Senate debates

Wednesday, 5 March 2014


National Health Amendment (Simplified Price Disclosure) Bill 2013; Second Reading

9:50 am

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | Hansard source

I want to express my very serious concerns in relation to this bill. Price disclosure is important. It is important for consumers. It is important for transparency. I am very supportive of price disclosure. I believe it is a very important part of managing the PBS, which costs taxpayers some $9 billion each year but is an essential part of our health system. I agree in part with Senator Di Natale that we do not want to go down the US path where they are having a huge debate about Obamacare. It is referred to as 'socialised medicine' when in fact it is not even Medicare-lite, in many respects.

I am deeply concerned about how this policy of price disclosure has been implemented. I believe that the 5,500 community pharmacies in this country have been absolutely dudded by the previous government and unfortunately by this government as well. Last year we saw concerns raised by some pharmacists about price disclosure relating to chemotherapy drugs, because that price reduction was implemented with little or no consultation with or warning to them. The consequences of that were dire, causing great uncertainty and distress to many chemotherapy patients and creating genuine hardship for pharmacies. We heard evidence from some pharmacies in regional Australia that they were basically having to close down their provision of those vital chemotherapy drugs and patients had to go 100 kilometres, 200 kilometres or more away to get them. That was just cruel.

I was very grateful for the work that I did with a number of my colleagues on the Senate committee that I was part of instigating in relation to that. In particular, Senator Dean Smith and Senator Concetta Fierravanti-Wells took a real interest in that. Also, Senator Siewert and Senator Moore were part of that. What was clear from that Senate inquiry was that there needed to be greater consultation. There needed to be a fair system of implementing price disclosure, because you can have all sorts of unintended and cruel consequences if you do not get the policy right.

We are now seeing the same thing happen again, as the price disclosure cycle is shortened from some 18 months to 12 months or even shorter than that. Price disclosure commenced in late 2007 and has been part of the community pharmacy agreement since. However, accelerated price disclosure is not part of the agreement. This legislation is to change this. The Pharmacy Guild, which I have been speaking to in respect of this, would like to go back to the original agreement. And why shouldn't they? A deal was done. That deal should have been stuck to. The previous government changed it. This government is implementing those changes. That is wrong.

Every pharmacist I have spoken to, including representatives from the Pharmacy Guild, have expressed their support for the price disclosure policy. But they have all said that the lack of warning and consultation has not given them time to prepare or plan for an even more significant reduction in their income. Let's put this into perspective. One pharmacist who wrote to me estimated that the shortened time period would have an impact of at least $32,000 per annum on their bottom line. That is in addition to the existing $56,000 per annum reduction from price disclosure. Pharmacy Guild representatives I spoke to just this morning indicate that the income for the average pharmacy could be reduced by around another $50,000 a year; that is on top of the $50,000 per annum they are already losing. There are about 60,000 people employed in community pharmacies. If you are a pharmacist, you are essentially a small business in difficult economic circumstances and that $50,000 could mean laying off one or two part-time employees—employees you have spent a lot of money training, employees with great skills in dealing with customers who have myriad medical problems. I dread to think of the impact on employment in this sector as a result of this lack of consultation and this sudden and draconian drop in income for community pharmacies.

The pharmacist who wrote to me expecting a $32,000 drop in his income is actually supportive of the policy, but he just wants more warning so that he can prepare his business for change. Community pharmacies play a vital role in our health system. There is no question about that. Senator Di Natale was talking about preventative health, and he is absolutely right: let's stop people getting sick in the first place and stop them ending up in hospital at enormous cost to the community and the additional trauma to themselves. Pharmacists are trying to provide support and advice to members of their community. Relatively recent changes in legislation have given them the ability to write prescriptions for some medication; they also help to reduce the strain on GPs and emergency rooms by providing basic medical advice. I have two cousins who are community pharmacists, and they tell me what it is like to run their business and about their travails. They take great pride in what they do and in training their staff to incredibly high standards in order to provide that service to the community.

While shorter price reduction cycles may save the PBS money in the short term, pushing community pharmacists out of business will only cause this delicate ecosystem of health care to break down. The Pharmacy Guild representative I spoke to a few minutes ago is someone I have great regard for. His information has always been accurate and, unfortunately, I believe his latest information is also accurate. According to him, there are in the order of 5,500 community pharmacies and 10 per cent of them are quite marginal—they are either in receivership or facing serious difficulties in trading. His fear is that, if this government implements this ill-considered policy from the former government, it could push up to 20 per cent of pharmacies over the edge. That is over 1,000 pharmacies. It would mean double the loss of this accelerated process and it would mean that many pharmacies would see $50,000 wiped off their bottom line. They are not saying that they do not want to do it; they just want time to adjust. We are talking about industries around the country that are under enormous pressure, and they just need time to adjust. Even the Productivity Commission has acknowledged that in relation to the manufacturing sector; it is about the transition. That is why this piece of legislation is so wrong—not in respect of the price disclosure but about the transition.

