Purpose of the Bill

The purpose of the National Health Amendment (Supporting Patient Access to Cheaper Medicines and Other Measures) Bill 2024 (the Bill) is to amend the National Health Act 1953 (NHA) to support the implementation of key elements of the Eighth Community Pharmacy Agreement (8CPA) reached between the Australian Government and the Pharmacy Guild of Australia (the Guild).

Key amendments include:

•    the introduction of a new Additional Community Supply Support (ACSS) payment, at a cost of $2.1 billion over five years
•    a freeze in indexation of patient co-payments for medicines listed on the Pharmaceutical Benefits Scheme (PBS). The Bill will freeze indexation of the general patient co-payment for one year and indexation of the concessional co-payments for five years
•    phasing out of the $1 allowable discount on the PBS co-payment that was introduced in 2016.

The Bill also includes a number of minor and technical changes to the NHA.

Background

About the Pharmaceutical Benefits Scheme

Overview and patient co-payments

The PBS is the Australian Government program for providing universal, subsidised access to medicines. The PBS subsidises the cost of medicine for Australian residents and overseas visitors from countries with which Australia has a reciprocal health care agreement, for most medical conditions. Most medicines on the PBS are prescribed by doctors, dispensed by pharmacists, and used by patients at home.

Under the PBS, patients pay a co-payment towards the cost of each PBS medicine with the Australian Government paying any remaining cost. Patient co‑payments are currently set at $7.70 for concession card holders and a maximum of $31.60 for general patients (those who are ineligible for a concession). These amounts are generally indexed every year in line with the Consumer Price Index (CPI) but may be revised at other times subject to the passage of legislation. There is also a PBS Safety Net Scheme which is intended to protect patients needing a large number of medicines in one year from excessive out of pocket costs.

Expenditure on the PBS is uncapped and may increase as new medicines are added and demand grows.

Optional discount

Since 1 January 2016, pharmacists and dispensing medical practitioners have been permitted to offer consumers a discount of up to $1 on each PBS co-payment, as long as the pharmacist absorbs the cost. This discount can be offered to both general and concessional co‑payments for each PBS medicine that is supplied, except for prescriptions subject to early supply rules. The discount can be offered when the medicine’s Commonwealth price (discussed below) is equal to or higher than the co-payment amount.

The discount is not mandatory, it is the choice of the pharmacist or dispensing medical practitioner whether they would like to give a discount. The Commonwealth does not reimburse them if a discount is provided.[1]

The $1 discount was introduced to enhance competition between pharmacies.[2] However, previous reports have suggested that the discount has not led to equitable outcomes, as it is more likely to be applied to some patients (those that hold a concession card) and in urban areas.[3] This inequality was noted in the Minster’s second reading speech as a driver for phasing out the discount:

The optional $1 discount was failing to drive competition and make medicines cheaper for most prescriptions at most pharmacies. It was particularly failing for patients outside of the inner cities.

The vast majority of people did not get the existing optional $1 discount—around four in five subsidised prescriptions were not discounted in 2023.

Of the scripts that were discounted, 76 per cent went to patients in the inner cities.

Outside of the inner cities, only one in seven subsidised prescriptions had the $1 discount applied.

Patients cannot take advantage of the $1 discount if there is just one pharmacy in town and no price competition.

Support for the $1 discount among stakeholders is mixed. The Pharmacy Guild of Australia did not support the introduction of the optional discount, arguing that it would undermine the universality of the PBS, and has previously called for it to be abolished or for a $1 reduction to be applied to all co-payments.[4]  Conversely Chemist Warehouse, which routinely provides the $1 allowable discount to their customers have called the proposed phasing out of the discount ‘a backward and anti-competitive step’, further arguing that ‘patients who currently shop at pharmacies that pass on the maximum permissible discount will face a Government-imposed price rise’. Both Chemist Warehouse and the Australian Medical Association have called on the Government to allow pharmacies to discount medicines as much as they would like. 

The Minister’s second reading speech states that the current $1 allowable discount will be phased out by freezing indexation of patient co-payments and that this will allow the cost of PBS medicines to stay lower for longer and provide a benefit to all patients. 

