Our guide to everything you need to know about the Seventh Community Pharmacy Agreement
The highly anticipated Seventh Community Pharmacy Agreement (7CPA) was signed in Canberra by Pharmacy Guild president George Tambassis and Health Minister Greg Hunt in June, in the presence of Prime Minister Scott Morrison and Deputy Prime Minister Michael McCormack.
Negotiated over 12 months between the Commonwealth and the Pharmacy Guild, with the backdrop of Australia being buffeted by bushfires closely followed by the COVID-19 pandemic, the 7CPA lays out government funding for the country’s 5800 community pharmacies over the next five years starting from 1 July 2020.
“The vital role of local community pharmacies in the Australian health system has never been more visible than in 2020, where the COVID emergency and the bushfires across multiple states have strained and stretched the primary health care system,” Mr Tambassis said on its signing.
“Through these challenging times, community pharmacies have stayed open to serve patients and ensure the continued availability of PBS medicines and other products and services, including vaccination.”
Minister Hunt said that the “landmark agreement” with community pharmacy will ensure Australians have access to more than 200 million subsidised PBS prescriptions each year.
For the first time, the Pharmaceutical Society of Australia (PSA) was also a signatory to relevant parts of the Agreement, in particular those related to the pharmacist code of ethics, professional practice standards, and the design, implementation and evaluation of pharmacy programs.
“PSA fought incredibly hard to represent pharmacists in this Agreement,” said PSA national president Associate Professor Chris Freeman.
“This was a particularly difficult agreement to negotiate, given the likely impacts resulting from the COVID-19 pandemic.
“PSA’s role in negotiations will achieve genuine and positive outcomes over the term of the agreement, support the vital role of pharmacists in primary care and enable them to practice to full scope, delivering better health outcomes for their patients.”
While pharmacy has not necessarily received a windfall in the new Agreement for the dispensing of pharmaceutical benefits, funds have been redistributed in a way that sees a rise in certain fees.
The Commonwealth has agreed to contribute more than $11.7 billion towards pharmacy remuneration for the dispensing of PBS medicines, including the dispensing fee, Administration Handling and Infrastructure (AHI) fee and the Dangerous Drug fee, plus an added $2.2 billion in patient contributions, leading to a total of about $14 billion for dispensing remuneration.
This is close to the $14.7 billion committed at 6CPA signing in 2015, and up from actual 6CPA spend estimated to be $12.8 billion including patient contributions and Premium Free Dispensing Incentive (PFDI) funding.
Meanwhile the PFDI has been cancelled from 1 July, with these funds reinvested into the original dispensing fee, AHI fee and Dangerous Drug fee.
The Commonwealth and Guild have also agreed to apply a new feature in the Agreement called the volume-based remuneration adjustment mechanism, “recognising that community pharmacies incur fixed costs notwithstanding the volume of PBS medicines they dispense [and] the inherent uncertainty in forecasting prescription volumes due to factors such as patient and PBS prescriber behaviour”.
The feature is “basically a guarantee”, explained Mr Tambassis, as the Guild says goodbye to the risk-share arrangement.
“The government has decided to guarantee our funds this time around, whilst last time in the 6CPA we thought we had this really good clause called the risk-share arrangement. Well, that didn’t work out too well,” he said, referring to the 6CPA clause that was meant to see pharmacies reimbursed for PBS shortfall but led to an ongoing dispute with the government.
The impasse was finally resolved when, in the May 2017 Federal Budget, the government agreed to provide $225 million over three years to community pharmacists and pharmaceutical wholesalers as a result of lower than forecast script volumes, through an increase to the AHI fee over the remainder of the 6CPA.
The Guild has managed to negotiate a different mechanism altogether in the 7CPA.
“We said, why don’t we get a remuneration adjustment mechanism that’s there for both sides,” explained Mr Tambassis.
“This time around we’ve tightened the remuneration, and the bandwidth of what we can get paid or what obviously has to be paid back if the volumes go too high. Certainly our economists tell me that it’s ‘tight-as’ this time around.”
However the Department and Guild have agreed to assess the adjustment process in the third financial year, to consider whether it remains fit for purpose.
60-day dispensing and the dollar discount
Double dispensing, which was heavily lobbied for by groups such as the RACGP and Consumers Health Forum, is currently off the table, Mr Tambassis confirmed.
“It’s gone in the Agreement. COVID-19 played a critical role there. It was panic stations in early March; it was obvious that if anyone in the pharmacy community or the medical community either prescribed or dispensed larger quantities than 30 days, we’d have a serious problem in this country,” he said.
“It may have been a great idea two years ago when PBAC recommended it, but we’re living in a different world now.”
GPs responded to the decision with disappointment.
“We regret that the government has chosen not to include extended dispensing in the new Community Pharmacy Agreement,” said then RACGP president Dr Harry Nespolon.
“Patients should not be treated as customers and foot traffic is not the basis of good health policy.”
The optional $1 discount has also not been written into the 7CPA, however Minister Hunt confirmed that it continues indefinitely.
Mr Tambassis said the Guild tried its best to get the “bad policy decision” off the table.
“That piece of legislation is still in place. They certainly still think it’s a decent idea—we don’t. So, just leave it out of the Agreement. Let’s keep advocating for solutions.”
