Shrouded in secrecy: the Pharmacy Guild resists deeper scrutiny

This op-ed was originally published online in the Guardian Australia's opinion section. Read the original here

For many years, pharmacies have held a favoured place in Australia.

Most suburbs have a pharmacy – a place where many people, particularly the elderly, feel they can go for the right medicine and perhaps some free and friendly health advice from the pharmacist.

That special status, maximised by their lobby organisation, the Pharmacy Guild, has delivered pharmacy owners political clout that reaches well beyond their customers.

The pharmacies’ status has helped ensure and protect substantial government payments to dispense the subsidised medicines available through the Pharmaceutical Benefits Scheme.

The nation’s 5,500 pharmacies, also protected by local monopoly status, will receive more than $18.9 billion from the taxpayer over the five years of the current community pharmacy agreement. The sum is reached in negotiations between the guild and the health department.

Following mounting criticism and questions about the agreement, the Australian National Audit Office three years ago undertook a performance audit into the administration of this arrangement. The resulting report criticised the department’s capacity to satisfy accountability requirements and protect the government’s interests. The report found systemic problems with the department’s handling of the huge pharmacy budget, including finding “dozens of meetings” with the guild for which the department kept no formal record.

The audit report stated that pharmacy remuneration has not been fully reviewed since 1989 and that the department “is not well positioned to assess whether the Commonwealth is receiving value for money from the agreement overall, or performance against its six principles and objectives”.

The audit report led to a wider government-initiated probe – the Review of Pharmacy Remuneration and Regulation, chaired by economist Professor Stephen King.

The review handed down its interim report this week. It contains numerous valuable insights and options for improvement in pharmacy arrangements, including the option for the Consumers Health Forum and the Pharmaceutical Society of Australia, representing the pharmacy profession, to join the negotiations for subsequent pharmacy agreements.

However a crunch question of value – for taxpayers and consumers – remains shrouded. That came about when the guild frustrated the review by issuing a caution to pharmacies against participating in a financial survey initiated by the review team.

The review report states that when it comes to pharmacy funding, “there is little transparency or coordination” for funding from different levels of government, and the survey was to have helped the review assess the costs related to an efficient dispensing service.

During its inquiry however, the review panel became aware that some pharmacy groups and the guild had discouraged members from participating in the survey.

In particular the guild recommended that ‘guild members should be wary about participating in this survey’.

“The panel is concerned that, despite the pharmacy sector receiving a significant amount of government funding, there is a general reluctance by the sector to provide this review and, more generally, the Australian government with the information required to ensure accountability and transparency for the public money that is being used to remunerate community pharmacy,” the report states.

The lack of transparency was “troubling from the perspective of public accountability” and might create long-term issues for the pharmacy sector as it would be unclear what level of remuneration is needed to maintain a viable and effective pharmacy network.

The suggestion of greater scrutiny did not go down well. The guild asserted in a media release that some of the report’s options could, if implemented, “put at risk one of the most trusted, sustainable and best performing parts of Australia’s health system”.

That raises the question of why the guild, which previously has described pharmacists as “agents of federal government”, should resist deeper scrutiny. The guild says requiring pharmacies to “provide detailed regulatory accounts to the federal government has no legal basis and would be an unprecedented regulatory impost on 5,600 small businesses”.

Those “small businesses” however tend to be part of national chains, four of which account for more than 60% of pharmacies, according to the review report.

But the pharmacy business is tough these days, tougher than it was until six years ago when pharmacies were able to profit from regulatory pricing loopholes. These have since been closed by measures which generated $2.2bn in savings to the taxpayer last year.

The guild has made up some lost revenue with a significant rise in dispensing charges and with the help of other increments from the government, including another $600m in this year’s federal budget.

The interim report of the review also includes recommendations to wind back the pharmacy location rules which protect existing pharmacies against competition. But that move has already been ruled out by the federal government in the face of intense opposition from the guild.

Once again, the guild’s prescription has won the day.

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Read the full interim report here

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About the author

Mark Metherell

Mark Metherell joined the Consumers Health Forum of Australia as Communications Manager in February 2013. Previously he was the Canberra based health correspondent for the Sydney Morning Herald, a position he held since 1999. He was also medical reporter for the Age in the 1980s. In a newspaper career spanning 40 years, he has held a variety of other posts including news editor and defence and foreign affairs correspondent.