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Monday, 23 November 2015
Page: 13220

Mr IAN MACFARLANE (Groom) (12:08): On behalf of the Joint Committee of Public Accounts and Audit, I present the following report, Report 451: Community Pharmacy Agreements, Review of Auditor-General Report No. 25 (2014-15).

In accordance with standing order 39(e) the report was made a Parliamentary Paper.

Mr IAN MACFARLANE: by leave—On 4 June 2015 the committee selected this ANAO audit report for further review and scrutiny at public hearings. The Australian government provides subsidised medicines to Australians and eligible overseas visitors through the Pharmaceutical Benefits Scheme. In 2013-14, the PBS subsidised over 210 million prescriptions at a reported cost to government of over $9 billion. The government also subsidised an additional 12.4 million prescriptions to the veterans community, at a cost of almost $400 million. Since 1990, the Australian government funding has helped maintain a national network of approximately 5,460 retail pharmacies as the primary means of dispensing PBS medicines to the public.

The fifth community pharmacy agreement covered the period July 2010 to June 2015 and was primarily a partnership with the Pharmacy Guild of Australia. The arrangement involved the delivery of $15.4 billion in funding. The ANAO report uncovered a number of failings within the fifth pharmacy agreement's implementation and administration. There were shortcomings in key aspects of Health's administration at the development, negotiation and implementation phases. The ANAO identified key issues relating to: the clarity of the agreement and related public reporting; record keeping; the application of financial framework requirements; risk management; and seeking ministerial approvals.

It was originally stated that the agreement would result in a net saving of $600 million over its term. However, the ANAO analysis indicated that the net savings estimated should have been closer to $400 million due to shortcomings in Health's estimation methodology. The principle issues related to: unexplained increases in the baseline cost of professional programs; the application of inappropriate indexation factors; and the treatment of patient co-payments.

Given the experience the Department of Health has had with the previous four pharmacy agreements, the failures of process observed are very disappointing. The failure to provide suitable records for public accountability and the breach of the Financial Management and Accountability Act governing public expenditure were particularly egregious.

The ANAO report's eight recommendations have been agreed to by all parties, and Health has given assurances that the sixth community pharmacy agreement has incorporated the ANAO's advice. Given the size of the expenditure for this new agreement—some $18.9 billion over the next five years—the committee is of the view that its implementation should be closely scrutinised to ensure that the lessons learnt from the previous agreement and the ANAO report are not lost.

In addition to the ANAO's advice, the committee made three further recommendations directed at: ensuring that Health report back within six months of tabling this report on the independent two-year review of remuneration and regulation for the sixth agreement, particularly with regard to value-for-money spending; ensuring that Health report back on the KPIs for the new agreement and how outcomes are to be achieved, monitored and measured; and the ANAO conducting a follow-up audit on the implementation of the new agreement.

In conclusion, I thank the committee members for their deliberation on these significant matters. I also thank the departmental representatives who appeared at public hearings for assisting the committee. I particularly want to mention the member for Boothby, who was the chairman of this committee until recently, and thank him for his work as well. I commend the report to the House.

Mr IAN MACFARLANE: by leave—I present executive minutes on reports Nos 445 and 447 of the Joint Committee of Public Accounts and Audit.