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February 2002 issue Pharmacy Today magazine


Health providers with standard contracts may well be watching pharmacy with great interest as the profession awaits the Commerce Commission's decision on the fate of the Pharmacy services Contract.

The Commerce Commission has advised the Pharmacy Guild the standard national contract may breach the Commerce Act's price-fixing and anti-competition regulations.Director of the commission's business competition branch, Geoff Thorn, doesn't see the application as a test case, but suspects health providers with standard contracts will be waiting for the outcome with interest.

"When you have the issue of groups of competitors agreeing on prices to provide services, then you're entering the realm of anti-competitive behaviour."The Act does allow for authorisation of potential anti-competitive business practices, but only if the public benefit is greater than the detriment to competition.

A draft determination will be completed in the next month and submissions will then be sought. A conference of interested parties will be held in early May and a final decision is expected four to six weeks later.

As Pharmacy Today went to press, the Ministry of Health was still waiting on the 21 DHBs to ratify the contract.
While the Commerce Commission decides the fate of the Pharmacy Services Contract, the Pharmacy Guild has released some of the details.

Proposed contract:

  • A baseline dispensing fee structure has been finalised for eight quarters, from July 1, 2001 to June 30, 2003.
  • Complex services will be remunerated at a higher rate, using multiplier factors on baseline fees, to ensure regular update.
  • The Ministry of Health and District Health Boards (DHBs) will manage prescription volume risk.
  • The contract will cover all community pharmacies, although each DHB may include additional local variations as appropriate.
  • Changes in the existing fee arrangement start from January 1, 2002 (quarter 3), with a new baseline fee set at $5.07. The fees increase each quarter to:
    • $5.11 on March 1
    • $5.16 on July 1
    • $5.19 on October 1
    • $5.21 on January 1, 2003
    • $5.22 on March 1, 2003.
  • Complex service fee multipliers will include methadone dispensing and advice services, which have been given a 1.3 multiplier factor. Graseby pump dispensing and advice services have a 3.0 multiplier on baseline fees.
  • Hospital medicine dispensing has been assigned multiplier factors of 1.5 and 2 for group D and C medicines, respectively.
  • Contribution towards procurement and stockholding has been set at 4% and 5% on medicines and subsidised extemporaneously compounded product (ECP) prescription components with a Pharmaceutical Schedule pack price of less than $150, and $150 and over, respectively.
  • The contract envisages a consistent national policy for management of hospital medicines, including those pharmacies currently under the Southern Contract.
  • Funding for individual Pharmaceutical Review Services (PRS) will be set at $350,000 a year, and the individual fee will be $160.00.
  • Allocation of DHB funds will be on a historical basis for the first year and on a population basis in 2002/2003, if DHBs are funded this way.
  • Administrative and efficiency issues have been proposed in the new contract, but have yet to be agreed on. These include requirements for prescriber endorsement on prescriptions written for sole supply or discontinued medicines being regarded as having been written generically under the contract proposals. Pharmacist endorsements will be acceptable without prescriber endorsement and pharmacists will be held accountable for any endorsements.
  • The Pharmacy Guild proposes holding 21 head contracts for its members in each DHB region, and putting in place back-to-back contract arrangements. This has not yet been agreed on, and requires further discussion with DHBs.
  • A transitional contract variation was proposed for the existing Triple region and Southern contracts, but might not now occur, given the delay in DHB sign-off.

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