Pharmacy deal in urgent need of new script

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The Australian National Audit Office’s report into the $15.4 billion remuneration scheme for pharmacy owners reveals the bewildering scale of administrative failure that only becomes clear on a detailed reading of the audit document.

The auditor’s exhaustive scrutiny of the administration of the Fifth Community Pharmacy Agreement (5CPA) shows the Health Department and the Pharmacy Guild failed to deliver on key government goals like giving more focus to patient services and maximising value to taxpayers.

The audit’s findings that large amounts of money went to areas not envisaged by, or adequately reported to, the Government underlines the importance of transparency, public reporting and firm policy and process.  When you are talking billions of dollars, the report shows that a million dollars here or there can easily end up in the wrong place.

Over the past five years, the CPA has been the subject of strong criticism from the Consumers Health Forum, professional pharmacists and others over the lack of transparency, accountability and inadequate focus on health outcomes.

This report vindicates calls for a fundamental rethink of the arrangements for taxpayer remuneration of pharmacy owners and of the dominant and potentially conflicted role played by the Pharmacy Guild.

Issues such as the Guild-orchestrated squeeze on funding for home medicine reviews and the troubling dispute over funding for chemotherapy infusions raised serious public benefit questions about the pharmacy agreement and its administration.

Threshold decisions on matters like fee increases, savings measures and loosely-worded contracts repeatedly went in pharmacy owners’ favour.

The audit reports that the department kept no records during the lengthy and detailed negotiation for this $15.4 billion deal.  The department also admitted it did not know how many pharmacists actually own PBS-approved pharmacies.  An astonishing admission in this day and age.

The audit also pointed to problematic issues for the Guild in its management of public money.  The Guild has stated the audit did not make any adverse findings in relation to the Guild’s role in the administration of the agreement.

The Guild’s role in administering the 5CPA was not in fact examined by the audit.  The audit did, however, highlight the many and likely conflicting roles which the Guild plays in the Agreement.  These include: industry lobbyist, agent of the Health Department, administrator of government funds, receiver of government grants, owner of business enterprises which sell services and products relating to the Pharmacy Agreement and advisor to the Department on the Agreement.

And the audit’s examination of the Health Department’s financing arrangements with the Guild did raise serious questions.  The Health Department was unable to provide confirmation or evidence as to whether the Guild had complied with rules governing management of public money paid to the Guild for the financing of a range of schemes including rural and Indigenous projects.

From a consumer perspective the report yields a compelling case for opening up to public scrutiny the process of administering of public spending on dispensing of medicines.

Despite a government-declared strategy of maximising savings, boosting the emphasis on health care rather than merely funding volume of dispensing drugs, these aims appear to have been swamped by the financial imperatives of Australia’s pharmacy owners.

CHF welcomes the new Health Minister’s support for more active consultation with consumers and other non-Guild pharmacy stakeholders.

We want to see consumers at the negotiating table for the next pharmacy agreement which should deliver on major principles of consumer-centred care and access to evidenced-based information about medicines.

In a comment that seems extraordinary given the $15.4 billion cost, the auditor notes:  “There is no formal mechanism in place to reconcile actual expenditures on pharmacy remuneration against funding specified in the 5CPA.”

It is findings like that and numerous others in the audit that convince us that Parliament must call an inquiry by the Joint Parliamentary Committee on Accounts and Audit into the Pharmacy Agreement report.

The audit shows that consumers pay out of their pockets for a much larger share of pharmacy costs than they probably realise - $4.8 billion over five years.  The Government has routinely cited the cost to the Commonwealth as $15.4 billion.  In fact consumers’ co-payments account for $2.2 billion of that figure.  On top of that consumers pay a further $2.6 billion for PBS drugs that attract no government subsidy.

The report states that it is difficult for stakeholders including the Parliament to “form an overall view of what the 5CPA has actually delivered”.  And this is a question which is often asked, is the Agreement about industry subsidy, is it about dispensing, or is it about delivering health outcomes?

It is time that Australian taxpayers knew exactly what they were paying for in the Community Pharmacy Agreement, and were able to tell if it had been delivered.  Any other outcome for the 6th CPA would not only be unacceptable, it would also undermine the credibility of all other sustainability-focussed health reform.  That’s a pill no Australian should have to swallow.


About the author

Adam Stankevicius

Adam Stankevicius was Chief Executive Officer of the Consumers Health Forum of Australia.