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Health Legislation Amendment (Pharmacy Location Arrangements) Bill 2006

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2004-2005-2006

 

 

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

HEALTH LEGISLATION AMENDMENT (PHARMACY LOCATION ARRANGEMENTS) BILL 2006

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Ageing,

the Honourable Tony Abbott MP)



HEALTH LEGISLATION AMENDMENT (PHARMACY LOCATION ARRANGEMENTS) BILL 2006

 

OUTLINE

 

The Health Legislation Amendment (Pharmacy Location Arrangements) Bill 2006 (the Bill) proposes a number of amendments to the National Health Act 1953 relating to the arrangements for approving pharmacists to supply pharmaceutical benefits to the community.  Pharmaceutical benefits are drugs or medicinal preparations for which benefits will be paid by the Commonwealth (commonly referred to as ‘PBS medicines’).  Under the National Health Act 1953 , a pharmacist may only supply pharmaceutical benefits at or from particular premises if the pharmacist is approved by the Secretary for that purpose.

 

These amendments are the result of the Fourth Community Pharmacy Agreement (the Fourth Agreement) between the Commonwealth and the Pharmacy Guild of Australia, which commenced on 1 December 2005 and will terminate on 30 June 2010.  The Fourth Agreement provides for new pharmacy location arrangements to commence on 1 July 2006, and this Bill proposes to give effect to some of those arrangements.

 

Schedule 1, Part 1 - Amendments relating to the operation of the Australian Community Pharmacy Authority (the Authority)

 

This Part provides for amendments relating to the operation of the Authority and the Ministerial rules administered by the Authority. The Authority’s role is to consider applications made by pharmacists’ for approval to supply pharmaceutical benefits, and to make recommendations to the Secretary as to whether or not such applications should be approved.  In making its recommendations, the Authority must comply with the rules determined by the Minister under section 99L of the National Health Act 1953 .  At present the only rules made by the Minister relate to the location of approved pharmacists, currently referred to as the ‘pharmacy location rules’.

 

Currently, the National Health Act 1953 provides for the Authority and the existing Ministerial rules to cease operation at the end of 30 June 2006.  The amendments made by this Part provide for the Authority and the Ministerial rules to continue to operate until the end of June 2010, to coincide with the expiry of the Fourth Agreement.

 

Schedule 1, Part 2 - Amendments relating to membership of the Authority

 

This Part provides for amendments to increase membership of the Authority from five to six members, by including a consumer representative.  The additional member will be someone who, in the Minister’s opinion, is an appropriate person to represent the interests of consumers.  This new member will be subject to the same rules that apply to the existing members of the Authority (other than the member representing the Department of Health and Ageing), such as being appointed for a two year period, being eligible for re-appointment and being entitled to a prescribed allowance.

 

Schedule 1, Part 3 - Technical amendments

 

This Part provides for two technical amendments to the National Health Act 1953 , correcting a cross-reference and punctuation.

 

Schedule 2, Part 1 - Amendments relating to the Minister’s discretion to approve a pharmacist

 

This Part provides for amendments to provide the Minister with a discretionary power to substitute a decision by the Secretary not to approve a pharmacist to supply pharmaceutical benefits at or from particular premises.  This discretionary power is intended to enable the Minister to address unintended or unforeseen consequences of the application of the pharmacy location rules, on an individual and timely basis.  In some instances, the pharmacy location rules may operate to prevent the approval of a pharmacist, and result in a community being left without reasonable access to the supply of pharmaceutical benefits by an approved pharmacist.

 

The Minister will only be able to exercise this power in respect of applications for approval made from 1 July 2006.

 

In order to exercise this power, the Minister will have to be satisfied that the Secretary’s decision will result in a community being left without reasonable access to the supply of pharmaceutical benefits by an approved pharmacist, and that approving the pharmacist is in the public interest.

 

This discretionary power will only be able to be exercised by the Minister at the completion of the existing approval process.  Further, this discretionary power is not intended to impinge any existing review rights available to pharmacists.  A pharmacist may seek a review of the Secretary’s decision through the Administrative Appeals Tribunal or through an application under the Administrative Decisions (Judicial Review) Act 1977 .  If a pharmacist is unsuccessful in requesting that the Minister exercise the discretionary power to approve their application, it will still be open to that pharmacist to request the review of the Secretary’s original decision if they have not already exhausted their avenues of review prior to approaching the Minister.

 

This discretionary power may only be exercised by the Minister personally.  In making a decision regarding the use of the discretionary power, the Minister may seek additional information from parties.  The Minister will not be under any obligation to consider a request for the exercise of this discretionary power or to exercise this discretionary power. 

 

Affected parties may seek the review of any decision made by the Minister regarding the use of this power through an application under the Administrative Decisions (Judicial Review) Act 1977 .

 

Other Associated Amendments

 

Other amendments provided for by this Part deal largely with the processes associated with the use of this discretionary power.  For example, the provisions set out how an applicant may make a request to the Minister, and the period in which an applicant must make such a request.

 

Amendment to Secretary’s Power to Approve

 

This Part also provides for amendments to clarify that the Secretary may approve more than one pharmacist to supply pharmaceutical benefits in respect of particular premises.  In some instances, a pharmacist may cease trading from their pharmacy (original premises) in preparation for a relocation to a new site.  Another pharmacist may seek approval to supply pharmaceutical benefits at or from the original premises.  Under the existing arrangements, the Secretary will not approve the second pharmacist to supply pharmaceutical benefits from the original premises until the non-trading pharmacy has formally relocated to the new site.  In some cases this results in delays, which ultimately impact on the supply of pharmaceutical benefits in a particular area.  The amendment made by this Part is intended to clarify the Secretary’s power to approve applications in these circumstances.

 

Amendment to Minister’s Power to Determine Conditions

 

This Part provides for an amendment in relation to the Minister’s power to determine conditions which apply to an approval to supply pharmaceutical benefits.  The National Health Act 1953 currently provides that the approval of pharmacists, medical practitioners and hospital authorities is subject to specific conditions, and to any other condition determined by the Minister.  It is intended that this amendment will clarify that, in determining those other conditions, the Minister may also determine a condition which relates to the premises from which pharmaceutical benefits are supplied.

