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- Issue 81: April 2009
- Issue 80: March 2009
- Issue 79: February 2009
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We are in the process of moving all of our articles to the new site.

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Time to Sort Things Out

Neil Johnston
Management Consultant Perspective

Issue 80: March 2009
Page: 1 of 1 Author's Profile | Send to a Friend | Printer Version
Finally, a high profile person has had the fortitude to stand up and highlight the major weakness in Australia’s pharmacy infrastructure.
The event was the Neil Naismith Memorial Lecture; the speaker was Professor Charlie Benrimoj (the high profile person); the backdrop was the preparation for the Fifth Community Pharmacy Agreement and the release of an interim paper by the National Health and Hospitals Reform Commission’s interim report –“A Healthier Future For All Australians”.
Professor Benrimoj argued that it was unacceptable for one organisation (The Pharmacy Guild of Australia - PGA) to be driving the professional future of pharmacy.
This comment ignited the full fury of the PGA in an over-reactive response that was later moderated, causing the Pharmaceutical Society of Australia (PSA) to “clarify” its position through the issue of a public statement and the PGA to issue a range of uncharacteristic private apologies.
The issue of discontent was PSA representation on the negotiating committee for the Fifth Community Pharmacy Agreement. Equal representation was argued for, but the PSA had to end up with a one-third interest, further diluted because the PSA members had dual “citizenship” in that they were pharmacy owners and more likely to come down on the side of the PGA in any decision making process.
Effectively, this means that PSA ends up with minimal influence in negotiations and limited effectiveness in promoting the continuing development of independent professional services.
Further, it would seem that PSA needs to undergo major reforms and re-invent itself to be relevant to meet the needs of the majority of its constituents e.g. perhaps PSA could initiate a rule where appointees to the 5CPA negotiating committee should not be pharmacy owners.

When I first saw the media reports relating to Charlie Benrimoj’s speech I felt a moment of joy. Finally, someone was standing up to the unreasonable PGA pressure that permanently binds the professional services bundle (research, development marketing and delivery) to that of a community pharmacy.

And then Charlie Benrimoj released a further statement on AuspharmList:

”The second argument I put forward at the lecture, which has not been widely reported, is about financial arrangements. I believe that payments for professional services should be made through the community pharmacy for a number of reasons including:
1. Pharmacy owners have risked their capital in establishing, maintaining and developing the community pharmacy infrastructure and are entitled to a return for their investment
2. The community pharmacy network, critical for the health care of the community, must be maintained and therefore should be financially supported.
3. The service, and service opportunity, is and must be linked to product supply."

It is not clear as to whether these elaborative points were delivered during the lecture. If they were, it is surprising that other media has not made comment.
If they were not, then the point stated that, “payment for professional services should be made through community pharmacy” may have been overlooked, because of the import of the challenge to the PGA involving representation on the negotiating committee.

I would like to comment on Charlie’s points:

Capital Risk
Just because pharmacies have a capital risk exposure does not automatically entitle them to monopolise current and future professional services.
They already do this with scheduled drugs – their core business.
There are a significant number of independent pharmacists who have set themselves up into a formal business structure and have invested in office furniture, software, computer equipment, reference libraries, mobile phones, motor vehicles, websites and Internet connections etc and who conduct their own private research and invest in continuing education, to enhance and value-add to whatever service they are providing.
This is the same type of risk that community pharmacies are involved with, but generally on a smaller scale.
Community pharmacies should be partnering and fostering these independents through renting office space, by promoting the professional service as part of their own mix and even co-investing in such a service company.
This needs to be looked at as a partnership of equals, not as a master/servant relationship.
The service ends up as being delivered through a community pharmacy with payment direct to the professional service entity and the pharmacy gaining its return through the lease of space, the sale of operational services and most importantly for the community pharmacy, the flow on of business into the regular pathway of goods and services sales from the patients serviced through the professional contact.
Having more freedom, the professional service operator could then develop his/her business in other settings such as a GP super clinic, a private or public hospital, a nursing home or even sell directly to government departments.
Having a strong interest in the development of a service practice the owner(s) would continue to invest their own funds, thus freeing up community pharmacy capital to invest in what it does best.

Despite the commonly held view that community pharmacies are a highly profitable, many struggle to provide a decent return because of the high overheads involved in managing the PBS coupled with continuing pressure on margins and site rentals.
This will continue into the future, as the ageing population will generate more prescriptions, and more pressure by government to continue taking a hit on margins.
How then will a community pharmacy have the time and the funds to invest in a professional service?
Government pressure on margins alone will not allow for any “bells and whistles”.
There is every good reason to consider a range of models for professional service development and delivery, rather than the unpopular PGA promoted version, with professional services playing second fiddle to prescription business.

There are other substantial arguments in the same vein that I will deal with separately along this report.

