$1 pharmacy discount to hurt businesses?

$1 pharmacy discount: single dollar coin

The optional $1 discount on patient copayments for prescription medicines could harm community pharmacy businesses and drive consumers towards a price-oriented, lower-value model, industry stakeholders fear.

The discount, previously announced by Health Minister Sussan Ley, appeared in the letter of in-principle agreement regarding the Sixth Community Pharmacy Agreement signed by the Pharmacy Guild and the Minister.

Pharmacies will have the option to discount regular and concessional scripts by up to $1.

“I’m happy with everything else I’ve seen so far about the 6CPA, of what’s been released – but not this,” says Samantha Kourtis, owner of the 2014 Pharmacy of the Year, Capital Chemist Charnwood in the ACT.

“My business doesn’t compete on price. We’re in an industry where you can’t just put the price up on public holidays, or after 9pm on a Friday when you have a mother of a sick child coming in for antibiotics.

“That’s just how health care works – the government is the price setter.

“And people know that they can come to me and get excellent health care, but all too often I’m standing there with a woman who gets six or seven concessional medicines a month, and she says to me, ‘I can’t afford six medicines. I’m only getting five this month. Which one should I not get?’

“She comes to me because she knows I care about her health care. But I know, without a doubt, that if I do not pass on this discount, I have lost that customer, if she can afford six out of six medicines by going somewhere else.”

Kourtis analysed her business to examine how discounting each script by $1 would affect her bottom line. By discounting all concessional and general copayments, the Charnwood pharmacy would lose $62,478, based on last year’s scripts.

“That’s net profit lost. I’d need to sell probably $200,000 worth of stuff to make up for that profit.”

The alternative is letting staff go.

“That’s one and a half staff, so from the customer’s perspective, if I do this your script will take more than 15 minutes to dispense and then you’ll have to stand in a line 10 people deep behind the mum with the crying baby.”

Industry commentator Bruce Annabel told the AJP that he believes Minister Ley has good intentions in implementing the optional copay discount, but that the reality will be a significant loss for community pharmacy.

The Minister yesterday said that a discounted copayment “will actually really improve patients’ affordability when it comes to medicines”.

“She probably thought, ‘It’s only $1,’ and wants to help battling concession customers save a bit of money,” Annabel says.

“But I would imagine that the warehouse pharmacies would see this as an opportunity to again price promote to the consumer and to take a little more market share off traditional community pharmacy.

“This is an advantage to them. The other implication is that most pharmacy owners are saying, ‘We won’t have much choice, we’re going to have to follow’ and apply the discount.

“If they do that across the board to concession and general customers, it’s going to mean something like an effect on their bottom line of 23-33% of profit.

“This is a major implication. It’s a significant amount. We probably won’t see all pharmacies discount to that extent, though we won’t know until the market determines it.”

Another effect is that customers will take longer to reach the Safety Net.

“It’s actually a conversation we’ve been having already with our general patients,” says Kourtis. “This came up recently: I had a customer, a woman with a child on Singulair. She pays $37.70, and the government makes up the rest.

“There’s a generic brand of Singulair, and depending on your deal you can get that for much less than the originator brand. So a big discount pharmacy chain is charging $22 for that as a private script and it doesn’t count towards the Safety Net.

“The customer asked me why I was charging $37.70, not $22; she’ll continue to get her prescription done at the discounter and to not understand why she won’t reach the Safety Net. This is a hard conversation to have with people, and they continue to not understand why they don’t reach the Safety Net.

“Trying to explain why you’re not charging a concessional customer $5.10 for their script, like the discounter, will be another long, hard conversation.”

Annabel says that some concessional customers may not reach the Safety Net at all.

“From the Government’s point of view, it’s a measure that saves them money and saves the consumer money, at the expense of the pharmacist or the pharmacy owner,” he says.

“For some time, I’ve been campaigning against pharmacy excessively discounting, because it commoditises medicine, and that’s what this may encourage just a little more.

“And because pharmacists will be getting paid less, it may encourage more pharmacy owners to focus on efficiency and just getting the job done, rather than spending the time perhaps working with the patient.”

Annabel says, however, that he is excited about opportunities for professional services under the 6CPA.

“The $1 copay discount is perhaps a very unfortunate initiative by the Government but I think that with so many opportunities available, it may not be necessary to discount it totally.”


The $1 discount as competition

Health Minister Sussan Ley said yesterday that the optional discount is an important competition element for pharmacy.

“I think it’s important that we introduce competition into the pharmacy sector,” she said.

“Now I’ve heard that message clearly through the ANAO report into the previous pharmacy agreement and through comments that have been made from various Productivity Commission Harper review reports.

“So the $1 discount is an important element of introducing competition.

“There’s no reason why pharmacists need to take it up. Some will, some won’t.

“Pharmacists in rural areas do a lot of different things when it comes to the primary care of the communities they serve.

“You often see them out and about in constant conversation with the doctors, with community health, with mental health professionals and I would expect that, with the programming funding that we have and we’re introducing for primary care, they will have their hand up to get access to that to demonstrate what they can do.

“So it’s all part of a package. It’s important that we make medicines more affordable for consumers and that’s what the discounted co-pay is about.”

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