 

Schedule 2, Part 2 - Amendments relating to expanded or contracted pharmacy premises

 

This Part provides for amendments to the National Health Act 1953 that are intended to simplify the administration of applications for approval to supply pharmaceutical benefits, where those applications relate to an expansion or contraction of approved pharmacy premises.

 

The National Health Act 1953 currently requires that, with certain exceptions, all applications for approval must be referred to the Authority for the purpose of obtaining a recommendation as to whether or not it should be approved.  The Secretary may only approve a pharmacist if the Authority has recommended approval.  This requirement currently applies to approved pharmacists seeking to expand or contract their pharmacy premises.

 

The amendments provided for by this Part will mean that expansion or contraction applications will no longer have to be referred to the Authority for the purpose of a recommendation for approval.  In effect, this amendment will allow the Secretary to approve a pharmacist’s application to expand or contract their pharmacy premises without prior recommendation by the Authority.  However, if the Secretary deems it necessary for such an application to be considered against the criteria set out in the pharmacy location rules, the application may still be referred to the Authority for review and recommendation.  If the Secretary refers an application to the Authority, the Secretary will only be able to grant an approval if the Authority has recommended approval.

 

Financial Impact

 

This Bill gives effect to pharmacy location arrangements agreed as part of the Fourth Agreement.  It is not expected to have a direct financial impact.

 



REGULATION IMPACT STATEMENT

HEALTH LEGISLATION AMENDMENT (PHARMACY LOCATION ARRANGEMENTS) BILL 2006

 

1.       Introduction

 

1.1.       The Pharmaceutical Benefits Scheme

 

The Pharmaceutical Benefits Scheme (PBS) provides access to necessary medicines, at a cost that individuals and the community can afford.  The PBS is the fastest growing part of the Government’s health budget. 

 

The PBS is primarily delivered through Australia’s network of almost 5,000 approved pharmacies, with Australian Government payments (about $6 billion in 2004-05) made to those pharmacies.  Patient co-payments complement government payments. 

 

One of the objectives of the PBS is that all Australians should have reasonable, timely access to prescription medicines, regardless of their capacity to pay, or where they live.  Because of the demographic and geographic distribution of the Australian population, some members of the community may have more difficulty than others in obtaining reasonable access to PBS services. 

 

1.2.       Community pharmacy

 

For most Australians, the community pharmacy is their shopfront for a range of medicines and health care products such as:

 

·       prescription drugs, including those supplied through the PBS, and over-the-counter drugs available only from pharmacies; and

 

·       non-scheduled drugs, healthcare and other products (such as cosmetics), that are also available from other retail outlets.

 

Community pharmacists also provide professional advice to consumers on the safe and effective use of medicines, and on other health care issues.

 

1.3.       Regulation of pharmacies and their location

 

Under section 90 of the National Health Act 1953 (the Act), the Government approves pharmacists, in respect of particular premises, to dispense subsidised PBS medicines. 

As part of that power of approval, the Government also regulates where pharmacies are located for the purpose of supplying PBS benefits. Since 1991, these powers have been exercised through a set of regulations authorised by Ministerial Determinations under the Act. 

 

Location rules for pharmacies reflect consensus between the Government and the Pharmacy Guild of Australia [1] (the Guild), as set out in a Community Pharmacy Agreement.  The purpose of these location rules is to provide a well-distributed, accessible and viable network of pharmacies. 

 

Further background to these arrangements is provided at Attachment 1 to this Statement.

 

1.4.       Reviews of pharmacy location arrangements

 

The regulation of pharmacy location arrangements has been reviewed over time ( Attachment 1 refers).  In February 2005, the Productivity Commission reported on a Review of National Competition Policy Reforms.  In the area of pharmacy regulation, the report found that:

 

·       restrictions potentially impose large costs on consumers, taxpayers and the wider community;

 

·       previous reviews had not been able to fully explore the linkages among the different regulations;

 

·       a broader review of pharmacy restrictions should take place in 2008, in time to inform the renegotiation of the Community Pharmacy Agreement in 2010; and

 

·       there may be opportunities for some more limited, beneficial changes as part of the Fourth Community Pharmacy Agreement (2005-2010).

 

The Department of Health and Ageing (the Department) and the Guild have also conducted a review of pharmacy location provisions, in preparation for negotiations on the Fourth Community Pharmacy Agreement (the 4 th Agreement).  The review considered submissions from interested parties. 

 

Taking account of the Government’s policy objective of maintaining a well distributed, viable network of community pharmacies to distribute PBS medicines, the review recommended that there be a continued, targeted easing of the regulation of existing pharmacy location arrangements, to provide increased flexibility to respond to community need.  The report also identified anomalies and administrative difficulties in the existing rules and suggested solutions to these problems.

 

The current location rules are being extended until 30 June 2006, pending consideration of the review by Government and the introduction of any new arrangements. 

 

2.      The Problem

 

2.1               What is the problem being addressed?

 

Not all Australians may have reasonable access to pharmacy and pharmaceutical services through the PBS, because they live in areas with inadequate services.  This includes, for example, rural and remote localities and new, developing suburban areas.

 

Current regulatory arrangements result in restrictions on competition between pharmacies, which can reduce the incentive for pharmacies to:

 

·       lower prices to consumers for non-PBS items;

 

·       raise the overall quality of services provided; and

 

·       become more innovative in meeting consumer needs.

 

3.      Objective

 

The Government is seeking to ensure that any regulatory intervention in the size and distribution of the community pharmacy network is consistent with:

 

·       the need to ensure reasonable access to affordable PBS products and pharmacy services for all Australians; while

 

·       limiting the effect of any restrictions on competition between pharmacies, to the extent justified by this need.

 

Taking into account Competition Policy Review and the Department/Guild review (section 1.4 refers), the Government has decided that it will introduce targeted easing of the current restrictions on pharmacy location.  Accordingly, this Regulation Impact Statement canvasses the reform of existing regulations within these parameters. 