The Federal government has promised to make $1.2 billion in funding available over the life of the 7CPA for professional pharmacy programs and services—an additional $100 million investment compared to actual expenditure in the 6CPA.
Indicative funding allocations for these programs have been written into the Agreement for the first financial year.
“Then it’s up to the Guild and the government to work out the rest of the $1.2 billion that’s left in the Agreement. So there will be a lot of horse-trading going on in the first year, but the first year is actually locked in,” Mr Tambassis told the AJP.
Indicative funding allocations for continuing community pharmacy programs during the first financial year of the Agreement are written as follows:
Medication Adherence Programs—$105.5 million
- Dose Administration Aids
- Staged Supply
Medication Management Programs—$96.4 million
- Home Medicines Review
- Residential Medication Management Review
- Quality Use of Medicines in Residential Aged Care Facilities
- Diabetes MedsCheck
Aboriginal and Torres Strait Islander Specific Programs—$12.6 million
- QUMAX/S100 Support
- Closing The Gap PBS Copayment Measure
- Aboriginal and Torres Strait Islander Workforce Programs
Rural Support Programs —$24.6 million
- Rural Pharmacy Maintenance Allowance
- Rural Workforce Programs
E-health —$18 million
- Electronic Prescription Fee
Other activity —$11 million
- Program administration, oversight and assessment
This adds up to an indicative total of $268.1 million over the course of the first year.
As stated in the 7CPA, the Commonwealth and the Guild agreed that these programs will remain “largely unchanged” during the first financial year, however signatories may consult on possible implementation of new or enhanced community pharmacy trials in areas such as e-prescribing, mental health and aged care.
However, a clear omission is funding for clinical interventions, which are no longer written into the Agreement, despite having been allocated nearly $20 million in the first year of the 6CPA alone.
Clinical intervention payments have been absorbed into other expenditure on professional programs, such as additional funding for Dose Administration Aids (DAAs), Aboriginal and Torres Strait Islander programs and rural pharmacy support, a Guild spokesperson confirmed.
For example, the Federal government has committed to increasing the Rural Pharmacy Maintenance Allowance, starting from 10% in the first financial year; a doubling of the base cap for DAAs during the first financial year; and providing uncapped access to DAAs for Aboriginal and Torres Strait Islander people.
The PSA’s Chris Freeman said, “there’s no doubt that it’s unfortunate to see clinical interventions no longer funded in the 7CPA.
“Unfortunately, the implementation of the clinical interventions program did not match the recommendations from the trials, there was a lack of data collected about the types of interventions, and there was not sufficient support in place to assist the delivery of clinical interventions.
“This has meant that clinical interventions have ended up being collateral damage when it comes to ongoing funding.”
However he added that funding allocation in the first year of the agreement is “pragmatic”.
“There will be review and evaluation of the current programs,” he said, with PSA to focus closely on this area.
Rural areas have seen a boost with the Federal government committing to a 10% increase of the Rural Pharmacy Maintenance Allowance (RPMA)—with the intention to increase this further in subsequent years.
Minister Hunt also signalled an upcoming transition from the Pharmacy Accessibility Remoteness Index (PhARIA) to the Modified Monash Model (MMM) for rural classification.
While this is not explicitly written into the 7CPA, the Guild told the AJP the change should occur sometime in first 12 months of the Agreement.
Minister Hunt estimates that an additional 800 pharmacies will access support through the RPMA under the new classification system.
Michael Troy, a pharmacy owner in South Grafton, NSW, is happy with the change.
“South Grafton has switched from PhARIA Level 1 to MM Level 3, which is good in just the recognition that Grafton/South Grafton is more rural than the middle of Sydney, Brisbane and Melbourne, which certainly doesn’t reflect where we are,” he said.
However, the Rural Pharmacy Network Australia (RPNA) is seeking further clarification on what kind of support rural pharmacies will actually receive under the Agreement.
“If you compare the funding allocation for rural programs in 6CPA and 7CPA there has been no substantial increase in the funding envelope,” the RPNA told the AJP.
“At the same time the Guild is reporting that 800 additional pharmacies will be eligible for the RPMA with the transition to MMM—this is basically a doubling of the number of pharmacies now eligible under PhARIA.
“So one question is how 800 additional pharmacies will be accommodated into a funding envelope that is essentially the same as 6CPA and, more importantly, will this change to the way the system works enable rural pharmacies to tackle the many rural disadvantages in any meaningful way?”
Wholesalers & the CSO
Finally, the Commonwealth announced that the value of the Community Service Obligation (CSO) funding pool will be up to $1.083 billion during the term of the 7CPA, to remunerate wholesalers for additional costs they incur in ensuring timely supply of PBS medicines and NDSS products to pharmacists.
The National Pharmaceutical Services Association (NPSA), which represents Australia’s full-line pharmaceutical wholesalers, welcomed the commitment of an additional $92 million in funding and the introduction of a floor price to support medicine supply through the wholesaler network.
“The investment is necessary to help offset years of funding erosion and ongoing Pharmaceutical Benefits Scheme (PBS) reform and cost increases,” the NPSA said.
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