$1 discount risks closures
January 15, 2016
Potential closure of up to
276 pharmacies and an average
reduction in pharmacy opening
hours has been estimated to result
from the government’s PBS $1
discounting scheme in a report
commissioned by the Pharmacy
Guild of Australia and completed by
Green Square Associates.
Professors Henry Ergas and
Jonathan Pincus of Green Square
completed the analysis with
analytical assistance from Cadence
Economics.
While the policy is designed to
save the taxpayer $373m over the
duration of the Sixth Community
Pharmacy Agreement (6CPA) from
reduced PBS outlays and increased
competition, the report said
this was dependent on two key
assumptions.
These numbers assume that the
takeup of the the discount is near
universal and there is no (or a
trivial) increase in demand for PBS
medicines as a result of the price
drop, the analysis reads.
Over the course of the 6CPA,
the economic analysis not only
identifies risks of pharmacy
closures and reduced hours of
service, but potentially the loss
of 593 full-time equivalent roles
in affected pharmacies as well as
a social welfare loss (reduction
in consumer surplus) as a result
of reduced access, amounting to
$230m.
The report highlights that
negative impacts on pharmacies
will include new administrative
and pricing systems deployment,
pharmacy revenue and pharmacy
industry structure in general.
A thorny point for the government
is that its policy contradicts its own
current legislation which states
that a “pharmacist shall not give,
promise or offer a gift, rebate or
reward” in relation to supplying PBS
medicines.
The overall impact of the discount
offer policy is estimated by the
analysts to potentially result in
a revenue loss of $806m, which
they say is “inconsistent with the
Commonwealth’s assurances that
the 6CPA will deliver the agreed
level of funding”.
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