 

4.      Options

 

Alternative options for regulation are summarised below:

 

·       Option 1 - Retaining the status quo.

 

·       Option 2 - Targeted easing of the existing pharmacy location rules. 

 

·       Option 3 - Use of remuneration-based incentives, where the approval and location of pharmacies could be influenced through differential dispensing fees.

 

4.1     Option 1 - Retaining the status quo

 

This option would see the retention of the existing PBS listing, and pharmacy approval and location arrangements, without any change. 

 

Who would be affected?

 

Government: The Government, with the advice of the Australian Community Pharmacy Authority (ACPA), will continue to administer the pharmacy location rules for PBS purposes. 

 

Community Pharmacy: Restrictions will continue to be imposed on pharmacy approvals, and where new and relocated pharmacies may be established for PBS purposes. 

 

Consumers:  The impact on consumers would largely depend on where they live.  The current location rules may impact on consumers’ access to pharmacy services, particularly in rural towns and high growth urban areas.

 

Effect on existing regulation and regulatory authorities

 

Existing regulations and arrangements relating to approval of pharmacists and location rules would continue, including the ACPA and related machinery in the Department and Medicare Australia.



Likely implications

Submissions to the joint Department/Guild review of pharmacy location rules identified a range of problems with the current location rules.  These problems have resulted in some rules being unworkable in practice, and ambiguities in the wording and interpretation of some rules, leading to ‘gaming’ by some applicants. 

 

Retaining the status quo will provide some benefits to some pharmacists who have planned and made investment decisions based on the current restrictions.  However, such decisions would have been made in the knowledge that the existing rules remain in effect only for the period of the Third Community Pharmacy Agreement.

 

On the other hand, parts of the pharmacy industry have been waiting for changes to address the existing anomalies in the rules.  Failure to address these anomalies will result in continuing administrative inefficiencies and compliance costs for both Government and community pharmacy.

 

4.2     Option 2 - Targeted easing of the existing rules

 

Under this option, current restrictions on the location of new pharmacies and the relocation of approved pharmacies would be relaxed, and exemptions widened, with the aim of improving flexibility and increasing competition within the existing community pharmacy sector ( Attachment 2 refers). 

 

An amendment to the Act will provide the Minister with the discretion to address any unintended consequences arising from administration of the revised rules.  The Minister would be able to substitute a decision of the Secretary of the Department (or Delegate), as decision-maker under the Act, not to approve an application where that decision has resulted in an unmet community need for pharmacy services.

 

Who would be affected?

 

Government: The Government, with the advice of the ACPA, will continue to administer the pharmacy location rules for PBS purposes. 

 

Community Pharmacy:   Existing community pharmacies will continue to benefit from being able to plan and grow their businesses with some certainty about the size of their local catchment area.

 

Consumers:   As with Option 1, the effects on consumers of the modified arrangements may depend largely on where they live. The wider community will be affected by any measures influencing the level of competition in the community, as well as the distribution of services. Regional and rural communities are expected to benefit from the new location rules, as they offer greater incentives to pharmacies to move to areas of need. 

 

Consumers are also expected to benefit from increased access under the new location arrangements, which allow (for example), the:

 

·       co-location of pharmacies within large medical centres;

 

·       relocation of pharmacies to small shopping centres; and

 

·       provision of additional pharmacy services in high urban growth and rural and remote areas.

 

Effect on existing regulation and regulatory authorities

 

·       Amendments to the Act will be required to extend the pharmacy location provisions of Division 4B of Part VII of the Act for the life of the 4 th Agreement, to make changes to ACPA membership to include consumer representation, and introduce a mechanism for Ministerial discretion. 

 

·       A new Ministerial Determination would be made under section 99L of the Act to give effect to the new location rules.  

 

·       The ACPA will be retained to consider applications to establish new and relocated community pharmacies. 

 

·       Medicare Australia will continue to be responsible for administering the approval process, within existing arrangements.

 

Likely impact

 

·       Progressive easing of the existing pharmacy location restrictions will assist the community pharmacy sector to adjust to change more readily, with pharmacy proprietors able to make longer-term planning and investment decisions with increased certainty. 

 

·       The community pharmacy should continue to present a viable, small business venture opportunity.

 

·       The proposed changes to the location rules will provide benefits in specific settings and circumstances.  Examples are set out in Attachment 2

 

·       Any ongoing regulation of community pharmacy location places restrictions on competition.  It therefore imposes a cost to Government in servicing relevant regulatory structures and to community pharmacy in compliance. Simplifying current regulatory restrictions will lessen that burden.

 

·       There are costs to Government, industry and consumers in maintaining a regulatory framework that is formalised and relatively static for the life of the Agreement.  A mechanism will be developed as part of the 4 th Agreement for the ongoing review of the location rules to ensure that they continue to respond to industry trends and consumer demand. 

 

·       The introduction of Ministerial discretion will also allow any problems to be addressed on an individual and timely basis.

 

4.3     Option 3 - Remuneration Based Incentives

 

A remuneration-based incentives scheme could provide an alternative to an easing of the current location rules.  Under this option, the location of pharmacies could be influenced by differential dispensing fees, based on areas of over or under supply.

 

While specific payment mechanisms may vary, one approach is to set a base dispensing fee and then adjust it:

 

·       Upwards, for defined areas where there is an undersupply of pharmacy services  (eg, the pharmacy : population ratio for the locality is considered too low); or

 

·       Downwards, for defined areas where there is an oversupply of pharmacy services.

 

Pharmacies in areas of equilibrium (in terms of their pharmacy: population ratio) would carry neither a loading, nor a penalty.

 

Differential dispensing fees could apply generally (ie to all pharmacies in the defined area), or selectively (eg to pharmacies establishing themselves in the defined area after a commencement date). 

 

There are issues, however, as to whether selectively applied fees and related criteria represent consistent treatment of all PBS approved pharmacies receiving Government remuneration.