It is worth noting that, while medium annual household income rose 118 per cent between 1991 and 2012, the cost of pharmaceutical products rose by 58 per cent. By comparison, medical and hospital services rose 191 per cent. So, in relative terms, community pharmacies have been given a raw deal. They are the poor cousins of the health system, and their ever-diminishing income is, quite frankly, unsustainable. What will the impact be of up to 1,000 pharmacies closing down through accelerated price disclosure? That is a very real concern to me. What will the impact be on regional communities if their local pharmacy closes down and residents have to travel another 10, 20, 30 or 50 kilometres down the road to get access to basic medicines?

The purpose of the community pharmacy agreement is to provide community pharmacists with financial certainty over the longer term. Although pharmacists are offering a service, they still have to run a business. They have to stock their pharmacy. They have to pay the rent. They have to train and pay highly skilled staff. A community pharmacy is a type of small business which does not rely just on its skills and advice and business acumen; it is also at the mercy of regulatory changes. Some changes, such as those in this bill, are poorly thought out, and these changes will be poorly implemented because you are not giving community pharmacies enough time to adjust.

The recent changes to price disclosure implementation have undermined certainty. The questions I have for the minister, which must be answered during the committee stages of this bill, are as follows. What consultation has there been with the community pharmacy sector? What are the proposed savings from the extra price disclosure? My understanding is that it is in the order of $149 million a year. If that is the case, what will be the drop in income for average, typical pharmacies—taking into account that some pharmacies are very small, niche businesses which are attached to a medical clinic or a doctor's rooms? Will it be in the order of $50,000 per annum, an accelerated drop in income which could have disastrous consequences for the viability of community pharmacies?

Mr Temporary Chairman Sterle, I know that as a senator for Western Australia you are very familiar with Broome. I do not know how many pharmacies there are in Broome, and I know that you cannot respond because you are in the chair. But I wonder what impact the changes in this bill will have in, for instance, the wonderful town of Broome. I think there might be about three pharmacies in Broome. I wonder whether any of them will be under pressure as a result of the changes in this bill.

So that there is no mistaking that my criticism of the proposals in this bill is bipartisan, I point out that the proposals were announced by the previous government the night before the commencement of caretaker mode prior to the last election. I do not think that that is good enough. In my view it showed a contemptuous—or, at least, a cavalier—disregard for the community pharmacy sector. There is no sense in robbing Peter to pay Paul in trying to minimise the cost of the PBS by putting community pharmacies under further strain. I have stated the figures: annual household income rose 118 per cent from 1991 to 2012, and medical and hospital services costs have risen 191 per cent in the same period; but the cost of pharmaceutical products rose only 58 per cent. Technological advances and generic medicines have of course been important in driving prices down, but this bill will cause a shock to community pharmacies and a sudden drop in their income.

I will later be moving an amendment to this bill to require the government to table a financial impact statement detailing the costs and benefits to the Commonwealth, to approved pharmacists and to consumers if any other day than 1 April or 1 October is prescribed for the bill's coming into effect. I believe that the date changes in the amendment will encourage further consultation before any further changes are made to the disclosure cycle. While the date changes proposed in the amendment do not address all the concerns of community pharmacists, I believe they would give them greater warning of changes if any were made to the cycle.

Ultimately the amendment is not about stopping price disclosure—and nor should it be—or about increasing the regulatory burden on government or, in a sense, on pharmacists. It is only about ensuring that proper consultation and research take place before the price disclosure cycle in the bill is changed. I do not believe that the amendment will add an unfair burden; instead it is an insurance policy against further strain on a very important part of our health sector.

The changes in this bill are bad news for community pharmacies. Ultimately they will be bad news for consumers if we see more average, typical pharmacies hit the wall or need to shed staff, as I believe they will, in order to cope with a $50,000 drop in income. It will be disastrous. It will mean fewer staff and less expertise when people want assistance with their medication. There is a pharmacy model under which pharmacies run a bit like supermarkets: with very little service. That sort of model concerns me. I think there is a compelling reason for the traditional pharmacy model, under which you get the advice you need from your pharmacist and from highly trained and skilled pharmacy staff so that you take the appropriate medication rather than a mix of medication which could cause adverse effects.

My questions to the government therefore are: what will the actual drop in income be in terms of this accelerated price disclosure? What modelling has the government undertaken of what the potential impact will be on community pharmacies? Has it considered the employment effects on community pharmacies by just bringing forward these changes so suddenly? Does the government concede that in terms of previous community pharmacy agreements this goes outside if not the letter of those community pharmacy agreements, then clearly against the spirit of those community pharmacy agreements? Has the government considered how many pharmacies are under strain in our current system and has it considered the representations that there could be up to a thousand pharmacies that could be pushed over the edge as a result of these changes? These are fundamental questions; I am hoping that they can be answered in the committee stages of this bill.


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