Health Minister Sussan Ley is promising to consult and negotiate more widely on the new agreement. Photo: Andrew Meares
Three months ago Prime Minister Tony Abbott was in “debt-and-deficit” mode when he addressed the Pharmacy Guild of Australia’s annual dinner.
Reminding the guild that the Howard Coalition government had generated surpluses and Labor governments had generated deficits, he said times were now different to those of just a few years ago and “I cannot stand up and say to you that government will no longer be looking for savings”.
The audience had no doubts about which program he was referring to and where he wanted savings. Although he didn’t name it, he was clearly talking about savings taxpayers’ dollars in negotiating the Sixth Community Pharmacy Agreement, which needs to be concluded before the old agreement expires in June.
On the latest estimates the Fifth Community Pharmacy Agreement has cost taxpayers $15 billion over the last five years.
Not wanting to provoke his audience, Mr Abbot said he wanted to work with pharmacists so that whatever the government did, it would be helpful for pharmacies and their customers and communities.
As a former health minister and long-term politician, Mr Abbott needed no reminding that these negotiations are delicate. They not only affect the incomes of 5460 pharmacy small businesses, they affect the cost of living of those of us who benefit from the 269 million subsidised prescriptions each year, and they involve a co-payment not unlike the GP co-payment that the government has found impossible to negotiate.
Those with a political memory will recall the fierce campaign that was waged against Labor when it sought to negotiate the first of these agreements back in 1989. A scare campaign raised fears that pensioners and the sick would not be able to access drugs as pharmacies would close.
As the negotiations foundered, leading political commentators predicted that the war the guild waged against the Hawke Labor government would cost it office. Many pharmacies were virtual anti-Labor campaign offices, with posters in their windows and pharmacists ready to tell customers what was wrong with Labor.
Full-page newspaper advertisements were taken out, a telephone tree was organised to continually ring ministers’ and members’ offices, letters flooded in, and the guild even organised a four-hour nationwide pharmacy closure.
In the end Labor toughed it out, winning the March 1990 election as tattered posters still hung in many pharmacy windows.
The problem for Labor then – and Abbott now – is that pharmacists rank highly in the public’s trust ladder.
The guild misses no opportunity to remind the government who it is dealing with. On February 26 last year, Queensland Liberal backbencher Jane Prentice tabled the largest petition yet presented to the House, drawing members’ attention to the “recent announcement by the federal government, without consultation, to change the Pharmaceutical Benefits Scheme (PBS) and reduce what is paid to community pharmacies to dispense medicines”.
The petition claimed the changes would put at risk the viability of community pharmacies across Australia.
“We therefore ask the House to take whatever action is needed to ensure that community pharmacy receives the funding support it needs to stay in business, serve patients, employ staff and remain open after hours.”
There were 1,210,471 citizens’ signatures.
If it’s still interested in saving money, the good news for the government is that thanks to generics – as drugs come off patent and are replaced by their cheaper equivalent – the cost of the scheme has stabilised, with the rate of growth below that of our GDP.
The bad news is that the Auditor General has found significant failings in the running of the scheme and the Health Department’s performance.
Most noticeably, initiatives in the fifth agreement that promised $1 billion in savings only delivered $400 million.
There was little transparency and much secrecy in the development of the agreement. The Health Department had dozens of meetings with the guild, along with email, telephone and teleconference exchanges. But it didn’t keep a record of these meetings, take minutes, or prepare agreed notes of what had been discussed. Departmental records examined by the Auditor General’s office contained only a one-page minute relating to discussions in January 2010.
The Auditor General commented that given the significance of the issues under negotiation, the decision not to prepare an official record was not consistent with sound practice and potentially limited the department’s capacity to satisfy accountability requirements and protect the Commonwealth’s interests.
At the time of these negotiations, Jane Halton was head of Health. She now heads Finance, which is charged with critically examining all expenditure measures and limiting departmental expenditure proposals.
The Auditor General observed that in running the fifth scheme, Health allowed millions of dollars to be reallocated between programs without the required ministerial approval. He also noted a stuff-up between Finance and Health where the wrong indexing rate was used to calculate the dispensing fee paid to pharmacists. He estimated that Health’s use of a 2 per cent indexation rate, rather than the 1.6 per cent wage cost index, had overestimated the total costs of dispensing fees by some $95 million.
The guild’s many different roles were also noted. It is variously an industry association and advocate on behalf of pharmacy owners; a publicly funded administrator of the Community Pharmacy Agreement, at times acting as the Health Department’s agent; a recipient of Commonwealth grants; an owner of business enterprises that sell products and services to pharmacies; and an adviser to Health.
New Health Minister Sussan Ley is promising to consult and negotiate more widely on the new agreement and has blamed Labor governments for the culture of secret handshakes, winks and nods. But the real test is whether she can shake off the guild’s hold over the scheme.
In his current mode of capitulation, it’s hard to see the Prime Minister supporting a challenge to the guild. While some are calling for negotiations to be delayed, Abbott will want the matter resolved as smoothly as possible and out of the way well before the next election.
The government is not likely to make any radical changes, such as allowing the two major supermarket chains, with their lower mark-ups, to have pharmacists dispense prescriptions from their stores.
That really would be a courageous Yes Minister moment.