 

Who would be affected?

 

Government: A differential dispensing fee regime could meet the Government’s reasonable access objectives for pharmacy services.  There would be savings from discounted dispensing fees to pharmacies in over serviced areas, but higher outlays on dispensing fees for pharmacies in designated under-serviced areas. 

 

It is difficult to assess the net effect required to maintain current distributional patterns or the net effect of such an approach on overall pharmacist remuneration outlays.

 

Community Pharmacy:   Income differentials may influence pharmacists’ location, planning and purchasing decisions.  

 

Consumers:   Consumers using pharmacies in relatively crowded local pharmacy markets may see little or no difference in terms of their reasonable access to services, although their choice of service provider could ultimately be reduced through a reduced number of pharmacies.

 

In less well-serviced areas, local consumers may see more pharmacies appearing to meet local needs, as pharmacists move their businesses to take advantage of incentives.

 

Effects on existing regulation and regulatory authorities

 

Existing legislation and statutory instruments that regulate the location of PBS approved pharmacies would lapse or be repealed.  Amendments to the Act would be required to provide for differential dispensing fees based on location.

 

Likely impact

 

If calculated appropriately, these arrangements could meet two objectives:

 

·       promoting reasonable access to community pharmacy services, and

 

·       providing direct incentives to pharmacies to maintain and enhance their overall efficiency and effectiveness as both professional service providers and as commercial businesses.

 

Differential dispensing fees may prove a factor in persuading pharmacy proprietors to think about the location of their pharmacies as a part of maximising return on investment.

It is expected there would be a high degree of administrative complexity in implementing this option.  Potential issues include:

 

·       the processes of defining geographic areas, determining the price variation among regions and their ongoing review, particularly given the lack of Commonwealth data on location-specific pharmacy performance;

 

·       other relevant criteria may need to be defined (eg an area with a high proportion of elderly residents may need more than an average number of pharmacies to service its needs);

 

·       the assessment of areas of undersupply or oversupply may present issues for pharmacists on or near the border of a region (for example, a pharmacist might find that by moving a short distance, they change regions); and

 

·       the Act does not currently allow the Government to unilaterally vary pharmacists’ PBS remuneration.  Accordingly, it would be necessary to change the Act to allow for differential fees, or negotiate the determination of remuneration for different regions as an amendment of the Community Pharmacy Agreement.  This would require the agreement of both the Government and the Guild.

 

It is also likely to be difficult to estimate in advance the level of fees required to achieve desired distributional results.  There would be risks, and relative uncertainty, both for Government and the pharmacy sector.  Pharmacists (those in areas considered to be over serviced) may experience reductions in their income, and this could occur for both efficient and inefficient operators.

 

In practice, an attempt to introduce a system of this kind is likely to be complex and controversial, and to result in dispute with the community pharmacy industry.

 

5.       Consultation

 

5.1     Who are the main affected parties?

 

·       Government.

 

·       The Pharmacy Guild, and its members operating pharmacy businesses. The Guild represents over 90 per cent of current pharmacy proprietors. 

 

·       Large retailers who have expressed interest in establishing pharmacies within supermarkets.

 

·       Consumers.

 

5.2     What are the views of those parties?

 

As part of the joint review of the current pharmacy location rules, submissions were received from pharmacy consultants, government regulatory bodies with an interest in the area (eg Medicare Australia and the ACPA), major retailers, and medical and consumer groups.  The review also considered other correspondence from individual pharmacists on the efficacy of the current location rules.

 

The majority of submissions and comments identified anomalies and administrative problems in the current rules and suggested approaches to resolve them. 

 

Other submissions suggested that any type of regulatory intervention placed restrictions on consumer choice and restricted competition in the sector which in turn inflates the capital value of pharmacies.   Some submissions argued that the current restrictions on pharmacies within supermarkets do not ensure provision of access to universal quality pharmacy services. 

 

Under the Act, the Government negotiates Community Pharmacy Agreements with the Guild.  The views of Guild members and other stakeholders have been taken into account in those negotiations. 

 

Both the Government and the Guild have expressed a commitment, through the negotiating process, to respond positively to the outcomes of the location rules review by relaxing as far as possible, regulations restricting competition in the community pharmacy industry. 

 

As a party to the Agreement, the Guild supports the preferred location measures, and is committed to their implementation.

 

5.3     Why was full consultation not appropriate?

 

The 4 th Agreement is primarily a matter between the two parties (the Commonwealth and the Guild).  The Pharmaceutical Society of Australia, as the professional association of pharmacists was represented in the negotiations, to provide advice on professional matters.

 

Submissions to the joint review of location rules assisted the Government in its consideration of alternative options, and in negotiations with the Guild.

 

6.       Conclusion and Recommended Option

 

The Government is seeking to balance increased competition and efficiency in the community pharmacy sector with the need to ensure reasonable access to quality community pharmacy services and PBS medicines across Australia, and the maintenance of a viable network of community pharmacies.

 

The Government has decided to adopt Option 2.  This option introduces targeted easing of existing location rules.  Implementation of this option will:

 

·       Address shortcomings in current regulations that have worked to the detriment of the under-serviced rural, remote, and outer metropolitan communities that they are intended to assist.

 

·       Improve access to pharmacy services in additional settings (such as medical centres and smaller style shopping centres), providing more flexibility to meet consumer need and demand.

 

·       Address current administrative difficulties, reducing existing administrative and compliance costs for both government and the community pharmacy sector.

 

·       Provide a base for further, longer-term relaxation of regulatory requirements.

 

This option is more likely to achieve a balance that is acceptable to Government, the pharmacy industry and consumers, than the other alternatives canvassed.

 



7.       Implementation and Review

 

The proposed new pharmacy location rules would commence from 1 July 2006 and continue for the life of the 4 th Agreement (ie until 30 June 2010).

 

There will be provision for ongoing review of the location rules, if required, during the course of the Agreement and a comprehensive review of the rules would be undertaken to inform re-negotiation of the next Agreement.



