PBS faces decade of negative real growth

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The Guild’s prediction that the $18.9 billion figure in the 6CPA would not be delivered has come true, executive director David Quilty says

Writing in this week’s edition of Forefront, Mr Quilty highlights the challenges of a “zero growth PBS,” citing two sets of figures which he says illustrate the challenge faced by the community pharmacy sector.

“The Health Department’s latest PBS Expenditure and Prescriptions Report shows that pharmacy remuneration in 2016-17 was $2.42 billion,” he writes.

“This is nearly $400 million less than the Department estimated for 2016-17 at the time of the signing of the Sixth Community Pharmacy Agreement (6CPA) in May 2015 and close to double the $200 million increase in the Administration, Handling and Infrastructure (AHI) fee that will be paid to community pharmacies over the last three years of the 6CPA as a result of the negotiation of the Pharmacy Compact.

“Clearly the $18.9 billion figure in the 6CPA will not be delivered with a likely five-year deficit in the vicinity of $2 billion.  

“At the time the 6CPA was negotiated, the Guild made clear to the Government that we believed that the $18.9 billion estimate was unlikely to be achieved and, unfortunately but predictably, our predictions are now being proved accurate.”

He says the deficit for pharmacies is a windfall for the Federal Government and results from the lower than anticipated PBS prescription volumes, combined with the impact of PBS cuts on the average per script pharmacy gross profit for dispensing medicines.

A second set of figures, outlined in a series of answers to Senate Estimates questions, also shows a lack of PBS growth going forward.

“These answers show that net PBS expenditure in 2016-17 at $8.8 billion was actually lower than in 2011-12 at $8.9 billion,” Mr Quilty writes.

“Furthermore, the Senate Estimates answers confirm that gross PBS expenditure (before rebates) between 2016-17 and 2019-20 is predicted to fall from $12.1 billion to $11 billion.

“To provide more perspective to the size of the challenge facing community pharmacies, the percentage of total PBS expenditure (excluding rebates) that is finding its way into community pharmacy has fallen from 93% in 2011-12 to 77% in 2016-17, while the percentage going to public hospitals has increased from 5% to 19% over the same period.”

A decade of negative real growth (from 2010-11 to 2019-20) is looming, he says.

“And net PBS expenditures could actually be lower in nominal dollar terms at the end of the decade than they were at the beginning.”

The proportion of this zero-growth expenditures going to community pharmacies is falling “markedly”.

This is due to a focus on subsidising lower-volume, higher-price new medicines dispensed largely through hospitals.

Meanwhile, individual general patients are increasingly paying directly for medicines available at a lower cost and sold in higher volumes, many of which are off-patent.

“The entrenching of the zero growth PBS has now got to the point where it is becoming untenable for pharmacies, the broader medicines supply chain and the pharmacist profession with medicines becoming more commoditised and a concomitant impact on quality, patient focused care,” Mr Quilty says.

“There needs to be a frank and fact-driven conversation about the implications of the current level and mix of PBS expenditure on community pharmacies and the broader medicines sector.  

“Such a conversation must be underpinned by a recognition that without the necessary level of public investment and incentives to invest, the sector is at risk of not having the financial capacity that is required to enable it to deliver on the objectives of Australia’s National Medicines Policy.”

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