‘Pharmacies compete fiercely on script prices.’

The current system benefits patients and drives competition on medicines, argues this community pharmacist

The main features of the Australian Healthcare system are the Medicare Benefits Schedule (MBS) and the Pharmaceutical Benefits Scheme (PBS). I believe these two schemes provide all Australians with equity, accessibility and universality, supporting and creating a world-class healthcare system.

Pricing for these two schemes has been set by the Federal Government. Even though some might argue the system isn’t adequate, they can’t argue against the benefits these schemes provide.

Under Section 90 of the National Health Act, pharmacies are given the approval to supply PBS medicines to all Australians.

Prior to 1991, pharmacies were congregated in affluent, more populated demographics. This led the Federal Government to intervene and introduce the location rules.

The location rules mean that 87% of Australians live within 2.5km of the nearest approved pharmacy premises to access PBS listed medicines when they’re needed.

These rules have been in place since 1991.

Removal of the rules would not be beneficial for patients as it would reduce access to PBS medicine and subsequent healthcare services delivered by those pharmacies, creating prejudice against certain demographics.

I believe this would compromise the healthcare delivery of services to all Australians.

It would also affect competition in the marketplace, since smaller and more patient-orientated pharmacies would be driven out of business, paving the way for the bigger, supply-only models that offer no healthcare services. Prices would stagnate as has happened in the hardware and liquor industries.

Patients support the current model as it delivers healthcare solutions. The Federal Government and the Health Minister Greg Hunt acknowledge the value that the community pharmacy network delivers to the patients. Minister Hunt is focusing on patients in their policy setting and making the patient the centre of the decision-making process, which is to be applauded. 

Certain economists and bureaucrats have claimed that there is no competition in the community pharmacy sector.

In fact, there are over 5700 community pharmacies in Australia with over 4000 individual proprietor pharmacists. Sixty per cent of prescriptions dispensed annually are for concession/pension card holders.

A pension/concession prescription costs $6.50. It’s at the pharmacy’s discretion to offer the discount of $1, reducing the cost to $5.50. Prices of those scripts can’t be discounted below the $1. The purpose is to ensure the universality, equity and accessibility of the PBS.

If the cost of medicine is over $40.30, the difference is reimbursed to the pharmacy via the PBS from the Federal government. The remainder of the prescriptions dispensed by pharmacies is either private or the price is extremely low on those scripts that pharmacies sell it for cost plus few dollars.

That leaves a substantial number of medicines under the co-payment, meaning their cost is below $40.30.

Pharmacies compete fiercely on those scripts’ prices, which is evident by the price variances between pharmacies. So when some people claim there is no competition, I believe they are wrong, as the evidence clearly states that there is.

Location rules are only significant when it comes to PBS approval. Any registered pharmacist can set up a pharmacy anywhere; the only caveat being that they won’t get an approval if there is an existing approval within 2.5 km. If not, then they can certainly apply for one.

At the end of the day, the patient must be the ultimate decision maker.

A positive public health policy is a policy that benefits everyone, not just a small group of people. 

I thank Minister Hunt for his good work on the PBS, and I fully support it.

Adele Tahan is a community pharmacy proprietor and Committee Member of the Pharmacy Guild of Australia NSW Branch.

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1 Comment

  1. Michael Post

    The location rules were quid pro quo for government introducing the first CPA in order to increase efficiency of audit and pharmacy payment in the early 1990s at a time of manual processing eg hundreds of employees at department health required to sort calculate and pay pharmacy claims .
    It is a hasty generalisation fallacy created and perpetuated by the Guild that government introduced location rules to benefit community access .
    The Guild amalgamated pharmacies prior to the 1990s in order to facilitate the first community pharmacy agreement .That was understandable at that time – PBS funding gave pharmacy stability and pharmacists wanted to be paid well. There were far fewer pharmacists and anyone wanting to own did own . Amalgamation and tightening up the network served pharmacists well at that time.
    Manual claiming is no longer an issue in this digital age and economy of scale is irrelevant in this regard. In my opinion there is no justification for location rules in this day and age.

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