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Pharma - Goss

Issue: Issue 82: May 2009
Author: Rollo Manning

Editor's Note: This month Rollo Manning is presenting at a conference titled "The 6th Annual Future of the Pharmaceutical Benefits Scheme". It took place on Friday 1st May 2009.
Rollo's presentation notes follow, substituting for his normal Pharma-Goss column.

A PowerPoint presentation has been prepared and the following information should be read in conjunction with the presentation, found here.

Realising the impact of the PBS reforms on consumer demand for medicines and consumer choice




      This presentation does not include the answers but raises the questions that need to be examined before any further commitment is made by Government to what can be called an inefficient method of delivering PBS items and the ancillary services that can accompany that supply.

      An analysis of the distribution of “Approved Pharmacies” will show the aggregation of outlets in high population areas and where there are 10 pharmacies within a one kilometre radius. The consumer does not need this high number. The downside is that the cash available to be spent by Government is being spread thinly across too many outlets. The outcome is a poor service in terms of quality and an inequitable distribution of money. Those outlets doing nothing but dispense are paid the same as those providing additional services. The consumer does not recognise the difference and in general receive their PBS medicines in a manner which may be “normal” to them – but could be a lot better with an improved infrastructure.

      The 2002 Community Pharmacy Database shows that 57% of pharmacies in Australia were owned by one pharmacist – a testament to the success of pharmacist only ownership but not to developing economies of scale through high volume dispensing and caring models of practice. The pharmacies that are to survive into the future will be ones that have volume to sustain and support additional clinical services or those that concentrate on the lower end of the market with consumers seeking a quick fast dispense with no additional information.

      The cost to the taxpayer is $1.4 billion at present rates and numbers of prescriptions dispensed for the Government. The act of dispensing pays $6 to the pharmacy and this remains the same be it a complicated first dispense for a client on multiple medications or a repeat supply that may only need six key strokes on the dispensary PC. The question must be asked as to what the consumer is getting for this fee and whether it is fair and reasonable to reimburse a dispensing pharmacy the same for a simple process (repeats) compared to a prescription where contact is needed to be made with the prescribing doctor and the consumer counselled on the likely outcomes in taking the medicines.

      There needs to be a system that provides for far greater accountability by the dispensing pharmacy for the money it is receiving. The current system of remuneration has not changed from the initial days of the National Health Act in 1953 and the PBS when compounding of medicines was the order of the day. As prescribing and manufacturing practices have changed the pharmacy remuneration system has remained the same with the all powerful Pharmacy Guild doing a sterling job for its members – the owners of the commercial businesses benefiting from the flow of cash from Government. All members of the Guild are treated equally whether it is the business in Cooktown, Gove or Newman as the business in Lindfield, Toorak or Indooroopilly. Additional allowances are available for rural and remote areas but these are not based on quality or quantity of professional services.

      There is the view that all consumers need counselling and information on the medicines they are taking. Certainly there is a case for consumers to be made aware of the need for information – without information medicines are just a packet of chemicals that will do no good unless taken as prescribed. But to expect everyone to want that same level of knowledge is an unreal expectation. This means there is a case for pharmacy service outlets to meet the needs of consumers across the board and also the case for a variety of options – be they Internet pharmacies, fast machine produced dispensing opportunities, pharmacies in supermarkets or the traditional outlet that consumers know so well because they have not changed much in the past 40 years.

      With that variety should come variation in the fee paid for the dispensing task and additional fees for the extras when required, requested or ordered by a prescribing doctor. It should not be too hard for the pharmacy profession to work with Government in coming up with a schedule of fees.

      The knowledge of the pharmacy graduate must be utilised or the content of the course dramatically reduced. The majority of the now “Approved Pharmacy” outlets are nothing more than a process shop for dispensing in the quickest possible time as a response to the demands of the marketplace. The level of knowledge is one that is ideally suited to a pharmacy service provided in hospitals, medical centres, aged care facilities or Aboriginal Health Services and not necessarily tied to the supply function. The Pharmacy Guild through the previous five year agreements with Government has been successful in having all payments for additional services tied to the retail shop – and that is its job – to do the best for its members. The question has to be asked as to whether the consumer is getting value for money for the expense of graduating students from the 17 pharmacy schools that exist across Australia and if the knowledge gained is being usefully used in furtherance of improved primary health care. The current trend to large primary health care centres provides the perfect environment for a “clinical pharmacist” to be located as an integral part of the clinical team – advising on new therapies, patient education programs, and drug utilisation analyses.

      The National Competition Policy review of pharmacy regulation in 2000 highlighted the deficiencies in pharmacy practice not moving with the times of the previous decade and this can now be extended to the past two decades.

      Whenever costs are quoted of the PBS it fails to enumerate those PBS listed medicines that are paid for by the consumer in full. The lack of data in the area of the market below the level of the co-payment is nothing short of disgraceful and despite numerous calls for this information to be made available nothing has happened. In 2007 the Chair of the Pharmaceutical Benefits Advisory Committee, Emeritus Professor Lloyd Sansom, described the situation as “an indictment on the profession” and where he “holds the (Pharmacy) Guild accountable.”

