‘This is a very successful outcome’

I was a founding partner of the what is now called Picture Pharmacy Services, a division of picture partners in Brisbane. I founded the pharmacy services division in the late 1980s and I sold out of that division about 16 years ago, and I now practice as a consultant, advisor, writer, presenter, member of a couple of boards and general pain in the neck around the industry. But you can probably delete that bit if you like.

But yeah, I'm passionate about pharmacy and having with my various conditions, been a customer of pharmacy since I could walk. I truly believe in the people in the white coat and what they can do for people like me and others. And I see in the industry and the profession a massive, massive opportunity, which I've seen for many years. And I'd like to think this community pharmacy agreement or set of agreements will actually finally help facilitate that.

And it's good to be a part of what's going on at the moment. But my other, I guess qualification is I'm an associate member of the pharmaceutical society, which is a privilege for me and I enjoy it. So that's me.

I think the Guild has done well and the negotiating team headed up by Anthony Tassone backed up by a number of people who assisted and they achieved a very good outcome, particularly when you think about where it all started from, which was rather rocky, but it finished up being in a very good situation for pharmacy. And I think there are a number of elements to it, one of which is the recognition of the need to provide some financial compensation for the impact of 60

day dispensing on pharmacy viability. If it had been left the way it was, there would've been significant angst and stress and also I would say financial failures within community pharmacy, which had the potential to impact on the distribution reliability for the PBS. But I think when you stand back from it a little bit, we're seeing the wholesalers will have their own agreement for the second time, and we don't have the details of that as yet.

I understand they're negotiating around the CSO, but I dunno whether there's anything else going on. So hopefully we'll see the result of that very shortly. But also the PSA for the first time and the groundbreaking achievement has managed to achieve their own services documents. Now, those services don't include things like deas and meds checks and so on, which are still within the 8CPA medicine related supply agreement negotiated by the guild.

So the areas that the PSA will be looking into are things like NIP VIP and also some of the other programs, which used to be part of the Standard Guild government agreement. So pharmacy's not losing any services at all. And the second agreement, which the guild, sorry, which the PSA has negotiated with the government is the new and expanded agreement.

And the new and expanded services agreement potentially offers significant improvements to the professional service opportunities and a very strong role for community pharmacy in the broader health spectrum. And there is a development plan over a number of years for that to be negotiated, modeled and then rolled out towards the end of the current five year agreement. So there are a lot of elements in that which I think could assist with the evolution of the industry or the profession.

And when you look outside that agreement and you look outside the guild government agreement for supply and related medicine programs, there's about 1.4 billion or a little bit more of services that are funded outside these agreements and they're funded by the federal government and they are quite significant. And on top of that, you have the state-based scope of practice initiatives as well.

So there is even presently no shortage of opportunities for community pharmacists to expand their professional areas and also for community pharmacies to embrace them. So I think if you take a broader look at this as well as a narrow look, I think overall this has been a very, very successful outcome and negotiated outcome for community pharmacy and pharmacists.

So I think there's plenty of potential in that strategic agreement. So we'll, a little bit of an unknown at the moment.

There are variations depending on whether you're in a provincial area or low socioeconomic area or whatever. So I think when you look at the numbers of the reimbursement, there are two elements to it. One is the additional AHI, which will be $4 .79 from the 1st of July, and that is indexed each year. And that will apply to scripts that are dispensed as 60 day. And then there's an additional compensation which is quite significant and I'll explain why in a minute.

But that is 78 cents per PBS and RPBS government subsidized prescription will be paid to pharmacies. So $4 79 for the 60 day scripts dispensed and 78 cents for all PBS and RPBS prescriptions, whether they're 60 day or 30 day. So I think that's a real coup, but when you look at the structure of it, there's in total 2.111 billion being applied over the five year term to fund compensation for 60 day.

Now, if the 60 day dispensing uptake gets to something like 60%, I don't think that compensation will be enough to cover the losses. However, who knows what negotiation could occur if it does actually get to that. But in the meantime, at a 16% or lower or even up to 20% or more, pharmacies will be receiving more compensation than what they will lose. It's according to my numbers, when you get to about a 35% uptake rate, pharmacy gets to a breakeven point.