ATTACHMENT 1

History of pharmacy location arrangements

 

Immediately prior to 1990, pharmacy location and the national network of pharmacies dispensing PBS medicines was characterised by marked inconsistency.  25 percent of pharmacies had a competitor within 100 metres, with other areas struggling to attract even one.

 

Accordingly, the Government and the Pharmacy Guild agreed to set out a new remuneration framework, coupled with a more rational distribution of pharmacy services, and industry restructuring.  The aim was to lower total pharmacy numbers, and to encourage greater efficiency, profitability and economies of scale in pharmacy business.

 

The First Community Pharmacy Agreement (1990-1995) restricted where a pharmacy could relocate its existing PBS approval (by distance).  It also restricted new pharmacy approvals to communities that met criteria demonstrating need.  The Second Agreement (1995-2000) consolidated remuneration structures, and maintained the location restrictions.

 

The Third Agreement (2000-2005) reduced the emphasis on prescription based remuneration arrangements.  It also modified the rules governing the location of pharmacies, including relaxing the rules for approving new and relocated pharmacies, particularly in rural and remote areas. The Government and the Guild also agreed to review the pharmacy location rules in preparation for a 4 th Community Pharmacy Agreement (2005-2010).

 

Wilkinson review of pharmacy location arrangements

 

In 1995 the Council of Australian Governments (COAG) agreed to implement the National Competition Policy (NCP), to foster greater economic efficiency and improving the overall competitiveness of the Australian economy.

 

The National Competition Policy Review of Pharmacy (the Wilkinson Review) was established in June 1999.  It enabled the Commonwealth, States and Territories to meet their National Competition Policy obligations to review their legislation regulating the operation of the pharmacy industry, and pharmacy professional practice. 

 

The Wilkinson Review reported in February 2000.  It found that:

 

·       while some form of restriction on the number of pharmacies dispensing PBS medicines should be retained, there may be more ‘competition friendly’ mechanisms for keeping overall pharmacy numbers to a level consistent with community need;

 

·       existing regulation on approvals of new pharmacies was placing significant restrictions on competition; and

 

·       if other remuneration-based measures to encourage more efficient and better distributed pharmacies proved to be impractical, existing regulation should be reformed. 

 

The recommendations of the Wilkinson Review were taken into account by Government when reformed regulation for pharmacy location was negotiated as part of the Third Community Pharmacy Agreement.



ATTACHMENT 2

New and amended location rules

 

New and amended location rules to improve flexibility and access will:

 

·       permit co-location of pharmacies with large medical centres (with eight or more full-time equivalent doctors) that operate extended hours;

 

·       allow location of pharmacies in small shopping centres (with 15 or more commercial establishments, and with a 2500m 2 supermarket) to recognise changing retail trends to smaller community shopping centres;

 

·       allow the relocation of an additional pharmacy to one-pharmacy rural towns, and one-pharmacy high-growth urban areas, without regard to usual distance criteria;

 

·       relax requirements for approval of new pharmacies, by removing the need for shopping facilities in the proposed pharmacy’s catchment area;

 

·       remove the requirement that a specified number of commercial establishments are open and trading , before an approved pharmacy can relocate to a shopping centre.   A pharmacy will be able to open in a new shopping centre development, even though not all other shops have already opened for trade;

 

·       ensure there is equity between the treatment of pharmacies that are located in shopping centres, and those located in near proximity to these centres;

 

·       provide greater flexibility for pharmacies located in private hospitals, by allowing the establishment of satellite dispensaries for hospital in-patients;

 

·       facilitate minor relocations of pharmacies within shopping centres and private hospitals, and within one-pharmacy rural towns, without regard (in most cases) to distance criteria or time restrictions; 

 

·       remove the requirement for pharmacies that are expanding or contracting in size to be considered as relocations, for the purpose of the rules;

 

·       introduce greater flexibility to the two-year restriction on relocations, to include a wider range of exempted circumstances; and

 

·       limit the number of extensions to an ACPA recommendation for approval, in order to reduce a pharmacist’s ability to ‘tie up’ access to a potential pharmacy site, and therefore to restrict competition.

 

Examples of Benefits in Specific Settings

 

·       Co-location of pharmacies with medical centres will assist in providing access to pharmacy services for acute medication needs, at the time of medical consultation. 

 

·       Location of pharmacies within small shopping centres recognises the retailing trend for smaller centres with larger supermarkets.  The existing requirement for large shopping centres (with at least 30 commercial establishments) has limited access to pharmacy services in many retail developments.

 

·       Not all of the required commercial establishments in a shopping centre need to be open and trading at the time of application approval.  In some cases, this requirement has delayed access to pharmacy services in new shopping centres.

 

·       Rules for relocation of an additional pharmacy to single-pharmacy rural towns and high-growth urban areas, will mean a second pharmacy can be approved in these communities.

 

HEALTH LEGISLATION AMENDMENT (PHARMACY LOCATION ARRANGEMENT) BILL 2006

 

NOTES ON CLAUSES

 

Clause 1: Short title

 

Clause 1 is a formal provision specifying the short title of the Bill as the Health Legislation Amendment (Pharmacy Location Arrangements) Act 2006 .

 

Clause 2: Commencement

 

Clause 2 provides the commencement dates for each of the parts of the Bill. Sections 1 to 3 and Part 1 to Schedule 1 will commence on the day on which the Act receives the Royal Assent.  Clause 2 also provides that Part 2 to Schedule 1, and Schedule 2, will commence on 1 July 2006.  Part 3 to Schedule 1 is deemed to have commenced on 1 July 2000, immediately after the commencement of the National Health Amendment Act (No.1) 2000 .

 

Clause 3: Schedule(s)

 

This clause provides that each Act that is specified in the Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule.

 

SCHEDULE 1 - AMENDMENTS RELATING TO AUSTRALIAN COMMUNITY PHARMACY AUTHORITY

 

Part 1 - Amendments commencing on Royal Assent

 

Item 1 amends subsection 90(3C) of the National Health Act 1953 (the NHA) to provide that subsections 90(3A), 90(3AA), 90(3AB), 90(3AC), 90(3AD) and 90(3B) will continue in force until the end of 30 June 2010 unless sooner repealed. 

