Taken on notice


There are questions about some of the evidence presented to the Senate committee hearing into the effects of red tape on pharmacy rules, says Anthony Tassone  

Evidence presented by Michael Rhodes of Rhodes Management to the Senate committee hearing into the effects of red tape on pharmacy rules contained many factual errors which need to be corrected.

There were too many errors to be addressed in this column, but I would like to highlight some statements presented as ‘fact’ by Mr Rhodes.

Mr Rhodes told the committee that hospital pharmacists “constitute over six times” the 3,000 pharmacy owners he said there are. These figures do not add up and under Mr Rhodes’ mathematics would equate to 18,000 hospital pharmacists.

According to the latest report from the Pharmacy Board of Australia on pharmacist registrant data, as at 30 September 2017 there were 30,058 registered pharmacists. The Society of Hospital Pharmacists of Australia website says it represents 4,000 hospital pharmacists. Mr Rhodes’ assertion is that most of the pharmacist workforce works in hospital pharmacy. 

This is demonstrably incorrect and any recent pharmacist workforce study shows approximately 65 per cent of the pharmacist workforce is employed in community pharmacy.

Mr Rhodes displays a lack of understanding of the PBS as displayed in his evidence on a number of counts. These need to be corrected given the PBS is pivotal to our National Medicines Policy.

He told the committee that he believed there were 1,600 medicines on the PBS when in fact the 2014-15 Department of Health Annual Report –  the most recent report that breaks down the PBS listings – shows that at June 2015, the PBS included 793 medicines in 2,066 forms and dosages, sold as more than 5,300 differently branded items.

Mr Rhodes also needs to do a bit more research into the Community Pharmacy Agreements (CPA) if his statement to the committee are anything to go by: “Back in 2015, the Auditor-General criticised the opacity and lack of accountability of how CPA arrangements come about and the lack of transparency in delivering value in those arrangements. Other studies such as the King and Harper reviews have also been conducted and have called for the CPAs and the CSOs, or community service obligations, to be abandoned.”

This statement is wrong. The Harper Review final report did not call for either the Community Pharmacy Agreements or the Community Service Obligation (CSO) to be abandoned. Neither did the Interim King Review Report call for the removal of the Agreements and in terms of the CSO, it listed three alternatives, including one to remove and one to retain the CSO.

The issue of location rules also has proved to be a challenge for Mr Rhodes.

“As we understand it, the location restrictions — I can’t remember the exact algorithm because the guidelines by the PGA is about 80 pages long — in summary, there are limitations on the distances between pharmacies. That’s often abused if you have a pre-accredited pharmacy number, which is when you see pharmacies open up next-door to each other. But there are rules of one kilometre, 1.5 kilometres, two kilometres, five kilometres that restrict pharmacies being opened in certain locations,” Mr Rhodes told the committee in his evidence.

It is astounding just how many errors can be squeezed into just two sentences. The guidelines are not the Guild’s guidelines and they are not 80 pages long. They are administered by the Australian Community Pharmacy Authority (ACPA) which sits in the Department of Health. The ACPA Applicant’s Handbook, cover-to-cover (including the glossary), is 49 pages long.

The specific requirements for each rule are outlined in no more than four pages.  Also there are no 2km or 5km location rules – they seem to exist only in the mind of Mr Rhodes, as does the concept of a ‘pre-accredited pharmacy number’.  

Mr Rhodes also seems to have some difficulty grasping the details of the Administration, Handling and Infrastructure fee (AHI), including what it stands for, and told the committee: “Right now, the Government pays a pharmacist or a pharmacy — the AHI fee per dispense went from $7.50 to $10.50 in the last Budget. That extracted $600 million extra until 2020 to fund the industry. That AHI fee stands for the admin handling and inventory fee. Let’s look at that: it’s actually paid to the pharmacy owner, yet it’s the pharmacist who bears the cost and liability to provide that service.

