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- Issue 81: April 2009
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- Issue 75: September 2008
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Pharmacy Wholesaling and Community Pharmacy - Spot the Difference.

Neil Retallick
A Friendly Society Perspective

Issue 75: September 2008
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The Pharmacy Guild is starting to gird its loins – preparing to negotiate the next Community Pharmacy Agreement (CPA).  Discussions into the evening, environmental scans, forecasts of prescriptions written, drugs dispensed and Pharmaceutical Benefits Scheme (PBS) subsidies.  Also in Canberra, the bureaucrats are developing their spreadsheets, loading data, fitting trend lines to the cost of the PBS and looking for reasons to pass off costs.  This process has become a ritual, well practised and understood by all participants.

There is little doubt that the CPAs negotiated between the Guild and the Government have provided positive outcomes for both parties and for other key stakeholders.  The ‘average Australian working family’ has won, in that more drugs are available at lower prices.  Their health outcomes have been improved at the same time as community pharmacists’ financial sustainability has become more predictable and more positive.

The Government has achieved significant benefits too.  Its financial commitment to the PBS has become more predictable and, whilst it has grown exponentially over the years, the return on investment has increased dramatically.  Return on investment measured in terms of lowering the total healthcare cost per person in Australia.  Community pharmacists have stepped up to the plate that is primary healthcare and made an increasingly significant contribution.

The next CPA will no doubt continue to add value to Australia’s healthcare system, continue the evolution of community pharmacists as key players in the front line trenches in the battle to contain the total cost of healthcare in Australia.

So is there a problem?  What difference is there to spot?

The new issue that both the Guild and the Government have to deal with is the Community Service Obligation (CSO).  This new mechanic wasn’t in existence prior to the last Agreement.  As you all know, the Guild negotiated the CSO with the Government as a part of 4CPA. 
Since then, the Government has dealt directly with the pharmacy wholesalers in establishing, reviewing and maintaining this device designed to control the cost to the Government of the wholesale links in the PBS supply chain.  Since then, the Guild has demonstrated that it lacks the experience and expertise to act on behalf of the wholesalers in matters material to the PBS supply chain.  Witness the recent fiasco around wholesale supply of drugs impacted by the Government’s PBS Reforms package.  In addition, the Government has developed strong and direct communication channels with all of the CSO Distributors.

The $64 question, or the $64,000,000 question is, Will the Government continue to negotiate the pharmacy wholesalers’ margin with the Guild in 5CPA?  Or will it recognise that this part of the PBS supply chain is not managed by the Guild and negotiate with the wholesalers directly?

Surely enough water has now passed under the bridge for the Government to realise its previously stated position – that it will only negotiate with one representative of community pharmacy with regard to the PBS – is now an anachronism.  A new world order has been created and the Government helped create it.  Now it must accept it and deal with it.

It is silly to think that the Pharmacy Guild of Australia, representing the independent owners of Australia’s community pharmacies, can sit at table with the Federal Government and decide issues that affect the commercial sustainability, indeed viability, of a number of publicly listed companies from whom the Guild has no formal imprimatur so to do.  We presume that Zeullig is aware that its future revenue streams, like those of API, Sigma and the other CSO Distributors, are about to be negotiated by its customer base.  Who is it that doesn’t consider this ludicrous?

It’s unlikely that the Government will initiate any change to the existing CPA process.  So it’s up to the Guild to acknowledge the conflict of interest inherent in the current scenario and suggest the Government extract the CSO sections from the CPA and negotiate these independently with the CSO Distributors.

The best outcome for all Australians will be 5CPA and the First Pharmacy Wholesaler Agreement (1PWA).    


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