Public Sector Informant: Consumers left to do heavy lifting on costs under new pharmacy agreement

Agreements exist in many forms in the health system and are the mechanism by which important policy promises - new and decades old - are funded and, ultimately, delivered. For example, free public hospital services are funded, in part, through agreements between the Commonwealth government and its state and territory counterparts. Similarly, the provision of subsidised medicines is enabled through five-yearly agreements between the Commonwealth and a private entity, the Pharmacy Guild of Australia. Agreements have also been in place at varying times with the general practice, pathology and diagnostic imaging sectors of the health system. These agreements are a function and an outcome of the siloed nature of our health system (policy and process) and serve to perpetuate the myth that what is funded in one part of the health system is somehow unrelated to need somewhere else. If the pandemic has shown us anything, it is that we continue to isolate individual parts of our health sector at our peril.

Despite the downstream impact on the lives of many of us, much of the business of agreements takes place beyond the public eye. You might imagine that the people most impacted by an agreement would be involved as a matter of course in its development, negotiation, implementation and monitoring. But this is not the case.

Agreements, particularly in the health sector, have long been paternalistic, solely the province of governments and providers. The expertise and input of consumers is, of course, always welcomed and sometimes deliberately sought through consultations. But the hard business of scope, funding, governance and implementation of agreements is always off-limits. One very notable exception is the new National Agreement on Closing the Gap. Central to this agreement is a genuine partnership approach that will include the long-overdue participation of Indigenous people in the selection of targets and indicators to be measured and reported. In the context of what has gone before, the partnership approach of this new agreement is quite ground-breaking.

Not so ground-breaking is a $25 billion agreement that commenced in July, the Community Pharmacy Agreement. This is the seventh such agreement, which began last century following a sustained display of political and industrial muscle by the representative of the owners of community pharmacies, the Pharmacy Guild of Australia (the Guild). Unwilling to risk the threat of a grass-roots campaign against it at the 1990 election, the Hawke government opted to negotiate the first five-year agreement with the Guild. In the intervening 30 years, about $70 billion was funded through these agreements, with another $25 billion allocated for the next five years. Not all of this funding has been provided by the Commonwealth, with consumers directly funding many billions of dollars (obviously, taxpayers ultimately also pick up the Commonwealth's share).

In this new agreement, consumers are expected to contribute nearly $10 billion straight from their own pockets in the next five years, accounting for nearly four in every 10 dollars (37 per cent) of agreement funds. Given the large-scale economic damage wrought by the pandemic it is disconcerting to find that while the new agreement provides for a relatively modest 6.3 per cent increase in funding over its predecessor, most of the heavy lifting will actually be done by consumers. Out-of-pocket payments increase by 13 per cent, with the Commonwealth's increased share restricted to only 2.4 per cent. Despite this, consumers have no role in setting the scope of agreement services, allocation of funding to different programs nor in the governance and implementation of the agreement.

It is already well-known that the level of out-of-pocket costs for medicines are an obstacle for some consumers in filling necessary prescriptions. These costs are also one reason why Australia is sliding down the ratings scales of international surveys on the performance and equity of health systems. It seems remarkable that a new, five-year agreement developed and negotiated during this pandemic, could envisage shifting costs further onto consumers at a time when they can afford it least.

One of the major shortcomings of leaving consumers on the sidelines has been a lack of transparency and accountability for outcomes in these agreements. This has resulted in at least one initiative never being implemented as envisaged and it is only in the last few years that any attempt has been made to consistently collect, measure and (hopefully) report publicly on some indicators for some programs. The new agreement envisages the development of key performance indicators, aligned to unspecified outcomes, but it appears that even this process will not include consumers.

The last two agreements have been rolled out under the Coalition but no one should hold their breath waiting for the other side of politics to champion the involvement of consumers in the policy underpinnings of the agreements or in their implementation and governance. This should not be surprising, given that the Guild is by far the largest political donor in the health sector. According to the Australian Electoral Commission, the Guild donated almost $1.5 million to the three major parties over the four years from 2015-2019, a period covering the last two federal elections, the negotiation of the sixth and the lead-up to the seventh Community Pharmacy Agreements. Some $773,791 was donated in 2018-19 alone. Little wonder that the Guild has been called (by a former stablemate of this newspaper) the most powerful lobby group you've never heard of.