Let’s extend this out a bit further. If I’m a pharmacist and I own two pharmacies, three pharmacies, four pharmacies, and I’m doing 200 scripts a day — multiplied by $10 per script dispensed, multiplied by four pharmacies — that’s 8,000 bucks a day that I’m giving to a very privileged ownership group to support the industry.”

The facts show the AHI for 2016-17 is $3.54 for Tier 1. The statutory AHI rises to $3.94 for 2017-18, an increase of $0.08 due to CPI indexation and $0.32 additionally in the most recent Budget in recognition of lower-than-expected volumes. The total cost over three years is $200 million. The $600 million referenced by Mr Rhodes is actually funding for new and expanding patient programs.

As to the 200 scripts a day, date of supply and official pharmacy figures show the average pharmacy dispensed approximately 140 prescriptions a day in 2016-17, with only about 100 of these being above co-payment dispenses.

Mr Rhodes was also incorrect in his statements regarding pharmacies not disclosing the full cost of a pharmaceutical or health benefit.  He informed the Senate committee:

“One of the things that is frustrating for pharmacies is that when they’re dispensing medicines and giving customers a tax invoice, you don’t actually see the PBS price. And we’re saying you should see the PBS price, so you do not get overcharged for that medicine. “

This is wrong.

The pharmacist has to print the full cost on the dispensing label under Section 64 Labelling of pharmaceutical benefits – full cost, of the National Health (Pharmaceutical Benefits) Regulations 2017: “A pharmaceutical benefit supplied by an approved supplier must be labelled with the words “full cost” followed by the full cost of the pharmaceutical benefit.”

If a pharmacy can purchase a medicine for less than the Agreed Ex-Manufacturer Price (AEMP) then this price will be captured by the price disclosure mechanism and the Government will decrease the AEMP to that which exists in the market. This is how price disclosure works – the price is linked to what PBS medicines are really being purchased for by pharmacies.

Another “fact” which cannot go uncorrected is the assertion that “eRx is a bit of software provided by a software company”.

The reality is that eRx is a Prescription Exchange Service (PES) that provides for the ‘exchange’ of electronic prescriptions (barcoded) between the prescriber and dispenser ‘activated’ by the patient when they present the hardcopy prescription at the pharmacy. Currently the PES service fee ($0.15) is paid for by the pharmacy and subsidised under the 6CPA.

There are more inaccuracies and questionable statements in Mr Rhodes’ evidence. Healthy debate is to be welcomed if it helps to improve the healthcare system in this country, and the health outcomes of patients. But inaccurate and sloppy evidence like this has no place in such debate, and does not accord the Senate committee the respect and diligence its deliberations warrant.

Anthony Tassone, Guild Victorian Branch President

* Anthony Tassone is President of the Victorian Branch of the Pharmacy Guild of Australia  

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18 Comments

  1. Tim Hewitt
    20/12/2017

    Well done Anthony.. may I ask who exactly Mr Rhodes is, from whence did he come, and in what capacity did he find himself before the Senate committee? (did everybody get an invitation?)… happy Christmas Mr Rhodes…

    • Anthony Tassone
      20/12/2017

      Thanks Tim.

      I do not know much about Mr. Rhodes.

      Below is a link to his LinkedIn profile:

      https://au.linkedin.com/in/michael-rhodes-798517

      Below is a link to his consultancy firm Rhodes Management

      http://rhodesmanagement.com.au/

      Invitations to present and give evidence in person are generally done following an initial submission to an inquiry.

      Whilst I do not know much about Mr. Rhodes, I do know he was wrong in a substantial number of errors in his evidence to this particular committee and I may consider writing a second part to this article to capture other errors of ‘fact’ given in his evidence.

