October 3, 2023


Great Health is a Choice

Will hundreds of Australian pharmacies close over dispensing changes or is it just a scare campaign? | Health

The Pharmacy Guild of Australia has painted a “catastrophic” picture in which 20,000 jobs will be lost and 650 pharmacies will close as they suffer a multibillion-dollar hit from filling fewer scripts and having fewer people wander in to buy anti-snoring devices.

The guild’s claims are outlined in a pair of reports it released this week – a technical report by Tulipwood Advisory and the Relational Insights Data Lab at Griffith University and a “companion report” by an economist and columnist at the Australian newspaper, Henry Ergas.

But the health minister, Mark Butler, has accused the guild of a “scare campaign” over the switch from 30-day to 60-day medicine dispensing.

So how do the report’s findings stack up?

Who is saying what?

The pharmacy guild’s president, Trent Twomey, has been a vehement and occasionally emotional critic of the government’s plans to allow more than 320 different medications to have the longer prescription.

“This independent report confirms the policy is catastrophic in its current form, leading to over 20,000 job losses, more than 650 pharmacies shutting, weekend opening hours drastically scaled back and millions of free services cut,” he said.

Butler says the government’s policy will deliver cheaper medicines “for more than 6 million Australians”.

“This will halve the cost of more than 300 medicines for millions of Australians, including pensioners, who are living with a chronic condition during this cost-of-living crisis,” he said.

“This is the latest scare campaign from the pharmacy lobby group about the government’s cheaper medicines policy.”

The government and the guild will likely continue to butt heads over the dispensing policy until its planned start date on 1 September, with the guild now pushing for it to be paused while consultations are undertaken.

How much will pharmacies lose?

The guild’s report says pharmacies will take a $4.5bn hit in revenue because they won’t be paid for filling millions of scripts – but that figure is based on some big assumptions. More on that below.

The report also estimates that, for every lost visit, pharmacies will lose $20 in “footfall” retail sales. That’s $20 worth of goods people might pick up when they go in for a script – jellybeans, makeup, a verruca and wart remover and so on.

It says that a $20 spend equates to a $6 profit, and that pharmacies now get about a third of their profit from retail sales.

But, as the government points out, this assumes consumers will never stroll in to buy nappies unless they are redeeming a script.

Will more than 20,000 jobs be lost?

Before going anywhere near that 20,000 figure, it is important to point out that it’s unknown how many GPs will switch to the new prescribing method, and when.

The report concedes it uses “somewhat arbitrary” figures to create various scenarios and that information on GP dispensing behaviour is “somewhat tenuous”. In the first year, it models as few as 45% of GPs switching, or as many as 80% – the “minimum” model. And by the fourth year, as few as 63% and as many as 95% – the “maximum” model.

So this critical factor, which will directly drive how big the impact of the change is, has quite broad parameters.

The “central” scenario sees a 63% uptake next financial year, and up to 90% in four years. This is the scenario in which there are about 350m fewer scripts over four years, with a corresponding $4.5bn loss of revenue, as mentioned above.

(The government estimates it will be 45% in the first year and 63% at year four.)

The next thing to note is that the guild is talking about 20,000 individual workers, not full-time equivalents. Under the central scenario it’s just under 5,000 FTE jobs lost (the report points out that’s 10,863 “actual jobs”).

To get to 20,818, the report adds in another factor – if the pharmacy has a debt to service or is obliged to supply a return on investment. In short, if it needs more money than just breaking even.

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Then, under their modelling, 20,818 individual workers – 9,461 FTE – would lose their jobs.

Will there be closures?

Twomey said the policy would lead to 665 pharmacies closing and would put a further 900 put at risk “due to significant financial pressure”.

But according to the report, under the central scenario it would only be about 200. The report then uses a “stylised assumption” about pharmacies with debts to service or investments to return on, to add another 600. Then it adds another 65 closures by year four, assuming a 90% GP take-up.

It came to those figures by using the $4.5bn claimed above and modelling how many individual pharmacies would be in strife under that scenario.

Then it used a formula to work out how much pharmacies would have to reduce their wages costs by – such as by cutting hours or staff – to stop losing money. If they couldn’t reduce costs enough to stop losing money, the report assumes they would close.

A further 900 would be under strain and might have to close if they can’t reduce costs.

On the other hand, the government says it will return its savings to the pharmacies, committing an extra $655m.

Will there be medicine shortages?

The report raises the spectre of shortages if people can pick up twice as many medicines at a time but the government says only three of the listed medicines are at any risk. The Australian Medical Association says the shortages claim has been “widely debunked”.

“We think it’s unfair on patients actually to still be holding this scare campaign,” the AMA president, Danielle McMullen, said on Tuesday.

Then there’s a claim that there will be a cost to taxpayers of $2.5bn over four years in increased hospitalisations due to medicine mismanagement. The report refers to existing hospitalisation statistics and extends them using the assumptions worked through above.

The media release accompanying the report says pharmacies will be forced to cut opening hours, including on weekends, and “end free services for patients such as blood pressure monitoring, home delivery of medicines and diabetes and asthma programs”. This is not detailed in the report.

Is it all bad news for pharmacies?

On the bright side, the report points out that most of those who lose jobs will find others, and that overall revenue will increase.

“Aside from the significant reduction in dispensing revenue beginning in 2023-24, revenue may be expected to continue to rise as community pharmacies seek new revenue streams based on increasing citizen health consciousness, the increased demands of population ageing and the related increasing incident of people living with chronic illnesses,” it says.

“More pharmacies are positioning themselves as health hubs offering immunisations, weight management services, advice on a wide range of health devices, and home medicines reviews.”

Ergas noted: “There are many difficulties involved in an analysis of this type. The government, parliament and the Australian community may well feel more comfortable if the conclusions set out here are subject to further testing.”