pharmacist professional service and advice to patients.

Another win for pharmacy is fees earned for dispensing drugs of $2000 + (price to pharmacy) was raised to $95 AHI plus dispense fee, presently $7.74.

2. Dispensed price transparency
Pharmacists are to make patients aware, prior to dispensing, of any safety net and/or Additional Patient Charge and the total price of a PBS script based on processes created in year 1 by the Guild and the department.

3. Risk share
The volume-based formula places a floor under dispensing incomes, providing confidence during the economic downturn—provided discounting is resisted.

4. Innovation & professional services
We sense in the 7CPA the government intent to achieve outcomes in the interests of both health consumers and pharmacists. That augers well for relevance of pharmacists to patients and the health system.

Fortunately for innovative pharmacies, the PSA persisted in the negotiations in obtaining the $1.2bn services funding, which at one stage was looking modest.

That amount is regarded as a base and the agreement can be regarded as a receptacle for future additional patient outcome driven program funding, which is very positive.

Only year 1 services programs have been set with years 2 to 5 services to be agreed. These may involve new and/or expanded initiatives aimed at driving innovation.

There’s a lot riding on these provisions. A patient outcome focus is required rather than relying so heavily on supply income.

There is a serious intention by the Minister, Guild and PSA that services funding will be fully expended this time.

Four areas of future innovation are:

  • Aged care—there are intended to be changes to the services programs to help older Australians “wherever they live”, aimed at supporting the recommendations of the Royal Commission into Aged Care. It’s not clear what these are yet. But for professional service pharmacists, aged care is a huge opportunity to service the growing demands of government-funded In-Home Care patients.
  • Digital health
  • Mental health
  • Other suitable programs

5. CMI
Fee for CMI provision was built into the dispense fee several years ago, yet how many CMIs are actually given to patients? This should change under the 7CPA with the Guild being required to “ensure pharmacists provide CMI in accordance with relevant professional practice standards… including PSA professional practice standards”.

CMI is an opportunity to connect with patients that may lead, where relevant, to other services and GP collaboration.

6. Vaccination
The 7CPA calls for a nationally consistent approach for pharmacist vaccination under the NIP thus recognising pharmacists’ contribution and accessibility, another brilliant opportunity to shine.

The government, Guild and PSA have given pharmacy a great platform, providing a foundation of status-quo but providing opportunities for innovative pharmacists. Those that leverage these opportunities will “make everything as it seems”.

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