Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I have some preliminary questions, just following up the questions I put in my second reading contribution. Does the government acknowledge that this accelerated price disclosure was not part of the previous community pharmacy agreements that the minister has referred to?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

Thank you, Senator Xenophon. I am advised that accelerated price disclosure was discussed as part of the agreement but simplified price disclosure is indeed new.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will put it another way. My understanding from discussions with pharmacists from the Pharmacist Guild is that what is being proposed now is not what was agreed to previously. Just putting it simply, what is being done now is not what was part of the deal in previous community pharmacy agreements.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I understand that the time frame has changed but not the principle.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Bingo! If you change the time frame, that makes all the difference. The complaint of these pharmacists is not about price disclosure per se but about the fact that they cannot adjust in time. They are having to make significant adjustments to their businesses, their community pharmacies, because of the price disclosure being truncated in this way. That is what is causing significant hardship. They are having to change their business models and restructure staffing. These are some of the issues.

The next question is: what will the additional savings of this accelerated price disclosure—I think the government refers to it as a 'simplified price disclosure'—be compared to what was in place prior to the changes announced by the former government on the eve of the caretaker mode coming in?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I do understand the concerns out there in the community. Coming from a rural and regional area myself, I have been well aware of the concerns. I concur with others who have raised the issue around the lack of consultation under the previous government. That is not something that this government intend to mirror. Indeed, our approach will be entirely different. Senators have raised the fact that under the previous government this legislation was introduced just before we moved into caretaker mode, with almost no consultation. I understand the very real difficulties that were created under those arrangements.

In terms of the timing, though, Senator Xenophon, it has been very clearly known by those in the sector since last August that we were moving towards this legislation. I would also indicate to Senator Xenophon that the initial impact from this legislation will not occur until October this year. So, while I do understand the concerns, I would not like there to be a misconception that the impact of this legislation is going to be immediate. I am very cognisant of the concerns that have been raised by the community pharmacy sector, but I will point out that October will be the point in time when this legislation will have an impact on those pharmacies.

In relation to Senator Xenophon's question regarding savings, while there are savings for the government of $835 billion over the forward estimates, as we have discussed, I suspect the question was more on the impact on pharmacies through reduced income. My understanding is that the guild modelling suggests it will be around $30,000 per annum. My understanding is also that government modelling broadly reflects that. I think perhaps some of the confusion around the figures related to the funding for this is that some figures are for over the life of simplifying the price disclosure. But when you look at the impact just from this legislation, as I understand it, the guild says it will be around $30,000 a year.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Just in response to that, firstly, the government say that there was a lack of consultation on the part of the previous government in their negotiations with pharmacists. But what I do not understand is that if they say that the process was flawed—that is the allegation made by the government about the previous government—why are they going through with these changes? I do not understand that. I make that as an observation and, if the government want to respond, so be it. The fact that there is an average $30,000 shortfall—and the Pharmacists Guild indicated to me a $149 million shortfall for community pharmacies as a result of this accelerated disclosure—would mean that for many average pharmacies that reduction in income would be in the order of $50,000 per annum.

My question to the government is: has any modelling been done about the potential effects on employment and service delivery of such a significant diminution in income over that much shorter period?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I do not think that I indicated to the chamber that the process was flawed. The process of consultation, we believe, was flawed, and there could have been more timely consultation provided by the previous government.

The previous government had already factored the $835 billion worth of savings into the forward estimates. What we were up against coming to this legislation was that that had already been done. I think the Australian people clearly understand the very difficult economic circumstances which the nation is in. We had to take into account the fact that the previous government had factored in $835 billion worth of savings, and we had to take that fact into account. We will take a different approach to consultation. On our coming to government there were very comprehensive consultations done with the stakeholders by the government.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

It seems clear that, while the price of medical and hospital services rose 191 per cent from 1991 to 2012—that is, over a 21 year period—the cost of pharmaceutical products rose 58 per cent: a much smaller price rise. The concern is that community pharmacies, when compared to other health service sectors, have unfairly borne the brunt of cost savings, and the concern of community pharmacies is that they seem to be a soft target for successive governments.

