Not all that it seems


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The government’s recent proposal to increase dispensed quantities of PBS medicines was nothing more than another savings measure, but it’s one with big potential ramifications for pharmacy, says Paul Cross   

If the government is serious about making medicines more affordable it could use some of the $25 billion siphoned from the PBS during this decade to reduce patient co-payments, said Mr Cross in his latest comment piece in industry newsletter Pharma Dispatch

The delayed or scrapped proposal to increase dispensed quantities of some PBS medicines is a
roundabout way of reducing patient out-of-pocket costs but it is a savings measure – reduced spending on the program dressed up as something else.

Like all things PBS in recent years, including how the government funds new listings, the sector is being asked to pay for this so-called affordability measure.

Manufacturers and others might have a sense of ‘schadenfreude’ about the Guild’s plight given how
previous reforms, including statutory price reductions to patented medicines, have been used to
redistribute $1 billion annually to pharmacy’s ‘Administration, Handling and Infrastructure’ (AHI) fee.

Yet they might contemplate how the proposal has once again confirmed the long-held attitude of
government to the PBS and how that manifests as chronic under-funding. 

Government is completely hooked on ‘recycling’ existing PBS funding – spending on the scheme will decline during this decade by around 20 per cent in real terms.

Manufacturers experience this by having to self-fund new listings, wholesalers as no indexation for the Community Service Obligation Funding Pool, and now pharmacy as a faux ‘affordability’ proposal.

This proposal is ‘faux’ because it is not really improving medicine affordability – like the $1 PBS patient co-payment discount, it is the government giving the appearance of improving affordability while forcing pharmacy to fund the change.

If implemented, it would just put more strain on the PBS.

The Pharmacy Guild has slammed the government’s proposal as a “catastrophe” and PharmaDispatch is aware of one analysis that shows it could reduce pharmacy margins by up to 40 per cent.

What would be the wider impact on community pharmacy, the supply chain and patient access to
medicines? Did the government even do an analysis?

It is not really a serious proposal about medicine affordability anyway because it only applies to some – mostly old, off-patent and treating common chronic conditions – and would generally advantage people who are already benefiting from the dramatic reductions in ex-manufacturer prices.

It would provide virtually no relief for non-concessional people paying over $40 per PBS prescription – including many families with children who face high out-of-pocket costs for medicines – and where are groups like the AMA and Consumers Health Forum on this reality?

You wonder whether their dislike of the Pharmacy Guild is such that it sometimes clouds their judgement on policy responses.

Will the AMA and RACGP be so supportive of the policy when they realise the logical extension is that it would result in a reduction in GP visits for repeat prescriptions?

Maybe it is really worth reminding some that this proposal was a savings measure – that is, it was taking money out of the PBS, not putting it in. PharmaDispatch understands the savings was included in December’s Mid-Year Economic and Fiscal Outlook. Was it reinvested in the PBS? Did it go to the budget bottom line or was it spent elsewhere? These are important questions.

The wider issue for pharmacy is what this proposal says about the future. It is just the latest example of the strategic decline in its remuneration – price disclosure that has largely eliminated trading terms, the $1 co-payment discount and now this proposed increase in dispensed quantities.

Topping up pharmacy remuneration through measures like the AHI fee provide one-off sugar hits. Yet these redistributive measures, which redirect money from one part of the PBS to another, are hardly sustainable given the scheme’s decade-long decline.

The issue is stark given the new therapeutic technologies will increasingly be distributed, dispensed and administered through channels other than community pharmacy.

The shift is already underway – at the start of this decade, 98 per cent of prescription volume and 94 per cent of spending was dispensed through community pharmacy. In 2016-17, while PBS prescription volume remains heavily weighted to community pharmacy (98 per cent), the share of spending through hospitals had increased from 6 per cent to almost 20 per cent.

This trend will continue and the risk for the Guild and its members is that they are left dispensing old, commoditised and very low-priced medicines – given this reality, it is inevitable that its remuneration will continue to come under pressure.

Paul Cross is the editor of Pharma Dispatch. This article is reproduced in full with his permission

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