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Fact Sheet- Fourth Community Pharmacy Agreement

Information about the Fourth Community Pharmacy Agreement.

• Fact Sheet- Fourth Community Pharmacy Agreement (PDF 462 KB)

Community Pharmacy Agreements

Since 1990, the Commonwealth of Australia and the Pharmacy Guild of Australia have entered into five-year agreements known as the ‘Community Pharmacy Agreements’. Primarily, the agreements set out the remuneration pharmacists will receive for dispensing Pharmaceutical Benefits Scheme (PBS) medicines.

Over time, these agreements have increased in scope to provide for professional pharmacy programs and services.

Fourth Community Pharmacy Agreement

The fourth agreement will commence from 1 December 2005 and will lapse on 30 June 2010.

The agreement will provide for $11.1 billion in payments for the dispensing and supply of PBS medicines. This represents a substantial increase to the $7.9 billion paid under the third agreement. It equates to an average payment of $11.38 per prescription dispensed, a nominal increase of 14.5 per cent (6.2 per cent in real terms) on the average payment under the third agreement ($9.93).

It will also achieve $350 million in savings over the life of the agreement, against the Forward Estimates for PBS medicines and medicines listed on the Schedule of Pharmaceutical Benefits that are supplied under the Repatriation Pharmaceutical Benefits Scheme arrangements.

The new arrangements will retain the current pharmacist payment structure, with payments covering:

• the cost of the medicine
• the cost to have the medicine delivered to the pharmacy by a wholesaler
• a retail mark-up, to cover pharmacists’ costs for handling and storage of medicines
• a fee for the pharmacist’s professional advice and services in dispensing the medicine to the patient.

The main features of the fourth agreement, to commence from 1 July 2006, are:

• a reduction in the allocation set aside for wholesaler costs (the wholesale mark-up) from 11.1 per cent of the manufacturer’s price for the medicine to 7.5 per Equates to a 7 per cent wholesale margin cent of this price
• an increase in the pharmacist’s dispensing fee to $5.15 per prescription
• the establishment of a Community Service Obligation (CSO) Pool for direct payments to wholesalers who supply the full PBS range of medicines.

Community Service Obligation (CSO) Pool

The fourth agreement introduces a new CSO Pool with funding of $150 million per annum in recognition of the additional costs faced by some pharmaceutical wholesalers in providing the full range of PBS medicines to pharmacies.

The aim of the pool is to ensure there are arrangements in place for all Australians to have access to the full range of PBS medicines, via their community pharmacy, regardless of where they live and usually within 24 hours.

The pool will make it commercially viable for pharmaceutical wholesalers to supply the full range of PBS medicines to pharmacies across Australia, regardless of pharmacy location and the relative cost of supply.

Pharmacy Location Rules

The First Community Pharmacy Agreement introduced measures to regulate the location and number of pharmacies approved to supply PBS medicines. These regulations (the Pharmacy Location Rules) take the form of a Ministerial Determination made under the National Health Act 1953.

They set out location-based criteria which must be satisfied for a pharmacist to be approved to supply PBS medicines and they have been retained through each agreement.

The fourth agreement introduces new Pharmacy Location Rules with effect from 1 July 2006 that aim to improve access to community pharmacies and provide greater flexibility for relocating pharmacies. Key features include new arrangements which will allow pharmacies to:

• co-locate with large medical centres that operate extended hours
• relocate into small shopping centres with 15 or more shops and a large supermarket
• relocate to single pharmacy rural towns and urban areas with high population growth.

The current restrictions preventing pharmacies from locating within supermarkets will continue.

Professional Programs and Services

The fourth agreement will provide $500 million for funding of professional pharmacy programs and services, an increase from $400 million allocated under the third agreement.

It will continue to fund programs that were funded under the third agreement, such as Home Medicines Reviews, and it will fund new programs aimed at improving community health outcomes, such as in the areas of asthma, diabetes and communicable diseases.