So that's roughly more than double the uptake rate experience that the experience that we're seeing at the moment. But the uptake rate obviously is pharmacy specific and also the drugs that pharmacies dispense a whole range of variables in it. One of the other factors here, which is important to understand is the government has agreed to pay as part of the 2.11 billion of compensation backpay for 60 day scripts dispensed from the

1st of April to the end of June this year. So in other words, the current quarter, so the 2.1 billion actually applies to five years plus one quarter, and that reimbursement will be $4 79 for 60 day scripts dispensed. In other words, at the A HI from the 1st of July, not the current A HI. So that's a positive. And also the 78 cents will apply to all PBS and RPBS scripts dispensed during that quarter.

So when you work the numbers out, given the low uptake rate, pharmacy can expect to get a very nice dividend for that period. I understand that this money will be paid somewhere towards the end of September or maybe October. Haven't had that confirmed as yet, but it's something like that. So that will help pharmacy financials look pretty strong for the year into 30 June 24. I think achieving compensation for 60 day dispensing has been a significant achievement.

If you look at New Zealand where they have 60 day and 90 day dispensing for a lot of drugs, there's been no compensation. And I think that's fairly consistent with other jurisdictions from what I understand. So I think securing that, even though it's probably not going to go a whole hog, if uptake goes to say 60%, it's a significant win to be able to achieve that.

If you look at the increase to the A HI and dispense fee just by themselves, the CPI uplift that we had on the 1st of July last year, which was 89 cents, there's another 47 cents combined for those two, which will come into effect on the 1st of July. That's a dollar 36. And when you work out the numbers and you multiply dollar 36 by the PBS and RPBS prescriptions,

that's quite a significant amount. And also provided you're not a discounter, you also get the advantage of that in the below patient copay area as well. So those amounts will go a fair way and maybe for some, not all the way to covering the increased in overheads that pharmacy has endured in recent years. So I think that's a significant thing to recognize and amounts like that. And general CPI increases to other fees can get lost in the maze of pharmacy day to day and can get taken for

granted. But I think CPI increases significant, and I think pharmacy will do very well purely from that. And of course the 60 day dispensing. I think the other one is the pharmacy programs. There's $1.3 billion which has been allocated to the services programs that are within the Guild government agreement. And that's over a five year period. I think there's about 227 million which has been earmarked for the current year. So the 1.3 billion obviously flags a room for growth.

see one. And of course to hospital, but also for pharmacy, it's a great way to look after the patients because they come back more regularly. And also the financial benefits are there, which I've written about before in a JP.

So I think just taking up these programs which are just sitting there, these are funded programs and the industry has provided these, and pharmacies can take these up and they're not that difficult to do. So I call these programs the low hanging fruit, and every single pharmacy can do these things. So those who've struggled to do any of them, the best thing to do is to start with one or maybe two and work your way into it.

The financial modeling that I've done with my clients and just purely looking at their KPIs, the pharmacies who do this, the financial returns for running a professional service style of pharmacy model with a lot of professional services and employing more pharmacists, the financial benefits are significant and these pharmacies tend to outperform the more traditional supply style pharmacies. So the financial model has been proven. So I think that's significant opportunity.

And in some instances you still come across the occasional pharmacy that doesn't do meds checks or those who don't do very many DAAs and they wait for someone to recommend it, whereas the best thing to do is to talk to the patients. And if you think they or the carer of a patient could benefit from one, then it should be recommended. So I think just taking those things up by themselves represent a significant opportunity.

But a lot of the retail elements of pharmacy have been hijacked by hard discounters and also by supermarkets, discount department stores, and of course online. So the way for pharmacy to compete in the marketplace and also to have a financially sustainable model, it's about operating in a different way. And that different way is, yes, prescription dispensing is critically important, it's the foundation of pharmacy.

And a lot of pharmacies still operate in a way that is simply about supply and reacting to requests for prescription dispensing. And I think if we can look at the pharmacist's role, particularly given their qualification skill sets, and in many cases, particularly young pharmacists, their own aspirations of what they want to do, I think doing more than dispensing has become, I think to me, a clarion call for a reorganization of the

practice model. So majority of my clients, the dispensaries are run by technicians, well-trained, highly competent dispensary technicians. And the pharmacist role starts from checking the script and looking at interactions and patient history and then speaking to the patient, providing services, working in consulting rooms or clinic rooms and looking at what patients need and advising accordingly.