As further outlined in the Explanatory Memorandum:

The $1 allowable discount will be gradually reduced each year, starting on 1 January 2025, by an amount equal to the amount the relevant patient co-payment would have been increased, but for the freeze in indexation outlined above. If the allowable discount has not reached $0 by the time indexation of the relevant patient co-payment recommences, the allowable discount will be reduced by the amount of the indexation. This means that the allowable discount that can be offered will differ depending on whether the patient is a general or concessional patient (p. 2).

While the changes made by this Bill will initially result in an effective reduction of co-payments for all patients (compared to maintenance of current arrangements), once the allowable discount has been reduced to zero, the option for pharmacists to provide an optional discount will no longer be available.  

Remuneration for pharmacies and the Community pharmacy agreement

When pharmacies supply a PBS medicine to a patient they are paid a fee by the Australian Government. This fee, known as the Commonwealth price (or PBS-dispensed price) is calculated based on a formula outlined in the Community Pharmacy Agreement (CPA) and is given effect to through a Determination made by the Pharmaceutical Benefits Renumeration Tribunal.[5] This formula is made up of the approved ex-manufacturer price plus other applicable charges for the supply of PBS medicines, including dispensing fees and administration, handling and infrastructure fees.

Eighth Community Pharmacy Agreement

Since 1991, every five years the Australian Government makes a new CPA with the Guild. The CPA establishes rules about how community pharmacies will provide PBS medicines. The most recent, 8CPA, is due to commence on 1 July 2024 and provides around $26.5 billion in remuneration (from the Government and from patient co-payments) for community pharmacies. The 8CPA covers matters including:

•    pharmacy remuneration for dispensing PBS medicines, including the introduction of the ACSS payment
•    the freeze in indexation of patient co-payments and the phasing out of the $1 optional discount
•    funding for community pharmacy programs to help patients manage their medicines.

Negotiations for 8CPA began in August 2023, a year earlier than planned, due to concerns raised by the Guild about the financial implications for pharmacies of 60-day prescribing. Announced in April 2023 and commencing in September 2023, 60-day prescribing provides doctors with the option to provide a 60 day supply of medication instead of a 30 day supply (for eligible drugs only) to patients with a stable treatment plan for an ongoing condition. This may reduce how often a person needs to see their GP or attend a pharmacy, resulting in savings for patients. While 60-day prescribing is intended to reduce costs for patients, the Guild argued that the policy would also result in lost revenue for pharmacies (due to a reduction in dispensing fees), leading to staff cuts and reduced opening hours. The new ACSS payment in 8CPA is intended to address this concern.  The ACSS, which will cost an estimated $2.1 billion over five years, provides pharmacists with an extra administration, handling and infrastructure payment (commencing at $4.79 and indexed annually) for dispensing a subsidised 60-day prescription. The ACSS will be paid on top of existing dispensing and handling fees.

Committee consideration

Senate Community Affairs Legislation Committee

The Bill has been referred to the Senate Community Affairs Legislation Committee for report by 24 June 2024.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[6]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not commented on the Bill.

Policy position of non-government parties/independents

The Coalition has not commented on the Bill, however in a joint media release on 7 June 2024, the Shadow Minister for Health and Aged Care, Senator Anne Ruston and the Shadow Assistant Minister for Regional Health, Dr Anne Webster stated their support for 8CPA and community pharmacies. The media release also questioned ‘… how the removal of a $1 discount, along with a freezing of the current price of medicines, will actually make medicines cheaper for those Australians who rely on them’.

At the time of writing, no comments by non-government parties or independents specifically relating to the Bill had been identified.

Position of major interest groups

As a signatory, the Pharmacy Guild of Australia strongly supports 8CPA, stating that ‘the Agreement is good news for all Australians who rely on their local community pharmacy for medicines, advice and everyday healthcare services’.

Financial implications

Under the 8CPA up to an additional $3 billion will be provided for community pharmacy. This funding includes $2.111 billion for the ACSS payment and $484.4 million for the freeze in indexation of patient co-payments and phasing out of the $1 allowable discount.[7] Total funding for 8CPA over 5 years is $26.5 billion.