Budgetary blundering?

Questions over use of taxpayer funds to compensate pharmacy, as department admits script shortfall “a lot more” than $200 million budgeted for relief 

Australia Greens leader Senator Richard Di Natale has questioned the public utility of compensating pharmacists for a shortfall in script incomes.

One of the 2017 Federal Budget highlights form a pharmacy perspective was the allocation of $200 million in remuneration to pharmacies as compensation for lower than forecast script dispensing amounts.

This was part of the controversial 6CPA ‘risk sharing’ arrangements to be invoked if prescription dollar amounts were lower or higher than forecast during the life of the agreement.

However, Senator Di Natale queried at a recent Senate Estimates Committee hearing whether the action was a result of a direct intervention by Health Minister Greg Hunt to defuse a potential “blue” with the Pharmacy Guild of Australia, and whether it was legitimate use of public funds.  

“The concern here, of course, is that we have another $200 million that conveniently avoids another public blue with a medical stakeholder,” Senator Di Natale said.

“That is the concern we have: whether that was an appropriate use of public funds. You have given me no confidence to suggest otherwise,” he told Department of Health buraeucrats appearing before the committee on 29 May.

Penny Shakespeare, first assistant secretary of the Department’s Pharmaceutical Benefits Division said under the new compact with the Guild, the government committed “an additional $200 million in remuneration to pharmacies, or an adjustment to the administration, handling and infrastructure fee. That will replace the process under the Sixth Community Pharmacy Agreement for annual reconciliation of script volumes and any expectation of adjustment of remuneration in future. The compact says $200 million—no more, no less,”

Ms Shakespeare said departmental reconciliation revealed a 2.14% shortfall in the actual script volumes compared with those forecast in the 6CPA.

Under questioning from Senators, the Departmental officials revealed that the $200 million compensation would not cover the shortfall, with Departmental Secretary Martin Bowles admitting “our assessment was it was a lot more than $200 million”.

“We do not have a specific number, but we believed that it was a lot more,” he said.

Senator Di Natale questioned the need for a separate compact with the Guild in the middle of an agreement, and the non-involvement of the PSA.

“We are now entering into this new phase, which has, as far as I can tell, not happened before, where we are having compacts with key stakeholders. One of them is around an extension of a $19 billion agreement, which is itself subject to a particular set of processes.

Even though… you indicated it was the same process, we are now hearing that groups like the Pharmaceutical Society of Australia were not involved or a party to those negotiations. I understand they are not a signatory to the negotiations, but they are a party to them. Why weren’t they a party to these negotiations?”

However the government’s process was defended by Senator Linda Reynolds (Lib, WA) who said “there seems to have been another mighty effort by my colleagues to find something where there is nothing—much ado about nothing. Good practice, transparent, good working relationships—that is it”.

The Department officials said the compact was in response to two issues. Firstly, the Guild “is always an interested party when we change medicine pricing policy” as happened in new agreements with Medicines Australia and generics manufacturers. Secondly, extending the program funding arrangements from the 6CPA.  

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