Review ‘pre-conceived agenda’ would see 1700 pharmacies close

The King Review has been “hijacked” by ideology and economic theorising, the Pharmacy Guild says

In its formal response to the Interim Report on the Review of Pharmacy Remuneration and Regulation, the Pharmacy Guild of Australia has condemned the report as having a “pre-conceived agenda for deregulation of pharmacy” which could see 1700 pharmacies close.

“The Pharmacy Remuneration and Regulation Review (the Review) is a lost opportunity,” the submission says.

“The Review should have sought to identify practical ways to build upon a community pharmacy model that works extremely well, enjoys the overwhelming support of the public and is fiscally sustainable.

“It should have focused on the potential to utilise this critical piece of privately financed health infrastructure and the highly trained health professionals who work in it to deliver better and more cost-effective health outcomes for all Australians.

“Instead, it has been hijacked by a combination of ideology and economic theorising leading to conclusions that would dismantle if not destroy the tried and tested, mature community pharmacy model, forcing the closure of an estimated 1,700 community pharmacies with major losses of jobs, and an irreversible corporatisation and commoditisation of medicines related care.”

The Guild says that the Review has “quite deliberately” decided to go down this route, but has not produced the evidence to support such a “radical and untested” approach.

It says the evidence provided to the Review instead supports the success of the current model and the high levels of public and stakeholder support it enjoys.

“Rather than objectively considering and forming conclusions based on the entirety of the evidence before it, the Review has been highly selective in seeking to substantiate its seemingly pre-determined dispositions and views in the key areas of dispensing, the Location Rules and the negotiation of future community pharmacy agreements.”

The Guild says the proposed Efficient Long Run Incremental Cost (ELRIC) benchmarking metric is “unworkable in practice, unprecedented in the health sector, and completely lacking in terms of any cost benefit analysis.

“It seeks to impose on 5,600 health-focused, multi-output small pharmacy businesses a highly regulated approach that applies to large single-output utilities. It glosses over the complexity of calculating an efficient average dispensing cost, the onerous and ongoing intrusion on pharmacies in extracting the necessary financial and health information, and the implications of such a least-cost driven approach on patient health outcomes.”

The single flat dispensing fee suggested by the Interim Report would be set at a level “so significantly below current average dispensing remuneration levels that it would likely render an estimated 1,700 smaller pharmacies unviable and unable to continue operating,” the Guild submitted to the Panel.

It says such a flat fee would not take into account costs incurred in dispensing dangerous drugs or extemporaneous preparation.

“This brazen approach is predicated on the completely unsubstantiated and inflammatory assertion that smaller pharmacies offer low-value services and do not have sufficient size to be economic in an efficiently run system.”

The Guild says the Interim Report included the presumption that current levels of dispensing remuneration are too high, without taking into consideration that 15% of pharmacies are already not earning taxable profits.

“It fails to take into account the health benefits of the government remunerating the dispensing of PBS medicines or the social cost that would be incurred with the loss of so many pharmacies. Worst of all, it effectively recommends that government should deliberately set remuneration levels for the core clinical service of dispensing in the full knowledge that they would result in large numbers of community pharmacies going out of business.”

The Guild also takes aim at the Report for recommending the removal of the Location Rules, including the prohibition on co-locating in supermarkets. Measures in the Budget have already given the sector some certainty over this issue, as well as comments by Health Minister Greg Hunt at last week’s PSA17 conference, in which he said the government will soon introduce legislation to remove the existing sunset clause on these rules.

The Pharmacy Guild also condemns proposed changes to the supply chain and the suggestion that the way Community Pharmacy Agreements are negotiated needs to be revamped, pointing out that the Review “erroneously uses a 2014 report of the Australian National Audit Office to effectively assert that the well-established agreement based approach to community pharmacy remuneration should be overhauled”.

It also reiterates its concerns over the way the Review has been conducted, starting with the appointment of chair Professor Stephen King himself, as well as the stoush over the financial survey and the retention of Deloitte Access Economics.

