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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