Agreement risk share ‘cuts both ways,’ says Quilty

Pharmacies need to be urgently reimbursed funds resulting from the 6.5 million shortfall in prescription volumes over 2015-16, says Guild executive director David Quilty.

In this week’s edition of Forefront, he writes that, “Like all risk share arrangements, the risk share in the [Community Pharmacy] Agreement cuts both ways.”

The purpose of the Community Pharmacy Agreement is to provide both the Government and community pharmacies with certainty, he writes: “Certainty for the Federal Government that PBS medicines will be supplied to all Australians efficiently and to a quality standard utilising the trusted national network of community pharmacies.

“Certainty for community pharmacies about the remuneration they will receive from the Federal Government in order to make the investments in their businesses to undertake the task of dispensing PBS medicines to the Australian public.”

If annual prescription volumes written into the Agreement are materially exceeded, the Government is reimbursed to protect it fiscally against a blow-out in PBS volumes, Quilty writes; likewise, if there is a material shortfall in prescription volumes, community pharmacies are reimbursed.

This provides them with the certainty they need to invest, employ and provide services to their patients, he writes.

“In 2015-16, there was a 6.5 million or 2.14% shortfall in prescription volumes. 

“At a time when community pharmacies are struggling to cope with the adverse impact of the further PBS reforms negotiated in tandem with the Agreement, there would not be a pharmacy anywhere in Australia that would not consider this shortfall to be material.

“For the Government, the prescription volume shortfall is good news as it means it has to pay for the supply of fewer medicines. 

“The Guild estimates the shortfall is delivering the Government a saving in excess of $400 million that was not anticipated at the time of the Agreement.

“For pharmacies, the shortfall equates to a $15,000 reduction in remuneration for the average pharmacy dispensing 55,000 scripts a year, at a time when the annualised adverse impact of the Government’s PBS reforms is an estimated $42,000 per pharmacy.”

Quilty points out that the $82 million reimbursement to pharmacies would not be an additional cost to the Government as its budgetary forecasts are based on the pharmacy remuneration required to deliver the agreed prescription volumes in the Agreement.

“For pharmacies, this reimbursement is urgent. 

“They have borrowed, invested and incurred the fixed costs to fulfil their dispensing related responsibilities under the Agreement. 

“Many are struggling to maintain their profitability as a result of the impact of the Government’s PBS reforms and their ability to make the transition to becoming broader primary health care providers will be put at risk if it is not paid.

“More importantly, this risk share arrangement goes to the crux of why the Federal Government and community pharmacies enter into agreements in the first place. 

“It is the means by which the core commitments in the Agreement are delivered in full, but not exceeded, to the benefit of both parties.”

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  1. Toby

    Quilty is joking, isn’t he? The government couldn’t care less about the profitability of pharmacy, especially small pharmacies. The government is so hard up, because it is in hock to the eyeballs to pay the billion-dollar-a-week welfare bill, (yes, it really is) it will bleed pharmacy and anything else dry to get the money. The concept of welfare reduction is not even on the radar, given that the communist media jumps on the merest suggestion of such, to crucify the government in the polls as ‘mean’. A PBS refund for pharmacy? We’d need to withdraw from the PBS en-masse first.

    • PharmOwner

      +1 The Fed govt could not give a toss about the profitability or lack thereof of community pharmacy. This is why employee and owner community pharmacists have no future except as very well educated, hard-working poor. Forget sending your kids to private school. Forget buying a house. It’ll be a battle just to put food on the table.

  2. Lydia Gaidell

    This shortfall of script volume, equating to a” reimbursement of $15,000 to community pharmacies generating over $55,000/year in script will be used by multinationals in their lobbying to get into the pharmacy market in Australia. They will use these figures as a representation to the Govt/PBS that the smaller community pharmacy model is now failing i.e. script volume dropping.The multinationals will create the idea that there is a need to introduce a different larger scale model to reach new higher levels of profitability. They will use these figures as proof. The Government is not in a financial position to refund individual community pharmacies, despite its expenditure on welfare etc. They will look out desperately for how this may be avoided in the future and how the Govt can avoid their side of the agreement (reimbursement). Boots, Walmart, Walgreen etc. will find leverage from this I think. Multinationals will be the way of the future. Educated, hard working, lower paid pharmacists will be on the multinational agenda too. Sad to see generic multinational business models be the way of the future. Individualism goes with the loss of community pharmacy, multinational generic business models and cut throat profit seeking in the name of the shareholder starts with the profits being enjoyed by the select few.

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