      It is reasonable to ask why this is so and a suggested answer could be that the Guild does not want the public to know how well its members are doing out of below co-payment dispensing. Consider the fees alone that are charged, or can be charged once a PBS benefit ceases to obtain a government subsidy. A total of $12.14 is added in fees making the return on the Agreed Manufacturers Price of 15% appear miniscule. With the move to lower priced generics that margin becomes even more miniscule and the fee side of the equation more important to the private business man trying to pay a rent that is excessive to the needs of dispensing PBS prescriptions. There is no need for a pharmacy business to be positioned on the top floor of a large shopping mall and probably next to a big supermarket to dispense PBS scripts. It could just as easily be in a shed at the back. But it is the consumer paying the price and through the charges levied on below co-payment script dispensing.

      Let’s look at an example of say a prescription for Amoxycillin Capsules 500mgm 20

               Cost                                         $3.00

               10% mark up                             0.45

               Dispensing fee                                     $5.99

               Generic Incentive payment      $1.50              

               Additional fee                          $3.62 – the consumer should be advised of this fee

               PRF recording fee                     $1.03 – the consumer should be offered this facility

               TOTAL                                  $15.59

The size of this market is undefined and it must be wondered if this is because nobody in “official” pharmacy wants anyone to know the value that is stored on the database of every pharmacy’s PC. The same PC that was funded by the taxpayer to have installed and operating for claiming PBS reimbursement online. Pity the poor consumer when they then pay high rates for a supply that could be done at minimal cost by a machine, Internet pharmacy or fast action quick delivery dispensary in a supermarket, doctor’s surgery or GP Super Clinic.

The law, negotiated as part of the Fourth Community Pharmacy Agreement, does not allow a pharmacy to be in a supermarket and yet there are plenty of examples of where there is a supermarket within a pharmacy!

      There is a dire need for a review of the Pharmaceutical Benefits Scheme when it comes to the delivery of the medicine to the consumer. At a time when pharmacists are crying out for more opportunities to use their knowledge and consumers are looking for choices in how they get their medicines dispensed it is foolish to continually be reverting to a structure that has remained virtually unchanged for 40 years. The landscape for the delivery of health services has changed and pharmacy must change with it and provide the opportunities for its science (pharmacotherapy) to be fully integrated into the primary and public health programs of the Nation. At present pharmacy is seen as the supplier of medicines and little else. The exception to this is hospital practice where pharmacists’ exerted their muscle back in the 1970s to introduce the “clinical” functions and as a result of success were adequately remunerated both in monetary terms and in the higher profile for pharmacists in primary health care. In the “community” practice this has not been the case and largely because of the influence of the commercial lobbying power of the Pharmacy Guild.

      The retail model loses its credibility when it is seen as the marketer of fashions and fads in the health care market and the consumer who is informed must wonder why this apparent endorsement of product is given without scientific evidence of positive health outcomes. 

      Leaders of the profession are questioning whether the current model will stand scrutiny to become a full partner with other health professionals in primary health care and are calling for changes to happen. The National President of the Pharmaceutical Society of Australia (PSA), Warwick Plunkett recently wrote that: “Pharmacy’s operational structure needs an overhaul if it is to become an active participant in the Government’s preventative health strategy”. Professor Samson said at the National Conference convened by the PSA in October 2008 that “…the profession (pharmacy) would miss out on inclusion in future health care models unless it changed its current structure.”

      Meanwhile the 78% of the profession that is employed in retail pharmacies and depending on the income of those businesses for their livelihood appear to sit back and do nothing hoping that the Guild will fix it. The Guild takes the view that all is well and Australia has the best system in the world. That is no reason to not want to be even better and find future consumers and pharmacists a system that really is supreme.

      The answer lies in the establishment of a new Pharmcare Agency within Government that is responsible for paying for services as they are delivered within standards and quality protocols determined by the profession. The only agents for Pharmcare should be those pharmacy practices in the community that agree to provide a certain range of services for a given price. The present arrangement where the proprietors of pharmacies accept the payment with virtually no contract must stop if consumers are to be shown they are getting value for money.

      The present spend of $1.4 billion a year has to be justified in terms of health outcomes and the present scheme has no evaluation built in at all.

      Neither should it matter who owns the Pharmcare Agency business so long as it is performing. It could be a supermarket, aged care facility or Aboriginal Health Service that are of course required to employ pharmacists who will then be required to practice under the strict standards and protocols laid down by Pharmcare under contract to Government.

In 1978 the Pharmacy Guild held its 50th anniversary conference with the theme Towards the year 2000. This postulated that there would emerge three models of pharmacy practice – the traditional pharmacy, the large supermarket style pharmacy and the clinically orientated pharmacy performing the functions pharmacists are trained to undertake. The first two have continued but there is little sign of the third. It is hoped that the consumer does not have to wait for the 100th anniversary of the Guild to see the clinical pharmacy practice model emerge.

If it doesn’t then it will be a matter of change or the world will change you and before pharmacists know it they will be absorbed into the health/welfare programs of government and no longer in that privileged position in the retail strip or regional shopping centre.


Comment is welcome to Rollo Manning at

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