We know from the Senate inquiry into chemotherapy drugs—docetaxel in particular, in which Senator Di Natale had a very strong interest—that if, with changes to price disclosure legislation, you muck the method of payment around and have a sudden, sharp shock in the form of a reduction in income for pharmacies, pharmacies are put in an untenable and unsustainable situation. The fear I have is that up to 1,000 pharmacies in this country could hit the wall as a result of the accelerated price disclosure provisions in the bill.

The questions are: is the government aware of any modelling on whether the changes in the bill will mean that some pharmacies will have to close their doors or shed staff and therefore reduce their service levels? Does the government concede that the cost of pharmaceutical products appears to have risen 58 per cent in a 21-year period compared to a 191 per cent rise in the cost of medical and hospital services? Is the burden being unfairly placed on the community pharmacy sector rather than on other parts of the health sector?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

Under the previous rounds there has been no decrease in the number of pharmacies. I am not in any way saying that what you are alluding to may not be correct, but I think it is useful to point out that there has not been no decrease in the number of pharmacies; in fact, I think there has indeed been a slight increase.

No, there has not been specific modelling done, as I understand it. But I think it is also useful to the Senate to place on record some of the facts around the potential increases to pharmacies, which are on average around $175,000 per annum. That includes: $16,000 per annum for increased prescription volumes; an estimated $14,000 per pharmacy from high-cost listings from 2014-15 alone; and $21,000 per annum in funding the Premium Free Dispensing Initiative. I would also point out to the Senate that the dispensing fees that are in place at the moment and other fees are not impacted on by this piece of legislation. Indeed, I think there is around $13.8 billion worth that goes to those dispensing fees and the other fees.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Notwithstanding that, does the government concede that it is taking in the order of $149 million by virtue of price disclosure? In terms of raw figures, can we just get that on the record?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I indicate to the chamber, to provide some clarity, that it is not a saving. The legislation is simply shortening the time frame and bringing forward, from an 18-month period to a 12-month period, when those impacts would occur. I think it is very important for senators to be clear that this is a time frame issue—that these impacts were going to occur anyway under simplified price disclosure. They are now happening in a shorter time frame, with the reduction to 12 months under the legislation.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I will not take this any further, other than to restate the position that this simplified price disclosure or accelerated price disclosure is actually going to make it more difficult for a number of pharmacies to adjust—because the time period has been truncated. Whenever you bring in any reforms or changes such as this, it is about how you implement it, it is the transitional arrangements, and what the community pharmacists have said to me is that, in good faith, they negotiated an agreement for price disclosure but not for accelerated price disclosure on these terms. I will not take it any further. I understand the minister's position on behalf of the government. I move the amendment on sheet 7459 revised:

(1) Schedule 1, item 2, page 3 (after line 13), after subsection 99ADH(2), insert:

(2A) For the purposes of the Legislative Instruments Act 2003, the explanatory statement in relation to a determination under paragraph (1)(aa) of this section must include a statement of the financial impact of the determination, including an analysis of the costs and benefits of the determination to the Commonwealth, approved pharmacists and consumers.

The aim of this amendment is to ensure greater consultation and disclosure when changes are made to price disclosure cycles. The amendment applies to subsection 99ADH(2b) in the bill, which allows a day other than 1 April or 1 October to be prescribed. The amendment requires, when another day is prescribed, that the government must present a statement of the financial impact of the determination, including an analysis of the costs and benefits of the determination to the Commonwealth, approved pharmacists and consumers.

I have consulted with the Pharmacy Guild on this amendment. Their primary concern is not the principle of price disclosure but the way it has been implemented with so little consultation. This amendment will ensure that consultation.

