On Friday 8 June 2018, the Department of Health commenced a review of the Community Service Obligation (CSO) Funding Pool for pharmaceutical wholesalers.
The following media release is the preliminary response by the National Pharmaceutical Services Association (NPSA).
Without urgent action to stamp out monopolies in the nation’s medicine supply chain, access to essential medicines could be jeopardised and Australians living in remote and regional areas could end up paying more for Pharmaceutical Benefits Scheme (PBS) medicines than those in urban centres.
National Pharmaceutical Services Association (NPSA) Chairman Mark Hooper said that in other countries, such as the United States, monopolies on medicine supply have led to citizens in regional communities paying more for medicine than those in metropolitan areas.
“In Australia, the Government designed the Community Service Obligation (CSO) to provide access to all PBS medicines for all citizens, whether they live in Bellevue Hill or Broken Hill,” he said.
“While we welcome the Government’s Consultation on the CSO Funding Pool Obligations, any reform needs to protect the original intent of the system, which is to ensure all Australians have affordable and equitable access to all PBS medicines, regardless of where they live.”
Mr Hooper said new monopoly arrangements between pharmaceutical manufacturers and international courier companies undermined the CSO’s current cross-subsidisation model, in which the delivery of higher-priced and higher-volume drugs pays for the delivery of lower-priced drugs.
“Allowing any company to selectively supply only high-value medicines further undermines a model where close to 90 per cent of PBS medicines are already uneconomic to distribute. That is not a good outcome for patient access.
“This jeopardises those parts of the supply chain that guarantee access to, and affordability of, all PBS medicines for people who live in rural and regional centres, as well as those with chronic illnesses.
“CSO wholesalers are the only suppliers with direct accountability for upholding the Government’s National Medicine Policy. The danger in allowing monopoly arrangements to continue is that the CSO, which continues to serve the community so well, will no longer work as the Government intended,” Mr Hooper said.
To ensure Australians continue to have affordable, equitable and timely access to medicines, NPSA will submit that all PBS medicines be made available to CSO wholesalers. Equally, it will argue that any new entrants to the CSO must be held to the same standards for delivering the National Medicines Policy.
“All PBS medicines subsidised by government should be subject to regulated distribution requirements that ensure fast, equitable access to every Australian at the same price,” Mr Hooper said.
This would not limit any direct distribution that pharmaceutical manufacturers may choose to explore, as long as such agreements are non-exclusive and are on equal terms.
“Australia’s medicine supply isn’t about allowing individual companies to gain more control of the market. It’s about securing a supply chain that works in patients’ best interests,” Mr Hooper said.
About the CSO
Five pharmaceutical wholesale companies are currently contracted by the federal government, through the Community Service Obligation (CSO), to deliver PBS medicines to all Australian consumers.
The CSO imposes a range of strict requirements and standards including pricing and reporting, next-day delivery, universal access to all PBS-listed medicines (except those currently delivered through exclusive-direct distribution), rural and remote services, low volume medicine delivery requirements, and security of supply. This network also provides contingency in the event of service interruption to any one distributor; for example, flooding or other natural disasters.
The current CSO distribution model consolidates what would otherwise be an extremely inefficient and fragmented supply chain between more than 500 manufacturers and 5,500 pharmacists.
Pharmaceutical wholesalers currently distribute about 6,200 PBS items to more than 5,500 community pharmacies and, through them, to millions of consumers throughout Australia. This vital service enables the dispensing of 295 million scripts annually by Australian community pharmacists in a timely and affordable manner.
The CSO model is cross-subsidised, which means the delivery of higher-priced and higher-volume drugs pays for the delivery of lower-priced drugs right around the country.
The National Pharmaceutical Services Association represents CSO wholesalers Australian Pharmaceutical Industries, National Pharmacies, Sigma Healthcare and Symbion.