“The Guild has come to the conclusion that the Review is so fundamentally flawed and inherently damaging that it cannot and should not be relied upon by government as a credible input on the key issues of dispensing remuneration, pharmacy Location Rules, the medicines supply chain or future community pharmacy agreements.”

Read the full submission here.

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  1. Consultant Pharmacist

    Greg Turnbull just keeps writing the same speech over and over but it only worked once:

  2. GlassCeiling

    Guild doing what it does best- false fear mongering . Removal of location rules is not deregulation – yet the ‘ threat’ is that one super- pharmacist ( let’s call him wolf) will be able to work in 50 locations all at once enslaving any remaining employee pharmacists after blowing down existing pharmacies and running staff out of town.
    Location rules should be called investment rules.

    Guild have created investment rules to the detriment of communities where no tender nor responsibility to community is incumbent on the investor outside of paying an annual registration fee and providing a basic service. The current system relies on the investor to be proactive and community oriented- it happens in many cases and does not happen in many cases.

    • Andrew

      I find it interesting that so much of the response to the report is around business, and money, and maintaining the lack of competition – nothing yet on patient outcomes, how to improve public health, or any kind of HEOR. What’s the priority here?

  3. William

    There is an “economically justifiable size” for all businesses and that includes pharmacies. Suburbs having six and more pharmacies would be hard to justify and why should the tax payer accept that extra cost?
    Some years ago there were amalgamation of small ones into larger ones but the criteria used were not robust enough.
    Either the trade will take the initiative and do it or the Government will enforce concentration into area dispensaries using automation.

  4. Philip Smith

    So if 1700 closed, another pharmacy could not rise from it’s ashes?
    It seems that those 1700 must have been over paid for?
    Yes its not nice for those who choose to purchase the pharmacy, but much like buying stocks or a mining town property these things come with risks.
    The 15% not paying tax, how much “owners” phones, car etc etc are being run through the business?
    If not, again the current restrictions have caused issues for these pharmacies have being over paid for.
    If the system is currently so great, why are these owners in this position and why are pharmacist so poorly paid?
    Guild just doing their job.

    • M M

      They are under performing businesses. A burden on tax payers. The fact is economic theories work. PGA assumptions are like saying “Pythagorean Theorem” doesnt work.

    • H Shan

      Valid questions. Owners should give a Google search about pbs spending for last few years and then check how much the Guild has agreed to give away to govt for other projects in the name of pbs cut.

      Then these small pharmacies should check how much pbs money they are going to lose even without the review and whether their business is viable or not.

      I think guild doesn’t mind if a discount chain kills several pharmacies as long as that discount chain is not a specific one.

      Solution? Put a cap on number of script dispensed by a pharmacist on average per day, calculated on weekly basis. If it is 120 scripts/day then a pharmacy doing 600 scripts/day has to employ 5 pharmacists. It will ensure proper counselling, CI, etc. and offer job opportunity for small pharmacy owners who are going to close down the business and also create an environment where nobody will try to be very big.

      • geoff

        I didn’t see your solution in any of the 220 page King Review Interim Report, so you have missed the boat. There was a suggestion about different fees for originals vs repeats so would that be 40 original and 80 repeats a day? Apart from that the Interim Report chose a $10 flat fee for illustration not as intended (with from memory a suggested range between $9-$11.50) …… unfortunately that illustration showed many would go broke and MOST pharmacies would be unprofitable. The profitable ones are those providing minimal service…. from my reading (and my submission in reply) linking everyone,s flat fee to the most efficient dispenser is arguing for low price, low service.
        Similarly the report had an erroneous example of how country people could save $35 per script by using mail order rather than drive to a local pharmacy….. the benefits of face to face counselling were totally ignored. From the report Rural and Remote (Pharia 3-6) are the least profitable so most likely to close….. clearly having an economist determine health outcomes has not been a great idea.
        I would suggest everyone actually reads the interim report.

  5. Toby

    You wouldn’t mind so much, if the government also produced a report that attacked the doctors to the same extent the King report attacks pharmacy. But then again, the government is scared of the AMA.

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