      Anthony Tassone
      President, Pharmacy Guild of Australia (Victoria Branch)

    • Mick Rhodes
      20/12/2017

      Sir – From whence and in what capacity I came can be found here http://bit.ly/2kBN4nS in our first report (An Independent Perspective) and our second report here http://bit.ly/2kzNmvx (The Compelling Need for Change). This is followed by our invitation to submit and our submission on Red Tape Reduction in the Pharmacy Industry which can be found here http://bit.ly/2j6vOqO calling for an urgent need for a portal that supports Consultation to Collection (C2C) and Order to Reception (O2R) in a Supply Chain Portal, the details of which can be found here http://bit.ly/2kbispA.

      My contact details are in the reports should you require further information or clarification.

      • amanda cronin
        21/12/2017

        I read the first paper and while I agree with a it if it some makes me unhappy.
        Firstly your not a pharmacist and have no real depth of understanding of what that entails. When non owners have a business they are not always aware when they are asking ethically challenging behaviour. I have witnessed the consequences of this in the UK and it is not beneficial for anyone but big business using government subsidised scripts to draw people in to their business to be manipulated by advertising.
        When you get your degree and come back from the UK having worked in that environment and think it is better for everyone get back to me.
        One thing I do agree on location rules. I think this protect mediocre and sometimes sloppy pharmacies from competition which detriments the public.

        When pharmacy became more about front of shop volume and using cheap scripts to lure people- basically using junk sales to subsidise healthcare is a morally contemptible situation that is not in the public or the governments interest.
        I would much rather pay for my medication at the value they are worth as a service then have it subsidised by fake supplements and impulse shopping which in the end cost consumers more.

        • Mick Rhodes
          21/12/2017

          Madam – Thank you for your response. It appears that on some key things we agree and on others less so. I encourage you to read the other material I have authored as well. My involvement in this industry was first prompted by an initial small number of employee pharmacists calling BS on some of the activities in the industry – particularly those perpetrated by the Guild whom represent owners as well as the PSA – whom in turn rely on the army of employee pharmacists to “do the work”. With over 2000 downloads so far and still growing the reports have resonated with mostly powerless employee pharmacists whom have not had a strategic voice for fear of retribution from their owner bosses, the Guild, the PSA or all three. My interest has subsequently expanded in this industry (much to the behest of representatives from the Guild and the PSA) as has the substantial support and contact I have received from employee pharmacists whom have thanked me for stating to date what has not allowed to be said. You can be sure i won’t be going away and I will continue to challenge the location and ownership rules restrictions, reimbursements to pharmacy owners, excessive price of medicines, low employee pharmacist remuneration (among a long list of things) and to offer industry wide strategies and solutions that will address the rampant waste and inefficiency in both the consultation to collection processes and order to reception processes, which is something no other “industry body” has put forward. May your Christmas and New Year be safe and festive.

          • Jarrod McMaugh
            22/12/2017

            Mr Rhodes

            The PSA is a representative organisation of ALL pharmacists in Australia.

            It has neither the capacity nor the history of “retribution” towards any pharmacist.

            Please do not imply that this is the case.

          • Stephen Roberts
            06/02/2018

            ALL pharmacists?
            Jarrod, of the 30,913 registered pharmacists on 31-Dec-2017, how many are members of the PSA?

          • Jarrod McMaugh
            06/02/2018

            Yes all

            I’m not aware of any method of advocating for pharmacists in Australia in a way that separates those members who contribute to the work of PSA and those who don’t.

            PSA represents every pharmacist. All other pharmacy organisations, while important, only represent a segment, such as employees, hospital pharmacists, accredited pharmacists, pharmacist proprieters, etc.