 

The combined operation of subsections 90(3A), 90(3AA), 90(3AB), 90(3AC), 90(3AD) and 90(3B) require that an application by a pharmacist for approval to supply pharmaceutical benefits under Part VII of the NHA in respect of particular premises, be referred to the Australian Community Pharmacy Authority (the Authority), and permits the Secretary to grant approval under subsection 90(1), of such an application only if the Authority has so recommended.

 

The exception to this requirement is where the application arises from a change in the ownership of a pharmacy that is to continue to operate from the same premises, and the change resulted from the sale of the pharmacy, the acquisition of a deceased pharmacist’s interest in the business, or a change in the constitution of the partnership that owned the business, or the pharmacist wishes to expand or contract the premises.

 

The need to amend subsection 90(3C) is a consequence of the amendment to subsection 99Y set out at item 2 below. 

 

Item 2 amends subsection 99Y of the NHA to provide that Division 4B of Part VII of the NHA will continue in force until the end of 30 June 2010 unless sooner repealed.  Division 4B contains the provisions relating to the establishment, membership and functions of the Authority, and the requirement for the Minister to determine the rules with which the Authority must comply in making recommendations to the Secretary on whether or not an application under section 90 for a pharmacist to supply pharmaceutical benefits at or from premises should be approved.  This amendment provides for the continued operation of the Authority and the Ministerial rules until 30 June 2010, to coincide with the expiry of the Fourth Community Pharmacy Agreement between the Commonwealth and the Pharmacy Guild of Australia.  Currently the Minister has only determined rules in relation to the location of pharmacies (the pharmacy location rules).  

 

Part 2 - Amendment commencing on 1 July 2006

 

Item 3 amends subsection 99N(1) of the NHA to provide that membership of the Authority will be increased by one to include a consumer representative.  New subsection 99N(1)(e) provides that the new member will be a person the Minister considers appropriate to represent the interests of consumers.  The existing subsection 99N(3) of the NHA provides that this person will be appointed by the Minister.

 

Item 4 amends subsection 99N(5) of the NHA to provide that this new member of the Authority will be appointed for a period of two years and will be eligible to be re-appointed to the Authority.  The new member will be subject to the same rules as the existing members of the Authority (other than the member appointed to represent the Department of Health and Ageing).

 

Part 3 - Technical Amendments

 

Item 5 corrects a minor technical error in subsection 105AD(1) of the NHA to correct a cross-reference relating to those types of recommendations made by the Authority in respect of an application for approval under section 90.  This reflects amendments made to subsection 105AD(2) by National Health Amendment Act 1995 , National Health Amendment Act 1998 and the National Health Amendment Act (No. 1) 2000 .

 

Item 6 corrects a grammatical error in subsection 105AD(2)(aa) of the NHA which refers to a type of recommendation made by the Authority in respect of an application for approval under section 90.

 

SCHEDULE 2 - AMENDMENTS RELATING TO APPROVAL OF PHARMACISTS

 

Part 1 - Minister’s discretion to grant approval

 

Item 1 amends paragraph 6(1) of the NHA to provide that the Minister cannot delegate to another person the discretionary powers provided to the Minister under new sections 90A and 90B.

 

Item 2 inserts a Note at subsection 90(5) of the NHA.  Subsection 90(5) provides that the Secretary will notify an applicant pharmacist of the decision in respect of their application for approval to supply pharmaceutical benefits at or from particular premises.  The Note makes clear that, if the Secretary has made a rejection decision, the Minister may (under certain circumstances) substitute for the Secretary’s decision, a decision to approve the pharmacist under subsection 90A(2).

 

Item 3 inserts a new subsection 90(8) to clarify the current situation so that there can be no dispute concerning whether or not the Secretary can approve more than one pharmacist in respect of particular premises for the purpose of supplying pharmaceutical benefits. 

 

Section 90 does not currently prevent the Secretary from approving more than one pharmacist at particular premises (that is, separate pharmacists and not those jointly operating a pharmacy business).  However, this has not commonly occurred, as granting more than one approval is generally impractical since only one pharmacy can operate at particular premises at a time.  However, there are circumstances in which this may be appropriate, as described below, and this amendment will make this clear.

 

A common situation which arises and in which the Secretary will now be able to approve more than one pharmacist in respect of premises that are already approved, is where the original approved pharmacist is seeking to relocate to new premises and another pharmacist is seeking to occupy those original premises.  For the Secretary to approve more than one pharmacist in respect of premises the following circumstances would need to arise:

·          the pharmacist approved in respect of those premises (the original approved pharmacist) has sought permission from the Secretary to cease trading at those premises, and the Secretary has agreed not to cancel the approval of that pharmacist in accordance with subsection 98(2) of the NHA; and

·          the original approved pharmacist has made an application for approval in respect of other premises and the Authority has recommended the approval of that application; and

·          the original approved pharmacist has agreed that their approval in respect of their original premises will be cancelled immediately before the approval the subject of the application recommended for approval by the Authority, if granted, takes effect; and

·          another pharmacist (the second pharmacist) makes an application for approval in respect of the premises at which the original pharmacist is currently approved, and at which the original pharmacist is no longer trading, and that application has been recommended for approval by the Authority.

 

In such circumstances, it is intended that the Secretary could approve the second pharmacist in respect of the premises, even though the original approved pharmacist still retains an approval in relation to those premises.

 

Items 4 inserts new sections 90A, 90B, 90C, 90D and 90E in the NHA, which relate to a new discretionary power to enable the Minister to grant approvals for pharmacists to supply pharmaceutical benefits at or from particular premises. 

 

Section 90A : the purpose of section 90A is to provide the Minister with a new discretionary power to substitute a decision by the Secretary not to approve a pharmacist to supply pharmaceutical benefits from particular premises, with a decision to approve the pharmacist.  This discretionary power is intended to be used in exceptional circumstances where there has been an unintended consequence of the application of the pharmacy location rules, causing the rejection of an application which results in a community being left without reasonable access to the supply of pharmaceutical benefits by an approved pharmacist, and approval of the pharmacist is in the public interest.

