Dispensing fees option could put pharmacies out of business

The Guild says it is still very concerned about the “true intentions” of the King Review

Pharmacy Guild executive director David Quilty has written in Forefront that one measure put forward in the Review of Pharmacy Remuneration and Regulation could put a large number of pharmacies out of business.

“The Guild remains very concerned about the Review’s true intentions for the future of community pharmacy,” Mr Quilty writes.

“There is no doubt this Review is causing uncertainty in the sector and nowhere is this more evident than in relation to dispensing, the core clinical function of any community pharmacy.”

The King Review interim paper has suggested that all current dispensing-related fees (aside from the Extemporaneously Prepared Fee) be replaced with a total dispensing remuneration benchmark of $9 to $11.50, and a flat $10 per script dispensing fee.

The report estimates that at $10 a script, the Government would save nearly $1.5 billion over the life of the 6CPA – considerably more than the entire 6CPA budget for patient services.

“Such an approach would constitute a serious reduction in core pharmacy revenues,” Mr Quilty writes.

“Given that the 6CPA estimates total government dispensing remuneration at $11.8 billion between 2015 and 2020, this constitutes a 13% reduction in nominal terms and a much higher real reduction, given the flat fee would only apply from mid-2020.

“If such a reduction were to occur, it is likely that a large number of community pharmacies – including the 15% that the Report acknowledges are currently not earning any taxable income – would not be able to continue operating as viable businesses.

“The Interim Report blithely infers that many pharmacies are too small and, by implication, sub-economic in terms of the model that it seemingly wishes to pursue. So much for the loyal patients and hard-working staff in these pharmacies, let alone the owners who have invested their livelihoods into these small businesses, which are often the lifeblood of their local community.”

Mr Quilty says the interim report suggests a dispensing remuneration range “that appears to be based on the views of one analyst in a piece published in pharmacy media in 2015”.

This falls short of the “compelling evidence” and “constructive pharmacy reform” the Panel said it intended, he says.

Mr Quilty also expresses concern about the proposal that every pharmacy be required to submit detailed accounting information each year to the government, in order to calculate the cost of dispensing in an efficient pharmacy.

“This regulated accounting approach mirrors that which applies to large monopoly utility and telecommunications providers. To my knowledge, it is unprecedented in terms of being applied to small businesses or health care professionals such as doctors or pharmacists.  

“The safe dispensing of a medicine to a patient along with the associated professional pharmacist advice and support is very different to shipping gas down a pipeline, transmitting power across an electricity grid, or communicating voice and data down a copper wire.  

“We are talking about the health and wellbeing of patients, each with their own individual needs and circumstances.  

“Requiring every pharmacy to prepare and hand over detailed financial accounts so the government can determine whether they are efficient or not, certainly fails the Panel’s own test that ‘regulation should not be excessive’.”

Mr Quilty says this would send “shock waves” through the health system.

“Surely, a nation that prides itself on Medicare and the PBS as the world-leading hallmarks of universal health care is not going down the route of measuring the wellbeing of patients in units of efficient cost based on an obscure and undefined regulated accounting methodology.

“If that is not enough to keep you awake at night, ask yourself does any government (or consumer for that matter) really want what is happening in electricity markets to occur in health?”

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  1. JimT

    with this sort of intent how the hell is the pharmacist award rate let alone over award payments have a chance to be increased to levels that they should be at !!!!!!

    • United we stand

      Any award increases will be heavily opposed from the Guild and if an increase is announced, they’ll be lobbying to remove the award system all together and replacing it “Enterprise Bargaining Agreement (EBA)” instead. Owners will be crying poor, yelling wage increases threaten small business viability and the loop continues.

      • Jarrod McMaugh

        As a Guild member I submitted information to both the King review and the wage case review that called for the award to be lifted.

        Many of the other guild members that I know are of the same opinion.

        Your assertions aren’t correct, and you’ll find that resistance to award increases aren’t in the interest of guild members at all. Other employees of pharmacists, though won’t be hoping for an increase

      • James Ip

        At most guild meetings I attend in Geelong, there is support from owner’s for a higher pharmacist award rate to match what the market pays. Not sure what the situation in Melb is but here we pay much higher than award. A higher award rate would help equalise the wages expense between discount and non-discount pharmacies

  2. JimT

    by definition the PBS remuneration model is a cost recovery exercise so………if theoretically the award rate was say $45 per hour then the associated fees paid would have this incorporated in their fee modelling….easy !
    So why aren’t th fees set with a realistic and fair cost base used in the calculations instead of the current rediculous award then we have to “BEG” for incremental award increases ???

    • United we stand

      I posed this question to Anthony Tassone a year ago. The short version of his response was the Guild can’t promise the government will recalibrate the dispense fee based on new awards or not. So they’re taking the conservative route instead. Ergo keep the award ridiculously low to keep businesses profitable.

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