          • Big Pharma
            07/02/2018

            Who advocates for accredited pharmacists? Not aware of anyone

    • Mick Rhodes
      20/12/2017

      … and yes happy Christmas to you Sir. 🙂

    • Andaroo
      18/01/2018

      He appears to me to be an opportunistic financial consultant targeting what he has probably determined to be a blue ocean like market segment for his newly registered business. As he states below, his interests have since expanded in the industry, so it appears his publication of his sales pitches as submissions and reports has worked.
      For a more succinct description : https://en.m.wikipedia.org/wiki/Parasitism

  2. Mick Rhodes
    20/12/2017

    Sir – Take this on notice. As a large slew of pharmacists have contacted me directly over your article, both angry at your comments and imploring me to respond, I offer these initial words. It never ceases to amaze me the tactics the Guild will employ to 1) DEFEND themselves and in the process of doing so 2) attempt to DISCREDIT others. I answer to nobody, I will not lay down and will continue to be the voice that will challenge your organisation and its self-interested objectives and more importantly be a voice that supports lowly paid employee pharmacists – whom overwhelmingly keep this industry ticking. My work to date has never been funded and I do so (in the normal course of very busy paid activity) to advocate what is right for patients, employee pharmacists, government and the tax paying public (PEPGT). My goal is simple – to contribute to the debate that will disrupt this industry and drive a better outcome for PEPGT. Clearly your members hate being exposed and hate being accountable. And I trust this is the first time in a long they have been. As for your article is so factually and contextually INCORRECT (as was your comment reply to me on December 15) as to be FRANKLY LAUGHABLE. The Guild has offered NOTHING in the way of INDUSTRY WIDE IMPROVEMENT OR REFORM and the representation of your colleagues at the senate select committee was embarrassing, particularly when asked TWICE by the senate chair “who benefits from Chemist Warehouse having lower prices” – after gabbling on and avoiding the answering question the first time, for about 2 minutes, the senate chair paused, and asked again, clearly and succinctly “WHO BENEFITS?” The CRINGE factor of your representative’s response having to say “CONSUMERS” was priceless. And that was just one example as subsequent dialogue was equally cringe worthy. In contrast, senators of the select committee stated on my submission, and I quote “we found your submission very interesting, in a VERY positive way”. So, over this very busy festive season as I author my response you can be assured your errors will be corrected and the context will be clear. As you’ve now chosen this path to create some semblance of credibility either for yourself or your organisation I trust the AJP will allow me the right of a reply in early 2018 (Shestyn Paola?). Merry Christmas and Happy New Year to you sir.

    • Yen Yab
      21/12/2017

      Hi Mr Rhodes. I would like to thank-you for your genuine interest to improve the retail pharmacy industry.

      It is regret that the answer to the question “who benefits from Chemist Warehouse having lower prices” is so wrong…laughably wrong (no offence). It should never have been “consumers”. The correct answer should have been: “Chemist Warehouse”!!!. Is it not obvious?

      Chemist Warehouse (CWH) and their predatory pricing (“lower prices”) is ONLY a business model, and its true intention is to grow rapidly to dominate the market and perhaps monopolise it. How does a monopolised market benefit consumers?

      In general, having “lower prices” does benefit consumers BUT not in every cases. For example, if the government was to remove all taxes from cigarette sales (i know this won’t happen) and cigarette prices dropped to $2 per pack, would this really benefit consumers? So, “who benefits from Cigarette manufacturers having lower prices”?

      Retail pharmacy is a unique health industry. Looking after people’s health takes time. And time cost money. What “having lower prices” mean is reduce the amount of genuine time spent counselling consumers. This is the reality in discount pharmacy models. You can’t have both low profit margin and genuine patient interaction. For example, CWH is charging non-concession patients “Amoxycillin Sandoz 250mg/mL suspension 100mL” $5.30. Assuming that the product comes in at no cost for CWH (other pharmacies normally buy it in for about $1.60), their profit is $5.30. The duty for the pharmacist to dispense this product include:
      1.Check patient history; check patient allergies
      2.Check if dose, dosage frequency and treatment duration is correct
      3.Check if all other script details are correct on the script, eg. prescriber details, patients details, signature of prescriber, prescribing date etc; if either Step 2 & 3 have error, the prescriber will need to be contacted
      4.Produce a dispensary label for the product
      5.Mix the powder suspension
      6.Put ancillary label(s) on the product
      7.Counsel the patient
      Thank god if all of the above steps goes smoothly and the consumer will pay their $5.30. If a normal pharmacy was to charge the same patient $5.30, they will only profit $5.30 – $1.60 = $3.70. It’s doubtful that this $3.70 will be enough to pay the wages of the pharmacist and the checkout staff. The only way that this $3.70 is going to sustain the business is to “somehow” cut short steps 1-7… which is to reduce time spent with the customer and curb the growth of pharmacist / staff wages. Sales volume will then dictate the flow of the business, and not “looking after consumer health”.