 

Paragraph 90A(1) sets out the types of decisions for which the Minister may substitute a decision.  That is, rejection decisions made by the Secretary in relation to applications lodged on or after 1 July 2006, which were made on the basis that the applications for approval under section 90 did not meet the requirements of the pharmacy location rules.



Paragraph 90A(2) provides that the Minister may substitute, for a rejection decision made by the Secretary, a decision to approve the applicant pharmacist and describes the circumstances in which the Minister may do so.  The Minister must be satisfied that a result of the rejection decision is that a community will not have reasonable access to pharmaceutical benefits as supplied by an approved pharmacist.  The Minister must also be satisfied that approval of the applicant pharmacist is in the interests of the public.

 

Paragraph 90A(3) states that the references in 90A(2) to ‘community’ and to ‘reasonable access’ are to have the meaning subscribed to them by the Minister.

 

Paragraph 90A(4) provides that the Minister can only exercise the discretionary power at the request of an applicant pharmacist under section 90B, and that the Minister must exercise the power personally.

 

Paragraph 90A(5) makes clear that, subject to the timeframe described at subsection 90B(5) the Minister does not have a duty to consider whether to exercise the discretionary power.  That is, the Minister’s discretionary power is non-compellable.

 

Paragraph 90A(6) makes clear that the Minister cannot exercise the discretionary power and approve an applicant pharmacist if that pharmacist is not permitted, under the law of the State or Territory in which the premises are situated, to carry on business as a pharmacist.  This mirrors the limit on the Secretary’s powers to approve a pharmacist, as set out in subsection 90(4).

 

Paragraph 90A(7) makes clear that, if the Minister decides not to exercise the discretionary power, an applicant pharmacist may still seek a review of the Secretary’s rejection decision by the Administrative Appeals Tribunal (AAT) in accordance with subsection 105AB(7) of the NHA.

 

Paragraph 90A(8) provides that any reference in section 90A (other than in subsection 90A(7)) to the Secretary’s rejection decision or a decision of the AAT, includes reference to a rejection decision that has been affirmed by the AAT or a federal court. 

 

Section 90B :  the purpose of section 90B is to set out how and when a pharmacist may request that the Minister exercise the discretionary power, and how the Minister may consider such a request.

 

Paragraph 90B(1) provides that, for the purpose of section 90A, an applicant pharmacist may request, in writing, the Minister to exercise the discretionary power in relation the Secretary’s decision.

 

Paragraph 90B(2) provides that if the Minister has determined the form of such requests, a request must be made in that form.

 

Paragraph 90B(3) sets out that an applicant pharmacist must make a request for the Minister to exercise the discretionary power within 30 days after one of the following events:

·          the applicant is notified of the Secretary’s decision not to approve the application; or

·          the applicant is given a copy of the AAT’s decision affirming the Secretary’s decision; or

·          a federal court issues an order affirming the Secretary’s or AAT’s decision (whichever is applicable); or

·          any review undertaken by the AAT or a federal court of the Secretary’s decision has been discontinued, withdrawn or dismissed.

 

Paragraph 90B(4) provides that the Minister will have three months in which to decide whether or not to consider a request.  The three months will commence on the day the request from the applicant pharmacist is received by the Minister.  If the Minister makes no decision in this period, on the first day after the three month period it will be taken that the Minister has decided not to consider the request.

 

Paragraph 90B(5) provides that, if the Minister has decided to consider a request, the Minister will then have three months in which to decide whether or not to exercise the discretionary power.  The three months will commence on the day the Minister decides to consider the request from the applicant pharmacist.  If the Minister makes no decision in this period, on the first day after the three month period it will be taken that the Minister has decided not to exercise the discretionary power.

 

Paragraph 90B(6) provides that the Secretary must notify the applicant pharmacist in writing of whether or not the Minister has decided to consider a request and, if applicable, whether or not the Minister has decided to exercise the discretionary power.  This includes a decision that has been taken to have been made by the Minister.

 

Section 90C :  the purpose of section 90C is to set out those circumstances in which a request for the exercise of the discretionary power cannot be made to the Minister.

 

Paragraph 90C(1) sets out that an applicant pharmacist cannot make a request to the Minister for the exercise of the discretionary power if the Secretary’s rejection decision is under review by the AAT or a federal court and that review has not yet been finalised.

 

Paragraph 90C(2) provides that if an applicant pharmacist makes a request to the Minister for the exercise of the discretionary power, and the Secretary’s rejection decision becomes the subject of a review by the AAT or a federal court, the applicant’s request is taken to have been withdrawn.

 

Section 90D :  the purpose of section 90D is to allow the Minister to seek additional information from the applicant pharmacist or other persons in respect of considering the use of the discretionary power.

 

Paragraph 90D(1) provides that in deciding whether or not to consider a request, or in deciding whether or not to exercise the discretion, the Minister may seek additional information from the applicant pharmacist or any other person the Minister considers relevant.  In requesting this information, the Minister must specify the period in which the requested information is to be provided.

 

Paragraph 90D(2) provides that if the applicant does not provide the requested information by the given date, the applicant’s request for the exercise of the Minister’s discretionary power may be treated by the Minister as having been withdrawn.

 

Paragraph 90D(3) provides that if the other person does not provide the requested information when requested by the Minister, by the given date, the Minister is not under any obligation to consider the information if it is subsequently provided.  Further, if the requested information is not provided by the given date, the Minister is not under any obligation to take any additional steps to obtain the requested information.

 

Section 90E :  the purpose of section 90E is to provide that any pharmacist approved under subsection 90A(2) will be treated as if they have been approved under section 90 of the NHA.

 

Subparagraph 90E(a) provides that the pharmacist approved under section 90A(2) is treated, for all purposes of the NHA, as if the pharmacist was approved under section 90.  The purpose of this provision is to make clear that the pharmacist who is approved under subsection 90A(2) is not, as a matter of law, an approved pharmacist under subsection 90(1), but is treated as such for the purposes of the NHA.

