‘Most or all pharmacies will get an increase on the 1 July.’

an pharmacist holding up a piggy bank employee pharmacist wages money earning funding salary salaries wage

New 7CPA sees “modest increase” in dispensing remuneration as Guild locks in funding and volume-based adjustment mechanism with government

The Commonwealth will be contributing $11.7 billion towards pharmacy remuneration for the dispensing of PBS medicines, including the dispensing fee, Administration Handling and Infrastructure (AHI) fee and the Dangerous Drug fee, according to the newly signed 7CPA.

This is up from $11.1 billion in the 6CPA, with patient contributions to pharmacy dispensing remuneration estimated at $2.1 billion over the course of the new Agreement.

Under the 7CPA, dispensing fees have gone up due to re-investment of the Premium Free Dispensing Incentive (PFDI), which is going to be cancelled on the 1 July.

PFDI funding was allocated $655 million in the 6CPA.

“That’s been reinvested in the other core dispensing fees, so most or all pharmacies will get an increase on the 1 July, but only in the constant fees rather than in this allowable fee that only happens from time to time,” explained Mr Tambassis.

“The PFDI, most pharmacies know how much that’s worth, that’s been reinvested now in the original dispensing fee, the AHI fee and the Dangerous drug fee,” he said.

“But really the whole dispensary remuneration has had a modest increase.

“We were more than happy that the government acknowledged the fact that our fees in that part of the Agreement, which we typically call part A, needed some reinvestment.”

See below for a full list of the new dispensing payments.

Meanwhile the Commonwealth and Guild have agreed to apply a volume-based adjustment, “recognising that community pharmacies incur fixed costs notwithstanding the volume of PBS medicines they dispense”.

A new feature in the 7CPA, the volume-based remuneration adjustment mechanism is “basically a guarantee”, explained Mr Tambassis, as the Guild says goodbye to the risk-share arrangement.

“The government has decided to guarantee our funds this time around, whilst last time in the 6CPA we thought we had this really good clause called the risk-share arrangement. Well, that didn’t work out too well,” he said, referring to the 6CPA clause that was meant to see pharmacies reimbursed for PBS shortfall but led to an ongoing dispute with the government.

The Guild-government impasse was finally resolved when, in the May 2017 Federal Budget, the government agreed to provide millions in funding to community pharmacists, through an increase to the AHI fee over the remainder of the 6CPA.

The Guild has managed to negotiate a different mechanism altogether in the 7CPA.

“We said, why don’t we get a remuneration adjustment mechanism that’s there for both sides,” explained Mr Tambassis.

“This time around we’ve tightened the remuneration, and the bandwidth of what we can get paid or what obviously has to be paid back if the volumes go too high. Certainly our economists tell me that it’s tight-as this time around.

“We’ve got a five-year deal for [pharmacists], some of those nasty things [from the 6CPA] are not there – they can plan for the future.”

Under the Agreement, the Department and Guild have agreed to assess the adjustment process in the third financial year, to consider whether it remains fit for purpose.

Commonwealth pharmacy dispensing remuneration in the 7CPA

Wholesale mark-up (for Ready-Prepared Pharmaceutical Benefits)

Where the Ex-Manufacturer Price is up to and including $5.50 – $0.41 per dispense
Where the Ex-Manufacturer Price is over $5.50 and up to and including $720 – 7.52% of the Ex-Manufacturer Price per dispense

Where the Ex-Manufacturer Price is over $720 – $54.14 per dispense

Administration, Handling and Infrastructure (AHI) Fee

Tier One (Price to pharmacists for Maximum Quantity less than $100) – $4.28 per dispense of Maximum Quantity

(up from $3.49 per dispense for pack quantity less than $180 in 6CPA. Currently $4.09 following indexation)

Tier Two – (from $100 and up to and including $2000) – Tier One AHI fee + 5% of the amount by which price for Maximum Quantity exceeds $100, per dispense of Maximum Quantity

(up from $3.49, plus 3.5% of the amount by which the price to pharmacists exceeds $180, per dispense in 6CPA)

Tier Three (over $2,000) – Tier One AHI fee + $95 per dispense of Maximum Quantity

(up from $70.00 per dispense for price of more than $2,089.71)

Dispensing fee (for Ready-Prepared Pharmaceutical Benefits)

$7.74 per dispense (up from $6.93 per dispense in the 6CPA. Currently $7.39 following indexation.)

Dispensing fee (for Extemporaneously-Prepared Pharmaceutical Benefits)

Dispensing fee for Ready-Prepared Pharmaceutical Benefits + $2.04, per dispense

(same in the 6CPA. Currently $9.43 following indexation.)

Dangerous Drug Fee

$4.80 per Dangerous Drug dispensed (up from $2.91 in the 6CPA. Currently $3.11 following indexation.)

The Tier One AHI fee, dispensing fee for Ready-Prepared Pharmaceutical Benefits and Dangerous Drug fee will each be indexed on the relevant date, however the wholesale mark-up will not be indexed over the five years of the Agreement.

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  1. Fady Joseph Moussa

    I doubt there will be any overall increase in revenue with clinical interventions funding and premium fee dispense incentive cancelled

  2. Joe Hijazi

    the 6CPA previous fees are incorrect, not sure where AJP is getting them from. AHI is currently 4.09 NOT 3.49 and dispense fee is 7.39 NOT 6.93…

    • Sheshtyn Paola

      Hi Joe,
      Thanks so much for your comment. The figures were taken from the original 6CPA document, however I will follow this up and amend the figures if required. Many thanks again.
      Kind regards,
      Sheshtyn Paola (author, AJP)

    • Sheshtyn Paola

      Hi there Joe,
      An update: while the original figures based on the 6CPA are correct, they have gone up over time due to indexation and are therefore currently higher than what was stated in the article. This has been clarified in the table. Please note that the original figures are crucial as the 7CPA fees will also be indexed over the term of the Agreement.
      Best wishes,

  3. Paul Sapardanis

    For non claimable rxs is there a change in the fees chargeable below $41?

    • Sheshtyn Paola

      Hi Paul,
      Thanks for your comment. If you’re referring to the allowable fee for items priced below the general co-payment, this will be $4.39 from 1 July 2020.
      Kind regards
      Sheshtyn Paola

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