Current law prevents new pharmacies opening within a certain distance of existing ones. Photograph: Bradley Kanaris/Getty Images
Daniel Hurst Political correspondent
The health minister, Sussan Ley, said the government was also pushing ahead with a plan to allow pharmacists the discretion to cut the Pharmaceutical Benefits Scheme copayment by up to $1 a script in an attempt to encourage competition.
Pharmacies that choose to offer the discount would absorb the cost, saving the government “a potential $360m over the next five years”. But the Coalition is yet to formally dump its 2014 budget policy of increasing PBS co-payments by up to $5, which remains stalled in the Senate.
The government has been negotiating with the Pharmacy Guild – one of Canberra’s most powerful lobby groups – over the shape of the next community pharmacy agreement. The deal relates to payments to 5,000 community pharmacies to dispense PBS medicines and deliver pharmacy programs and services.
The fifth such agreement, which expires at the end of June, was worth $15.7bn over five years. In March the Australian National Audit Office warned of “persistent shortcomings” in the Department of Health’s record keeping during negotiations on the fifth agreement signed in 2010, including a failure to keep formal records of its meetings with the Pharmacy Guild.
Ley said on Monday the government had complied with the ANAO’s recommendations in its negotiations and had reached agreement in principle for a new deal valued at $18.9bn over five years. She said this represented an increase of about $3bn compared with the 2010 deal.
Several reviews – including the competition review headed by economist Ian Harper – have called on the government to begin phasing out rules that prevent new pharmacies from opening with certain distances of existing pharmacies, usually 1.5km or 10km depending on the location.
“In addition to introducing the ability for pharmacists to discount scripts for patients, agreement has also been reached to undertake the most significant independent and public review of the pharmacy sector ever conducted over the next two years, including consideration of both remuneration and regulation, such as location rules,” Ley said.
“Any findings and recommendations would look to be incorporated into future agreements.”
Ley said the government would seek to provide pharmacists with greater stability in the price of medicines and would “de-link their remuneration from the variability in medicines brought about by price disclosure”.
She said the government would double its investment in support programs for patients to $1.2bn over the next five years.
“However, for the first time, all pharmacy programs – new and existing – will be scrutinised and approved by the government’s independent Medical Services Advisory Committee. This is part of the Abbott government’s increased focus on evidence-based medicine and transparency, as well as recognition of the important role pharmacy plays in the primary care sector,” Ley said.
The Pharmacy Guild, which has previously signalled it might launch a campaign against the $1 discount proposal, issued a statement on Monday welcoming the funding for pharmacy programs and the extension of the location rules.
The president of the guild, George Tambassis, said the location rules ensured community pharmacies were highly accessible and well distributed throughout Australia.
He said the guild was pleased to have signed a letter of intent with Ley relating to the community pharmacy agreement but said there was “more work to do”.
Tambassis said the government was seeking to save money from across the PBS supply chain and “pharmacies will contribute significantly to this savings task both directly and through flow-on impacts”.
“The government has made clear that these savings are necessary to secure the agreement and the guild is supporting them, with the exception of the discounting of the PBS co-payment measure, which is a matter for government,” he said on Monday.
The guild has previously argued the optional discount proposal would undermine the principle that all Australians pay the same for medicines because pharmacies in rural areas would not face the same competitive pressure to offer the price reduction.
The opposition leader, Bill Shorten, said if the government was so keen to have affordable medicines it should drop its 2014 budget measure to increase patient costs.
That was a reference to the government retaining its policy to increase the existing PBS co-payments by $5 for general patients and 80c for concessional patients.
The legislation passed the Coalition-dominated House of Representatives in July 2014, but is yet to clear the Senate where it faced strong resistance from Labor, the Greens and crossbenchers, who also opposed the now-scrapped Medicare co-payment for GP visits.
Asked how the $1 optional discount interacted with the stalled plan to increase PBS co-payments, Ley made it clear that the earlier measure was not her brainchild but remained as government policy.
“That’s a separate measure I inherited from the last budget,” said Ley, who took over as health minister in December. “That is in the Senate at the moment. This package [in the community pharmacy agreement] is in no way contingent on that and I’ll be paying attention to what we do about that package in the future but this is a stand-alone reinvestment for the future.”
Labor’s health spokeswoman, Catherine King, said: “Only an Abbott government health minister could seek to make medicines ‘more affordable for consumers’ while raising the price $5 while asking chemists to cut their own income by $1 a script.”
The Consumer Health Forum said pushing ahead with the proposed price rise of up to $5 “would be contradictory and pose a cost barrier for many patients, particularly the chronically ill”.
But the group’s chief executive, Leanne Wells, welcomed the proposed new community pharmacy agreement, saying it “signals a fresh approach along with the prospect of further reform in the interests of patients and consumers”.
“The minister’s proposal for an independent public review into the pharmacy sector to examine areas including remuneration and location rules is a welcome break from the previous practice of both sides of politics to treat these anti-competitive aspects as no-go areas,” she said.