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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