I am grateful for the work of the office of the Minister for Health, the Hon. Peter Dutton, and his adviser, Mr Simpson. They have been very helpful in providing information to me and having a discussion about this. I will wait for the minister's response, but I think that the neatest and best way of ensuring consultation is via this amendment. I look forward to the minister's response.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I indicate to the chamber that the government does not support the amendment. I do appreciate Senator Xenophon's very real concerns in this area. Regarding the transparency and information that is requested, all the parameters to calculate the financial impact of the simplified price disclosure are already publicly available, primarily in two ways. Firstly, a legislative instrument will be tabled every six months to allow the price changes to take effect. The instrument will include the full list of the medications subject to price disclosure, the form of the drug, the adjusted price and the percentage reduction. Secondly, concurrently, the department releases information on its website with a summary of the changes to ensure that consumers are aware of the expected price reductions. This is usually accompanied by a media release. The government believes that the appropriate arrangements are in place in terms of information and transparency and, as I said, will not be supporting the amendment.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Can I ask the government—and I am happy for this to be taken on notice, for obvious reasons—what level of consultation was there in respect of this piece of legislation and the policy rationale behind this legislation in the lead-up, from the time that the coalition formed government? In fact, is the government able to say what consultation existed under the former government in terms of whatever information is available from the department. Again, I am happy to take it on notice, but I just want to see the nature, level and dates of that consultation, if I could get an undertaking from the minister for that information to be provided in due course and in a timely manner. I think I see a nod of the head there—I am not verballing the minister!

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I am sure you would never do that Senator Xenophon! I can indicate that we will take that on notice, but perhaps I can provide some information for the senator. The department had a stakeholder meeting with all areas of the pharmacy sector on 6 December last year, which included the Pharmacy Guild of Australia, manufacturers, hospital pharmacists, the Pharmaceutical Society of Australia, and consumers. There was material on the website to reflect the feedback from the industry, and those consultations were used to inform the regulations that were developed in support of the legislative change.

I appreciate that you are after further detail. I will just place that on the record for an indicative expression of the consultation that took place. But I would be happy to take that on notice.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

One further question on this line. Will the government consider the impact on community pharmacies from these changes in the future? There seems to have been a gradual but continual cutting of the revenue that community pharmacies get. In respect of that, is the government concerned about the long-term viability of community pharmacies, particularly in regional Australia? Will there be any ongoing dialogue that goes beyond this specific aspect of price disclosure, and goes to the viability of community pharmacies, in acknowledgement of the role they play in providing assistance and service to communities, particularly in regional Australia, in dispensing medicine and providing general medical advice?

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

I think you would probably be well aware that, as someone from a regional area, I listened very closely to those in regional communities. Certainly the government acknowledges the importance of evaluating policies and programs, very much so, and we will be doing that at the appropriate time.

Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Link to this | Hansard source

I just want to indicate to the chamber that we will not be supporting the amendment from Senator Xenophon. As I said in my contribution on the second reading debate, we acknowledge the view of the Pharmacy Guild of Australia, but I also refer Senator Xenophon to the Bills Digest from the Library, which goes to the questions you were asking. There is commentary in there for senior health economists that indicates the figures that have been arrived at by the Pharmacy Guild are not agreed with by everybody. I think this is a contested space.

I acknowledge the view of the Pharmacy Guild but I would like to put on the record that I think we need to balance that view with the principle that we need to pay the right price—not too much and not too little—for pharmaceuticals in this country. We are purchasing those pharmaceuticals on behalf of the taxpayers of our country. We have to get the right price that ensures we have a viable, strong community pharmacy sector, particularly for regional Australia, but we have to make sure that we are paying the right price for pharmaceuticals.

I also think it is a bit disingenuous for the assistant minister to say that this is all the Labor Party's fault. You are the government now. It is your decision and you have to own it. To blame Labor is just not good enough. This is legislation that you are introducing into this chamber, so to blame Labor for this is frankly just a bit unfair.

Fiona Nash (NSW, National Party, Assistant Minister for Health) Share this | Link to this | Hansard source

To clarify, I certainly did not blame the government. My commentary around the government was to do with our concern about the lack of consultation of the sector before the legislation was announced.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendment moved by Senator Xenophon be agreed to.

Question negatived.

Bill agreed to.

Bill reported without amendments; report adopted.