Announcement date
3 June 2024
Link to announcement
New pharmacy agreement delivers cheaper medicines | Health Portfolio Ministers | Australian Government Department of Health and Aged Care
Problem being addressed
The Impact Analysis (IA) has been prepared to support Government consideration of a new Community Pharmacy Agreement (CPA) relating to payments for the supply of subsidised Pharmaceutical Benefits Scheme (PBS) medicines to Australians, and related matters.
The proposal considers the available options for establishing the Commonwealth price and the parameters that will best support access to timely, safe and affordable PBS medicines for all Australians through community pharmacies, as well as arrangements for related pharmacy services, consistent with the four pillars of the NMP objectives as updated in 2022:
- equitable, timely, safe and reliable access to medicines and pharmacy services at a cost that individuals and the community can afford
- medicines meet the required standards of safety, quality and efficacy
- quality use of medicines and medicines safety, and
- collaborative, innovative and sustainable medicines industry and research sectors with the capability, capacity and expertise to respond to current and future health needs.
Proposal
The proposal considers three options for the future remuneration for delivery of PBS medicines to Australians:
Option 1: Continuation of the 7CPA until 30 June 2025 and no new CPA following its expiry, unless one can be negotiated before this date (Status Quo)
Option 2: Establish an 8CPA that includes all existing pharmacy programs
Option 3: Establish an 8CPA for dispensing remuneration and only pharmacy programs delivered directly through community pharmacies
The IA identifies Option 3 as the preferred option as it provides the best platform in which to pursue reform to the programs currently funded through the 7CPA and consider the establishment of new appropriately targeted programs.
It was agreed that the 8CPA, which will commence on 1 July 2024, will provide a better deal for pharmacies and deliver a funding boost of $3 billion and a total $26.5 billion in funding over five years including:
- $22.5 billion for community pharmacies to dispense prescriptions
- $2.1 billion for a new Additional Community Supply Support Payment
- $1.05 billion over five years for other pharmacy services and programs, including Dose Administration Aids, MedsChecks, Staged Supply of medicines, and an increased Regional Pharmacy Maintenance Allowance
- $485.9 million to cover the costs of a one-year freeze of the maximum PBS co-payment for everyone with a Medicare card and up to a five-year freeze for pensioners and other Commonwealth concession cardholders
- $196.7 million to increase the number of patients who can receive funded Dose Administration Aid services
- $103.3 million for new and improved pharmacy programs
The agreement is expected to give community pharmacies more financial certainty and will support a sustainable pharmacy network across Australia.
Assessed Impact Analysis outcome
Good practice
Assessment comments
The analysis in the IA is good quality overall. The IA addresses the seven questions and follows an appropriate policy development process commensurate with the significance of the problem and magnitude of the proposed intervention. In particular, the IA demonstrates a comprehensive understanding of the policy problem, the interventions available to government, and the views of external stakeholders.
To be considered 'exemplary' as per the Australian Government Guide to Policy Impact Analysis, the IA would have benefited from further in-depth analysis on the flow-on and distributional costs and benefits of the policy options. Additionally, the IA could have been improved by including a more detailed discussion of the implementation risks of the policy, including their likelihood, consequences and how they will be managed.
Additional comments – Commercial-in-confidence
Certain sections of the IA were required to be redacted due to their commercial-in-confidence or legal-in-confidence nature. These redacted sections were predominantly in regards to confidential consultation with key stakeholders and have been redacted for publication.
Additional comments – Addendum
Two key policy proposals warranted separate consideration through addenda to the IA: the future of the optional $1 discount policy, and the provision of additional dispensing revenue. The addenda to the IA provides information on the additional investment of up to $3 billion for community pharmacy and cheaper medicines, which was announced by the Australian Government on 14 March 2024.
Regulatory burden
The Department of Health and Aged Care estimates these measures will result in an increase in regulatory costs of $0.099 million over the lifespan of the 8CPA, expected to be five years.