A threat to certainty?

The Pharmacy Guild has dismissed a report that refers to the CPA as a “26-year-old dinosaur of market inefficiency”, saying its recommendations would reduce certainty across the sector

A few months ago AJP covered a report called ‘The Future of the Pharmacy Industry’.

It was written by business consultant Michael Rhodes, director of Rhodes Management, in response to requests from a number of pharmacists for him to provide “an independent perspective” on the pharmacy industry.

Mr Rhodes has recently released his second report, reiterating his argument for supermarket ownership and higher pharmacist wages.

Additionally, in the report he answers all 140 questions from the King Review discussion paper.

As with the first report, the second has already been shared on social media and online amongst a large proportion of pharmacists across the sector, with many pointing to the report’s argument for raising employee pharmacist wages.

Mr Rhodes believes supply of medicines to the community should be opened up to supermarket chains.

“Opening up to supermarket chains will add at least 1000 extra pharmacy outlets in the market and most importantly provide for additional regional coverage where otherwise pharmacies would not operate,” he argues, adding that general practitioners should also be able to practice within pharmacies, as a trade-off for allowing supermarkets to enter the sector.

He says it is “categorically unacceptable” that the government continues to negotiate CPAs with the Pharmacy Guild of Australia exclusively.

“Consumers are NOT represented. Employee pharmacists are NOT represented. Makers and distributors of drugs are NOT represented,” argues Mr Rhodes.

“The CPA constricts market supply and this has been factually proven in a number of reports. It is a 26-year-old dinosaur of market inefficiency.

“The industry, like all industries, should be survival of the fittest, unless exceptional circumstances exist commercially that preclude the National Medicines Policy access to medicines objectives (e.g. far remote areas).

“Protecting anything from normal operations and consumer choice only funds inefficiency and laziness.”

Mr Rhodes uses some very strong language in the second report when referring to the current pharmacy landscape:

“It’s a failure of respective governments whom [sic] have not woken up and smelled the roses, the tax payer and consumers are being fornicated with,” he writes, adding that the current system is “perverse” and takes advantage of underprivileged Australians.

Anthony Tassone, President of the Guild Victorian Branch, says the report is a “subjective narrative” that does not demonstrate that the National Medicines Policy has not been successfully delivered under the current system.

He says that, as with Part One of the Rhodes report, the second fails to fully understand and acknowledge the benefits of the current framework for the tax payer in delivering substantial value on the PBS, high accessibility to community pharmacies, and strong patient satisfaction and trust held for pharmacists.

“There does not appear to be any true engagement or consultation with those who operate within the industry to gain a further understanding since the first report was released,” says Mr Tassone.

He points out that community pharmacy is “the most accessible major service in Australia”, with 87% of the population living within 2.5km of a community pharmacy underpinned by a wholesaler network delivering PBS medicines across Australia, and served by a Community Service Obligation.

“PBS reform and simplified price disclosure is anticipated to deliver $20 billion of savings by the end of the 6CPA over the forward estimates. It has succeeded in creating the necessary headroom to critical therapies such as Hepatitis C treatments, biological and biosimilars. 

“This has all been in large part thanks to community pharmacy agreements and pharmacy location rules that have all helped to deliver on National Medicines Policy,” says Mr Tassone.

“Even with pharmacy location rules in place, the number of approved pharmacies in Australia has still steadily increased over the past five years, from just over 5,300 to 5,577 as at June 2016.

“Also, through PBS reform and price disclosure—the federal government is extracting significant value out of the supply chain and part of this cost is being borne by community pharmacies through reduced trading terms and settlement discounts impacting significantly on cash flow. The Rhodes report does not appear to acknowledge this,” he says.

“The conclusions [of the report] are based on a presumption that; there is an accessibility problem (which there isn’t), that community pharmacy agreements do not deliver value for tax payers (which they do), and that pharmacies supermarkets would somehow improve a model delivering value and that consumers are satisfied with (which they haven’t been proven to in other jurisdictions with deregulated ownership),” says Mr Tassone.

“The recommendations in the report are at odds as it seeks to create more certainty but they would threaten the ability of or healthcare system to meet these objectives and would almost certainly reduce certainty and confidence across the sector.”

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