Linkedin
Facebook
Email
more
Following the announcement by Health Minister Mark Butler, from 1 September 2023, the cost of some prescriptions for Australians will reduce, with the introduction of the ability to obtain a dispensing of 60 days’ worth of medicine instead of the current 30.
On 1 September, 100 of the 320 targeted medicines will be listed for eligibility for 60-day dispensing, followed by a second tranche in March and a final tranche in September 2024.
The aim of this change in policy is to improve access to medication to patients and reduce the frequency at which patients may need to visit their GP a to get a script and will also save a potential of $180 a year for some as patients will pay the same $30 patient contribution towards their script for 60 days as they were for 30 days of supply. For pensioners, this will mean a saving of $45 per year per medication.
It remains to be seen as to whether the limit required to be reached under the safety net will be correspondingly reduced.
The safety net is the level of expenditure which, when reached in a calendar year, means all further medicines acquired in that year are free.
It should also be noted that your GP can elect to choose to leave the medication on a 30-day dispensing cycle.
Whilst the change is touted as a cost saving measure for patients and the Government it does have some ramifications for community pharmacies around the country.
The has raised concerns for patient safety with this change, which should be the primary focus, however there are no doubts that this will have a financial impact for pharmacy owners as well.
The Pharmacy Guild of Australia and pharmacy owners have expressed concerns for patient safety and wellbeing which should always be the primary focus.
There has been plenty of discussion around exacerbation of existing medicine shortages, higher wastage of medications due to larger supplies being hoarded, and increased lack of contact with local pharmacists who are the most accessible healthcare providers.
Under the current Community Pharmacy Agreement (CPA), a pharmacy is entitled to receive a dispensing fee of $7.82 from the PBS for every script it dispenses.
By allowing patients to double the volume of drugs they can get dispensed at any one time, it is effectively halving the dispensing fee a pharmacy will receive for that drug.
At face value, $7.82 doesn’t seem like a large number however the Guild is advising that on average, factoring in the total number of scripts issued in Australia for the 320 medications affected, that each Pharmacy will be worse off by $177,000 per annum.
The equivalent new revenue that a pharmacy needs to make to recoup the lost $177,000 of dispensing fees is $505,000 to $590,000. No easy feat. And when you are operating on say one and half pharmacists it is almost impossible to cut wages to match the revenue lost.
Of course, this is the average, and some pharmacies will be less impacted than others and vice versa.
The other side of this change is what we consider the opportunity cost of further revenue. i.e. with reduced foot traffic in pharmacies, it is not unreasonable to expect in decline in revenue from the remaining categories in the pharmacy.
Reduced script dispensing also reduces the ability for the Pharmacist in charge to provide any further services, such as MedsChecks, all of which are normally remunerated under the CPA.
The potential loss in revenue will add further pressure to an already stretched industry which is experiencing high wage costs due to pharmacist’s shortages and high stress working conditions and may create upwards pressure on prices charged for services across the board.
Some free services may well now attract a fee for service. Alternatively, there will be a cut in services and possibly times at which the pharmacy is open.
As the planned staging of this change rolls out, pharmacy owners should focus on the financial hygiene of their pharmacy to ensure they have the best chance to minimise the effect of this change.
Key considerations to discuss with your advisors should focus on:
- Inventory - Are you carrying the right amount of inventory, or will you need to carry more to meet the 60-day scripts. Obviously the first question will be whether you can get hold of the inventory you want. Furthermore, is there any nonperforming inventory which you would consider not carrying? After all, your inventory represents tied up working capital.
- Lease - Ensuring you have the right lease and right space is even more critical. Your average revenue per square meter will decline. Do you need to reconfigure? Do you need more consulting rooms?
- Finances - Ensure you gauge the impact of the changes on your bottom line. Work with your financial advisor to assess the impact on your covenants and where required talk to your bankers in advance to ensure they are part of the team.
- Programme Revenue - Focus on maximize alternative programme income from the CPA, is there an area you are not focusing on which you can?
Overall, ensure you begin a financial assessment of your overall position in light of these changes. We understand there should be tools available to assess these impact.
To subscribe to receive our Federal Budget report, or to RSVP for our Federal Budget Webinar, please visit the following links:
For more information
If you would like to discuss how this year's Budget may affect your Pharmacy business, please contact Kian Ghahramani.