Sustaining the community pharmacy network

The reason Charlie advances here is because he thinks professional service payments are critical to sustain the community pharmacy providing financial support.
There is no disagreement that community pharmacy is critical for the health of the community.
However, if financial support is being looked at as being derived from clinical services, this will never happen.
Clinical services are an intangible with a high cost in training human resources, coupled with a strong investment in communications IT.
There is a long lead-time in delivering a service that will be perceived as valuable and attract a fee from a patient or government.
Inevitably what occurs is a bureaucratically delivered system (such as Home Medication Reviews) that has a range of players involved, with none of the participants making sufficient financial return.
Community pharmacies need an alternate access to development funds to invest in robotic equipment and energy conserving technologies.
They also need investment in highly trained managers, not necessarily pharmacists.
Payment for these investments will occur through the savings in overheads and coupled with a continuing development of systems to sustain strong cash flows and to manage financial surpluses will create the ability to sell goods competitively. The best example here is Woolworths.
Professional services will add little to the bottom line of a community pharmacy profit & loss account directly, but indirectly they will promote the entire market mix and generate profit increases overall.

Service and opportunity linked to product supply

This is a strange statement because if you take the case of a GP service with a resultant prescription, the link to product and supply is through the prescription.
A clinical pharmacist could generate a prescription in the same way without being in a pharmacy environment.
Granted, if that pharmacist was located within a pharmacy, the impact on S3 sales and the value adding to prescription sales (counselling) would translate favourably into overall sales increases.
But this is not a good enough reason for restricting an independent pharmacist.
A pharmacy could still contract with an independent pharmacist to provide the service, and this would identify the value of such a service as it is quantified for reimbursement.
If it were not economical to both sides it would not survive, and that may well be close to the mark already.
I could not envisage an independent pharmacist contractor not wanting to associate with a pharmacy or a range of pharmacies.
Providing the service in an environment that supports freedom of choice would produce a more harmonious result.

What exists now and what is wrong with it

The major professional service that currently exists is the home medication review.
In this service the consultant pharmacist seeks to remove medications or replace them with more effective and safer versions.
So, the number of drug reductions basically measures success.

Success in a pharmacy is measured by the number of prescriptions dispensed (and the cash register total) – totally the opposite to the professional services pharmacist.

The professional service is not necessarily performed in the pharmacy, and may be performed in many locations.
For the purpose of economies of scale, pharmacies would prefer services located in their environment.

To compound the problem the consultant pharmacist is not able to identify the client.
Is it the GP?
Is it the patient?
Is it the referring pharmacy?
Is it the Department of Health & Ageing?
Or is it the pharmacy coordinating all the referring pharmacies?

Technically, the GP should write an introductory request on behalf of the patient, who then seeks out a consultant pharmacist.
A register of local consultant pharmacists should exist for the patient to choose from.
Generally, recommendations would come by “word of mouth” from satisfied clients/patients in the consultant selection, or from local advertising by the consultants themselves, similar to any other business.

A 2005 survey revealed that 54% of HMR's were performed by external consultants.
Today I suspect that percentage to be higher as owners and their employees have opted out of the process.
It is little wonder the system has not taken on properly.
Pharmacy owners have no time to do the job themselves and doing a small number with an employee pharmacist doing the interview becomes too costly.
Then reports get behind because again, they have to be done in bulk to be economical.
Reimbursement scattered among up to three pharmacists can mean there is not enough to go around.

Left to organise the service in peace, consultant pharmacists would make their own arrangements economically and liase with the GP and the patient’s pharmacy.
That puts money back on the table and incentive to do the job.

Pharmacy operated professional services will not run properly from a pharmacy if they compete for time against the core business of dispensing.
Worse, “top down” Mirixa type services will suffer the same fate, unless they are contracted out to pharmacists who have dedicated time to perform the services, and that means an independent pharmacist without the burden of having to dispense.
They seem to do it better in New Zealand and for this reason our new writer, John Dunlop, would be one to follow to see how it is done over there.

Pharmacists in New Zealand currently participate in the governance of Primary Health Organisations (PHOs) in the provision of Care Plus services, and in the clinical governance processes within PHOs. A new organisation, the Clinical Advisory Pharmacists Association has been established and represents the clinical pharmacists who work with PHO’s. Although these developments are encouraging, further impetus is likely to be needed to fully realise the potential of PHO / pharmacist engagement.

Meanwhile, as independent pharmacists in Australia look to PSA to provide leadership for independent contractors wishing to develop and provide new professional services, they are finding a “black hole”
The pharmacist's division of APESMA has recently made application for independent pharmacists to receive payments directly for HMR services.
That is a great first move.
However, pharmacists set up in their own business would be looking for an umbrella organisation to duplicate what the PGA does for its members.
The field is wide open for any existing organisation to court these people before an entirely new organisation is formed.
There is a deliberate gap in umbrella service provision and as “nature abhors a vacuum” it is only a matter of time before someone seizes the opportunity.
A few years back i2P suggested that the PGA be that organisation (yes we did!), but trust has been shattered there completely, because of PGA behaviour and its narrow view of the world.
Expectantly, everyone has been waiting for the PSA to fill the gap, but recent events illustrate how castrated that organisation is.

Perhaps we need to import some New Zealand expertise to fill the void.

Meanwhile, the pharmacy profession in Australia does not even have a forward plan for the development of clinical/professional services and a business model for the actual delivery.
And at a time when government is calling for input into primary health care services we only have a fractured and fragmented service offering...located with “near proximity” to the super clinics being proposed.

Wake up to yourself PGA before the profession is decimated by other allied health groups. Your dominant view of the world is definitely not supported by those pharmacists looking to enhance their profession.
You are welcome to be the gatekeeper of drugs and provide a supply service – but keep out of the professional arena, because you are not a good fit!

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