      The above is just an example of how “having lower prices” and predatory pricing will not benefit consumers. Genuine healthcare comes with a price. Doctors don’t discount their medical services, why should pharmacy?

    • Yen Yab
      22/12/2017

      Hi Mr Rhodes. I would like to thank-you for your genuine interest to improve the retail pharmacy industry.
      It is regret that the answer to the question “who benefits from Chemist Warehouse having lower prices” is so wrong…laughably wrong (no offence). It should never have been “consumers”. The correct answer should have been: “Chemist Warehouse”!!!. Is it not obvious?
      Chemist Warehouse (CWH) and their predatory pricing (“lower prices”) is ONLY a business model, and its true intention is to grow rapidly to dominate the market and perhaps monopolise it. How does a monopolised market benefit consumers?
      In general, having “lower prices” does benefit consumers BUT not in every cases. For example, if the government was to remove all taxes from cigarette sales (i know this won’t happen) and cigarette prices dropped to $2 per pack, would this really benefit consumers? So, “who benefits from Cigarette manufacturers having lower prices”?
      Retail pharmacy is a unique health industry. Looking after people’s health takes time. And time cost money. What “having lower prices” mean is reduce the amount of genuine time spent counselling consumers. This is the reality in discount pharmacy models. You can’t have both low profit margin and genuine patient interaction. For example, CWH is charging non-concession patients “Amoxycillin Sandoz 250mg/mL suspension 100mL” $5.30. Assuming that the product comes in at no cost for CWH (other pharmacies normally buy it in for about $1.60), their profit is $5.30. The duty for the pharmacist to dispense this product include:
      1.Check patient history; check patient allergies
      2.Check if dose, dosage frequency and treatment duration is correct
      3.Check if all other script details are correct on the script, eg. prescriber details, patients details, signature of prescriber, prescribing date etc; if either Step 2 & 3 have error, the prescriber will need to be contacted
      4.Produce a dispensary label for the product
      5.Mix the powder suspension
      6.Put ancillary label(s) on the product
      7.Counsel the patient
      Thank god if all of the above steps goes smoothly and the consumer will pay their $5.30. If a normal pharmacy was to charge the same patient $5.30, they will only profit $5.30 – $1.60 = $3.70. It’s doubtful that this $3.70 will be enough to pay the wages of the pharmacist and the checkout staff. The only way that this $3.70 is going to sustain the business is to “somehow” cut short steps 1-7… which is to reduce time spent with the customer and curb the growth of pharmacist / staff wages. Sales volume will then dictate the flow of the business, and not “looking after consumer health”.
      The above is just an example of how “having lower prices” and predatory pricing will not benefit consumers. Genuine healthcare comes with a price. Doctors don’t discount their medical services, why should pharmacy?

  3. PharmOwner
    23/12/2017

    With respect, I would not waste my time contacting the leaders of Chemist Warehouse and I do not have time to read the full Hansard transcript. I was responding to you emphasising that Senator Leyonholm asked the question about Chemist Warehouse offering cheaper prices twice. I’m making the point that price is only one factor when it comes to assessing exactly who and in what way, stakeholders benefit or do not benefit from their interactions in pharmacy.

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