LESLEY RUSSELL. The Next Community Pharmacy Agreement

May 27, 2020

In normal, pre-coronavirus pandemic times, we would have expected to see the details and funding for the 7th Community Pharmacy Agreement announced in the May federal budget. But the new agreement, expected to cost some $20 billion over five years, is being negotiated behind closed doors and out of public view.

Beginning in 1990, a series of five-year Community Pharmacy Agreements (CPAs) between the Australian Government and the Pharmacy Guild of Australia (the Guild) have governed the payments made to community pharmacists for the dispensing of medicines listed on the Pharmaceutical Benefits Scheme (PBS) and associated services. This includes a Community Services Obligation Funding Pool which provides financial support to pharmaceutical wholesalers to ensure that low-volume PBS medicines are delivered to community pharmacies anywhere in Australian, especially in rural and remote areas. The CPA also governs pharmacy ownership and location rules and, increasingly, is a source of funding for professional pharmacy programs and primary care services and pilot programs.

The 6th CPA provided $18.9 billion for these activities and additional funds ($825 million / 3 years) were included in the 2017-18 budget. This current agreement expires on June 30 and negotiations for the next agreement (expected to cost some $20 billion over five years) have been underway for some time. Although there were two roundtables for stakeholders held last year and, for the first time, the Pharmaceutical Society of Australia (the professional body for pharmacists) has been involved, these negotiations between the Minister for Health and the Guild have been held behind closed doors.

Lack of transparency has been a consistent aspect of these agreements from the beginning, despite the fact that since 1990 more than $64 billion has been provided to community pharmacy under the CPAs. Funding for community pharmacy activities has continued to grow even as overall PBS costs have been constrained.

Notwithstanding the fact these agreements now account for more than 30 percent of the Government’s spend on the PBS, their governance, administration, and accounting has consistently been found to be out of step with normal public sector principles. There is little transparency about the appropriateness and adequacy of the dispensing payments, with the Government almost totally reliant on information provided by the Guild. Many consumer and primary care programs have been continued in successive agreements despite evaluation reports that have been unable to assess their effectiveness or value.

The Guild is a powerful and effective lobby and has been extraordinarily successful at protecting pharmacists’ income generated from the PBS (between 41 and 46 percent of their total income, depending on location). This is highlighted, for example, by the 2013 fight over dispensing fees for cancer drugs. The Guild was able to get a $82.2 million increase in dispensing fees for chemotherapy drugs after it protested that changes in funding arrangements for chemotherapy services left pharmacies with a $277 million shortfall. Similarly, it was able to coerce the Government into providing $210 million in the 2017-18 budget to community pharmacies as compensation for lower than forecast prescription volumes. And more recently, after a spate of public lobbying from the Guild, the Government decided it would not go ahead with a proposal to double dispensing quantities for some prescription medicines.

The Guild has fiercely and successfully opposed efforts to change the location rules which govern the clustering of pharmacies, to allow pharmacies in supermarkets, and other efforts to increase competition. Such changes have been called for in a succession of inquiries and reviews (as outlined in a recent article by Jennifer Doggett), by the Consumers Health Forum (CHF), and the Grattan Institute.

The Guild has also pushed for pharmacies to receive funding to deliver primary care services to patients. Both the Guild and the Pharmaceutical Society of Australia (PSA) regard the community pharmacy sector as an ideal environment to host preventative health initiatives such as immunisations and screening services alongside services to assist with medication management, especially for at-risk patients with chronic conditions taking multiple medicines.

Under the 6th CPA funding for these sorts of services and pilot programs has exceeded $1.26 billion. It’s highly likely funding for these activities will be increased in the next CPA, especially given the impact of the coronavirus pandemic. This is not inappropriate given the importance of medication compliance and medication reviews in improving health outcomes and quality of life, the recognised role of pharmacy as part of the primary care team, the ready availability of pharmacy services in most communities, and public trust in pharmacy professionals.

Despite the fact uptake of these programs is described as “alarmingly low”, this has generated turf fights between doctors and pharmacists. Some of the medical opposition is because evaluations of a number of long-running pharmacy programs have failed to demonstrate their value. In most cases, there has been insufficient data to enable any assessment of the impact of these programs on health outcomes, although some of them have been operating through multiple CPAs.

As an example, the Home Medication Review (HMR) program has been part of every CPA since the third (2000) and there have been many evaluation reports. These are summarised in the most recent report, dated March 2017. This evaluation found that the systematic literature review and the lower level evidence in reviews funded as part of successive CPAs do not allow a conclusive determination to be made with regard to the clinical and cost-effectiveness of HMRs performed by pharmacists. Yet it acknowledged that HMRs have become an accepted part of pharmacy practice (and there are likely some benefits to patients and the healthcare system).

As outlined by Doggett, there has been a raft of recent reports with reform recommendations for community pharmacy. The extent to which these recommendations will be reflected in the new agreement is unknown and uncertain. The most salient and recent of these is the 2017 review of pharmacy remuneration and regulation, chaired by Professor Stephen King, that was required by the 6th CPA; regrettably, the Government’s 2018 response to this offers small hope for changes.

The King Review – described as being “primarily a consumer-focused review” that considered the PBS as a “government funded ‘community resource’” and aimed to make community pharmacy more “patient centred” – made 44 recommendations. These included (yet again) the removal of pharmacy ownership and location restrictions – instantly dismissed by the Government which has announced support for just four of the recommendations, none of which involves significant policy changes. The review also (yet again) echoed concerns about the lack of transparency and accountability in the administration of the CPAs.

Recommendation 9-5 specifically states that support for future primary care type services should be for “those programs that have successfully met evidence of comparative clinical value and cost effectiveness as required by the Medical Services Advisory Committee.” It also states that “future funding for these programs should be on the basis of merit and not dependent on the outcomes of any other consideration such as an agreement on pharmacy remuneration.” Very few of the current pilots and programs will meet these criteria.

A key recommendation from the review is that the PSA and the CHF should be “participants” in future CPAs. To date they have been active participants in the preliminary roundtables, their additional involvement is not known. The formal participations of pharmacists and consumers in the next CPA would be a major force in ensuring that community pharmacies and dispensing mechanisms and supporting services for prescription medicines deliver value for money and improved patient outcomes.


The issues, controversies and standoffs that led to the first CPA are well-chronicled in a background paper produced in 1990 by the Parliamentary Library and these provide insights into the continuing powerplays that have underpinned each successive Agreement. It is not easy to develop an accurate chronology of initiatives and spending under the CPAs from the publicly available documents and the funding is not detailed in the Federal Budget Papers. However the six Agreements are available on the Department of Health website and the Explanatory Memoranda for the legislation implementing the various Agreements also provide useful information (memorandum for 3rd CPA here; 4th CPA here; 5th CPA here; 6th CPA here).

Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy and a non-resident Fellow at the United States Studies Centre at the university of Sydney.


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