And if you have that approach, all the services funding, even the ones that are currently available, you can maximize those. So I think changing the mindset from being what I call, which a lot of people don't like the dispensing chemist role to a professional pharmacist practitioner. I think making that change becomes critically important.

I prefer to call that front of shop or retail area front of practice, which has a totally different connotation. And there are some banner groups who see that and have made adjustments to their categories. So the traditional model historically and in many situations still is it's about maximize script throughput.

If I maximize script throughput, I maximize my income, more scripts I do more income I get obviously, and to improve the profit from that substitute as many generics as possible for originators. And that's become pretty standard these days anyway. People accept generics and majority of cases, and also to maximize supplier buying terms or deals because then that minimizes your net into store costs. And then to look at minimizing overheads.

And the big target for minimizing overheads is wages, particularly pharmacist wages. And I think that approach has led to a number of issues, which in my view has created the workforce issues that we're currently seeing. The difficulty of getting pharmacists. We know from the data that every year there's a record number of pharmacists going through the pharmacy, schools getting qualified, and yet it's so hard to find a pharmacist in community pharmacy,

particularly when you go outside the big cities. It's really, really difficult. And I think part of that is the dispensing model, which is about maximizing script throughput and then minimizing cost and so on in order to manage the bottom line. Now, there's an alternative to that. The alternative is the productivity model, as you mentioned before. The productivity model is looking at the wages paid or salaries paid, not as a cost or an overhead, but looking at it as an investment.

And like any investment you look at, well, what makes up that investment? What am I investing in? Am I investing in activities that don't give me much of a return or could I invest in a different mix of staff, for example? In other words, more pharmacists, more technicians, more nurse practitioners, more mental health counselors, more wellness consultants and so on. What can I do with that investment? Can I reshape that same amount of money but in a different way?

So the objective being what can these people do with the skills that they have? Can they attract more patients because of the skills and the additional services they can provide? And in doing so, can we therefore generate income by taking advantage of the current services in the eighth agreement that the guild negotiated, plus the new ones that are going to come through PSA. So the productivity model is driving the top line, not managing profit through trying to keep wages down.

So obviously efficiency and processes and getting rid of waste, they're all important. Looking at different systems to speed things up, that's important, but it's about what people can produce and producing is about attracting patients and then what you can do for patients and then getting paid for it.

And I think pharmacy can do this. We've got very well-trained, highly skilled pharmacists. I think a lot of them, and I talk to them in my capacity as an adjunct professor at the pharmacy school, QUT in Brisbane, they want to do more. They don't want to just sit behind a computer and bash out scripts for their career. And that's why a lot of them leave. They want to do things to help patients. They've learned a lot of skills at university and they want to apply those.

So they have skill sets, they have aspirations, they have things they want to do with their profession, and many of them get frustrated.

So I think taking up the opportunity in this unique situation that pharmacy's in now where we can as the most accessible health professional in Australia, start to take the running to take up the slack, which at the moment can't be, if you like, associated by hospital or general practice, huge opportunity, particularly in the primary care area and the services area.

agreement at the moment. There shouldn't be, I dunno why there is, I know there's a bit of a splinter group within the industry, but I think that whilst you can always argue for more, I think men, to look at what's been achieved for the industry and the profession in order to grasp that unique opportunity, which I think we are looking at at the moment over the next few years. So rather than complaining about the things that people would like to have, let's celebrate what we do have.

So I think there should not be a case for, I guess an overly aggressive range of complaints against this set of agreements.

But it's all very positive. I think there's not a lot to complain about. I mean, the New Zealanders didn't get any compensation for 60 day dispensing. So I think we need to understand that pharmacy in Australia is in an extremely fortunate position, and the government needs pharmacy. They really do.

And I think the Department of Health with the 60 day dispensing policy, which was dropped on the industry in April last year, whilst it shouldn't have come as a complete surprise because this has been coming since 2018, and the PBAC recommended extended dispensing to the then Minister for Health, it was badly framed. It was implemented very, very quickly without any thought for the impact. And nobody was consulted except maybe another healthcare group external to pharmacy.

So I think that may have also assisted in this agreement, but I take my hat off to the negotiators from the PSA and from the Guild. I think they did a superb job, and I think it places pharmacy in an extraordinarily fabulous position that not many countries around the world can enjoy.