Are low employee pharmacist wages the result of a flawed and unsustainable system due to price disclosure?
In a recent poll of AJP readers, the majority of respondents (49%) said “inadequate remuneration” was the biggest challenge Early Career Pharmacists are facing in their career.
Following this were the options, “lack of opportunities for career progression” (11%) and “too heavy workload” (10%).
Wages are clearly far and away the top concern for young pharmacists, a result that mirrors the feedback published in the PSA’s ECP White Paper.
Many of those consulted by the PSA indicated that the current pharmacy award rate is low in comparison to other healthcare professionals and should be re-negotiated.
However some community pharmacy owners are arguing that the reason wages are so low is because the current system is fundamentally flawed.
Peter Feros and Paul Riley, proprietors of Cincotta Discount Pharmacy in Merrylands, NSW, say that under price disclosure, the reduction in remuneration for dispensing PBS prescriptions has decreased by 22% – reducing the average community pharmacy’s annual income by $100,000.
Meanwhile, costs have been rising and many owners are unable to keep up.
“Every July, costs go up, rents go up, electricity goes up… Labour costs themselves are 62% of the cost of dispensing.
“How have we stayed afloat? With generics and wholesaler rebates,” says Mr Feros, a veteran of the industry who has an interest in several pharmacies.
“Remove these rebates and the community pharmacist income is below expenses growth and average wage growth.”
In addition the accelerated Weighted Average Disclosed Pricing Program (WADPP), which introduced a 12-month cycle, reduced the average community pharmacy’s profits by a further $30,000 per annum, placing further pressure on owners, says Mr Feros.
Employee pharmacists leaving the sector
Reductions in the pharmacist hourly rate have led to many leaving – or thinking about leaving – the sector.
Mr Feros concedes that employee wages are low.
“The community pharmacist award rate of pay has traditionally been ridiculously low. So much so that, to retain pharmacists, community pharmacy has traditionally paid employed pharmacists above the award,” he says.
However he cites PPA statistics that show that as price disclosure has cut into PBS remuneration, the rates paid to employee pharmacists have concomitantly dropped from $37 per hour in 2009 to less than $33 in 2015 – a 10.8% decrease.
Mr Feros stresses that rebates have not gone straight into owners’ pockets, however some AJP readers are sceptical.
Mr Feros points out that in 2011, over-award payments added up to $120 million.
But since the drop in wages from 2009 to 2015, the expenditure on pharmacist over-award payments have also decreased.
And while the average adult income in Australia is about $80,000 per annum, for pharmacists it sits at about $65,000.
With sector competition and lowered income, pharmacies are trading out their more experienced pharmacists for cheaper ones, suggests Mr Feros.
“How pharmacists are keeping ahead of the game is by replacing higher-paid labour with lower-paid labour – or starting off with lower-paid labour like Chemist Warehouse does.”
A Catch-22 situation?
The low award rate is actually holding back current PBS calculations, argues Mr Riley.
“The government dispensing fee is calculated based on the award wage,” he says.
If the award rate was raised at least to the current paid rate, it would have a positive impact on negotiations with the government regarding PBS funding, Mr Riley suggests.
“The government in calculating remuneration doesn’t look at the paid rate, it looks at the award,” he says.
“Let’s at least go up to the paid rate. We’ve discounted our own profession by not paying our staff enough money.”
Mr Feros agrees.
“They have undervalued our labour for 40 years. Pharmacy has always been the lowest-paid healthcare professional, even since I graduated from the University of Sydney 40 years ago.
“Clearly pharmacists’ hard-earned skills need to be more highly valued.”
He says because Chemist Warehouse gets about 70% of its income from front of shop sales, it’s based on a less risky business model.
“Perhaps if we could get the award up to the paid rate, big discount chains like Chemist Warehouse may have to raise theirs and it would offset the disadvantage.”
PSA has recently highlighted the impact of price disclosure on wages.
“Low wages in community pharmacy are a direct result of price disclosure hitting community pharmacy as negotiated between the Pharmacy Guild and the Federal Government,” said PSA National President Shane Jackson this week.
“We know that when gross profit per script is up, pharmacy owners pass those profits on to employees.
“We need a much stronger Seventh Community Pharmacy Agreement with all parties around the table—including PSA—to create better outcomes for consumers, adequate remuneration for the profession and ensure delivery of programs and services are focused on health outcomes.”
Dr Jackson says that the profession also needs to look outside of Government and Community Pharmacy Agreements to new roles and new remuneration.
“PSA has been working tirelessly to secure funds to expand pharmacist roles and remuneration, including through the Primary Health Networks, in areas such as minor ailments, General Practice pharmacy and by integrating pharmacists in Aboriginal Health Services.
“There is no quick fix to this. If we are to address this important issue, a longer term strategy is needed – and that’s why PSA is leading the 10 Year Action Plan for Pharmacist Practice in Australia to scale-up new roles and new remuneration, for the benefit of consumers.”
Meanwhile the Pharmacy Guild has said that maintaining a strong pharmacy model would be the best supportive measure towards higher wages.
“It has to be around the viability and sustainability of community pharmacy, and bringing new and innovative ideas to community pharmacy,” said Guild President George Tambassis at a seminar about remuneration last year.
“Unless we can create a viable pharmacy network then there’s no way to find a solution.”