Jonathan Chilton-Towle email@example.comThursday 02 February 2017, 8:38AM
The current Community Pharmacy Services Agreement may
be costing pharmacists and wholesalers $14 million more than they
are paid to dispense medicines, a report looking at the true costs
of the pharmacy sector supply chain shows.
The Grant Thornton True Costs of the
Pharmaceutical Supply Chain report, which was publicly released in
December by the Canterbury and Nelson-Marlborough DHBs, estimates
total CPSA-related procurement and stockholding costs for
pharmacies and their wholesalers in the 2014/15 financial year were
This estimated cost exceeds the $35 million funding
contribution from the CPSA margin that year by $14
However, the cost estimate relies on boundary
decisions as to what costs are related to procurement and
stockholding activity and what costs relate to other service
activity, and when the boundary decisions are not taken into
account the report estimates that pharmacies earned a positive net
margin of $25 million in 2014/15 from providing CPSA
According to the report, at a system level there
appears to be sufficient funds for the supply chain, although it
also states there is limited information available on this in the
The report fulfils a commitment made by the two DHBs
in December 2015 during the mediation of a dispute with two
pharmacies arising from them surcharging people for dispensing
Pharmacy Guild chief executive Andrew Gaudin says the
report confirms the guild's position that medicine margin funding
has not been covering the true cost of the supply chain for the
procurement and stockholding of medicine for community
"The report estimates that, in the
2014/15 year, the supply chain was underfunded by between $10
million to $19 million. This is not a fully costed estimate as it
does not take into account the costs of packaging materials and
handling costs for bulk packs which are a part of supply chain
costs," Mr Gaudin says.
"It is our expectation that DHBs will now use this
analysis to find a long-term sustainable solution to medicine
margin funding as part of the next contract.
"We believe the findings of this report, and previous
reports, clearly highlight an issue with current medicine margin
"We look forward to working with DHBs and other
stakeholders to ensure this important issue is addressed and that
community pharmacy can operate within a sustainable funding
environment, providing professional and valuable healthcare to New
Selwyn Village Pharmacy owner Des Bailey, who was one
of the pharmacists involved in the surcharging dispute with the
DHBs, says he wants to be careful with what comment he makes about
the report, although he notes the
$14 million deficit in funding that the report found.
ProPharma general manager Anthony Aitken says, in a
statement, the report highlights there is a shortfall in the
medicine margins paid to cover the supply chain.
"The analysis showed a shortfall of $14 million
annually that needs to be addressed to ensure the critical roles
pharmacists and wholesalers play in the delivery of healthcare to
New Zealand patients is maintained at the current high levels," he
"ProPharma believes that this report highlights
there are opportunities to continue to improve supply chain
Wholesalers and pharmacists will need to invest
significant capital to ensure the supply chain remains fit for
purpose, but margin funding must be able to provide a return on
investment to justify expenditure.
"We also recognise that a higher level of information
sharing in the supply chain will benefit all participants and, in
particular, community pharmacies," he says.
Canterbury and Nelson-Marlborough DHBs say, in
a statement, they consider Grant Thornton's report an important
contribution to the conversation about optimising the
pharmaceutical supply chain, building on two earlier reports by
Deloitte New Zealand and Sapere Research Group.
Community Pharmacy Services director Rachel Mackay
says the report raises challenges for all parties involved in the
CPSA to work towards, although she thinks some of the issues raised
will take longer than until next July, when the next CPSA is
released, to fix.
It is too early to say what impact the report will
have on negotiations and whether the next CPSA will be able to
implement any of its recommendations, she says.