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September 2002 issue Pharmacy Today magazine


A negotiated pharmacy contract appears to be on the verge of oblivion as district health boards attempt to solve their budget woes. Any pharmacy services arrangement looks likely to be imposed on pharmacy by DHBs through a section 88 notice of the New Zealand Public Health and Disability Act.

According to Waitemata DHB public documents, a pharmacy service process will not be in place until April 2003 at the earliest. The national contract was originally scheduled for implementation on July 1, 2001. More recently, the Ministry of Health has been working towards a start date of October 1 this year, with HealthPAC preparing its claims systems based on the draft contract's terms.

A section 88 notice allows the DHBs to dictate the terms of the supply of pharmacy services without being obliged to take into account any consultation. A section 88 notice will need to be nationally consistent and approved by the Minister of Health. Once a pharmacy accepts payment for a service under the notice, it is deemed to have accepted its terms. Those terms can be "enforced" by DHBs.


Pharmacy Guild president Richard Heslop describes the section 88 notice as a "draconian" method of doing business.

"On the eve of a new relationship between DHBs and pharmacists, they've chosen to enforce rather than negotiate using a largely dictatorial provision." Pharmacy is being used as a lever by DHBs to pry additional funding from the ministry, he says.

Pharmacy Today understands District Health Boards New Zealand (DHBNZ), which has been guiding boards through the pharmacy services process, has agreed to use the draft contract, including pricing, as the basis of a section 88 notice.

But sources within the public health sector say some DHBs want the draft contract re-written to enable them to reign in burgeoning community pharmacy costs.
Pharmacy Guild chief executive Murray Burns says using the draft contract would mean a fairly painless and speedy transition to an agreement between pharmacy and DHBs.

Attempts to redraft conditions of service will be a costly and time consuming process, he says. The ministry has warned DHBNZ that boards will carry the costs of converting the draft contract into a section 88 notice and for settling past claims under the current contract.
DHBNZ declined to comment.

Cash strapped and silent

Since pharmacy service funding became a DHB responsibility, boards have argued that their 2002/2003 budgets have yet to be finalised and costs are likely to outstrip funding. This is compounded by the expiry of a national risk-share arrangement between DHBs and the ministry.

In an e-mailed response to questions, the ministry's deputy director-general for DHB funding and planning Gordon Davies says DHB budgets for primary care contracts have yet to be finalised and finances are the likely reason three DHBs declined to sign-off the draft contract.

Waitemata DHB refused to ratify the contract, which it deemed "not financially sustainable".

It is still wrangling with the ministry over its projected 2002/2003 deficit of $12 million and expects deficits for the following two years. The board predicts spending on pharmaceuticals to exceed funding by $6 million for 2002/2003. Its funding general manager Wendy Reid didn't respond to calls requesting information.

Otago DHB has held much of its discussion on the contract in committee away from the public scrutiny. But public documents show the board was anticipating issuing a section 88 notice as soon as the guild withdrew its Commerce Commission application.

The board's funding general manager did not respond to calls. Former Pharmacy Guild executive and MidCentral DHB funding general manager Sue Peacock, who is apparently helping DHBs with pharmacy agreement issues, also failed to respond to questions.

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