 

Subparagraph 90E(b) is an interpretive provision.  Because an approval granted under subsection 90A(2) is treated (by virtue of subparagraph 90E(a)) as an approval granted under section 90, a reference in the NHA to an “approval granted under section 90” is to be interpreted as including a reference to an approval under subsection 90A(2).

 

Subparagraph 90E(c) provides that if an approval is granted to a pharmacist under subsection 90A(2), because that approval is treated as an approval under section 90 (by virtue of subparagraph 90E(a)), the approval is subject to all conditions to which an approval granted under section 90 is subject.  The new paragraph makes clears that the conditions, which may be imposed by virtue of section 92A, include any conditions imposed by means of a determination made under subsection 92A(1)(f) of the NHA.

 

Subparagraph 90E(d) provides that if an approval is granted to a pharmacist under subsection 90A(2), the rights and obligations of an approved pharmacist under the NHA apply to that pharmacist.  As such, this pharmacist will be subject to the offence provisions that are applicable to approved pharmacists (for example, see section 103 of the NHA).

 

Item 5 amends subsection 92A(1)(f) of the NHA.  Section 92A sets out the conditions with which a pharmacist, a medical practitioner, or hospital authorities approved to supply pharmaceutical benefits must comply.  The conditions include those relating to the practice of supplying, and charging an amount for the supply of pharmaceutical benefits, and the appropriate methods of recording certain supplies made.  Subsection 92A(1)(f) provides for the Minister to determine any other condition with which a pharmacist, a medical practitioner, or hospital authorities approved to supply pharmaceutical benefits must comply.

 

The intention of item 5 is to make clear that, in determining other conditions under subsection 92A(1)(f), the Minister is not confined to the types of matters already prescribed in subsection 92A.  For example, the Minister may also determine conditions which relate to the premises from which pharmaceutical premises are supplied.

 

Item 6 inserts a Note at subsection 105AB(7) of the NHA.  Subsection 105AB(7) provides that an application may be made to the AAT for the review of the Secretary’s decision not to approve a pharmacist under section 90.  The Note makes clear that the Minister may, under certain circumstances, substitute for a decision of the Secretary rejecting an application for approval that has been affirmed by the AAT a decision to approve the pharmacist.

 

Item 7 inserts a section 105AE at the end of Part VIIA of the NHA.  The new section 105AE relates to the time limits for seeking a review of a decision of the Secretary not to approve a pharmacist under section 90.  It makes clear that, if an applicant has requested that the Minister exercise discretionary power, and has been unsuccessful in that request, the applicant may still seek a review of the Secretary’s rejection decision or institute an appeal associated with that decision.  This new provision has been inserted to ensure that the applicant’s rights of review of the Secretary’s decision are not limited because of an application to the Minister to request the exercise the Minister’s discretionary power under section 90A(2).

 

Paragraph 105AE(1) sets out that this section applies if:

·          the Secretary has decided not to approve a pharmacist under section 90; and

·          the applicant has requested that the Minister exercise the discretionary power; and

·          the Minister has decided either not to consider the request or not to exercise the discretionary power (including a decision which is taken to have been made by the Minister).

 

Paragraph 105AE(2) provides that the Secretary’s decision is taken to have been made on the date the applicant pharmacist is notified of the Minister’s decision regarding the use of the discretionary power (including a decision which has been taken to have been made by the Minister).  This will allow applicant pharmacists to seek a review of the Secretary’s decision by the AAT or a federal court if they had not already done so prior to making a request to the Minister for the exercise of the discretionary power.

 

Part 2 - Expanded or contracted premises

 

Item 8 amends subsection 90(3A) of the NHA to provide that all applications under section 90 must be referred to the Authority, subject to existing subsection 90(3AA) and new subsection 90(3AE).  The effect of this provision is to expand the categories of applications that do not have to be referred to the Authority to include expansion and contraction applications.  Currently, only certain applications arising out of a change in ownership of a pharmacy do not have to be referred to the Authority for approval.

 

Item 9 amends subsection 90(3AB) of the NHA to make clear that the reference to “pharmacy” in existing subsection 90(3AA) is to have the same meaning in the new subsection 90(3AE). 

 

Item 10 inserts new subsections 90(3AE) and (3AF).

 

Subsection 90(3AE) provides that, if the application relates to pharmacy premises in respect of which a pharmacist is already approved, and the expanded or contracted premises occupy any of the space currently occupied by the pharmacy, subsection 90(3A) does not apply.  That is, applications for approval in relation to an expansion or contraction of premises need not be referred to the Authority.

 

Subsection 90(3AF) provides that, regardless of subsection 90(3AE), the Secretary may (at his or her discretionary power) refer an application relating to an expansion or contraction of pharmacy premises to the Authority. 

 

An example of where the Secretary may refer such an application to the Authority is where the expansion or contraction may result in the premises being directly accessible from within the premises of a supermarket.

 

Where such an application is referred to the Authority, it will be reviewed in accordance with the pharmacy location rules determined by the Minister under subsection 99L(1) of the NHA.

 

Item 11 amends subsection 90(3B) of the NHA to provide that, if an application has been referred to the Authority in accordance with existing subsection 90(3A) or with new subsection 90(3AF), the Secretary may only grant approval in respect of that application if the Authority has recommended the granting of approval.

 

Item 12 amends subsection 90(3C) of the NHA to provide that those subsections associated with the operation of the Authority, including new subsections 90(3AE) and 90(3AF) will cease to operate at the end of 30 June 2010 (see also Item 1 of Schedule 1).

 

Item 13 is a substantive provision which makes clear that the amendments made by this Part apply to an application made on or after 1 July 2006.  Any application for an expansion or contraction of pharmacy premises made before 1 July 2006 will not be subject to the new provisions of this Part.

 

 

 

 




[1] The Pharmacy Guild of Australia is a peak employers federation, representing the interests of community pharmacists.