New legislation, which came into effect on 1 January 2016, allowing pharmacists to discount prescription medication on the Pharmaceutical Benefits Scheme (PBS) has caused a stir in the competitive prescription medication market in Australia.
Pharmacists at their discretion may now discount the PBS patient co-payment by a maximum of $1 per PBS supply.
As you are likely aware, patients who access medication via the PBS currently pay a co-payment of $6.20 (for concession cardholders) or up to $38.30 (for general patients) towards the cost of each PBS medicine, with the Australian Government paying any remaining cost.
The safety net thresholds are currently $372.00 for concession cardholders and $1475.70 for general patients. Those who spend more than their safety net amount on co-payments in any given year receive further prescriptions for that year for free (for concession cardholders) or for the concessional co-payment of $6.20 (for general patients).
Dollar discount: when it applies
Generally the $1 discount is applicable to all medications listed on the PBS unless specifically excluded by the relevant legislation.
Listed below are some specific circumstances where the discount may (or may not) apply:
- As you would be aware, a Regulation 25 supply occurs where the supplier believes that immediate supply is necessary. Where the supply of a PBS medicine is not subject to ‘early supply rules’, and the supply occurs at an interval that would be classified as early supply, the supply can be made on the PBS with the $1 discount if supplied under Regulation 25. The price paid by the patients will count towards the patient’s safety net threshold and the approved supplier is able to discount the PBS patient co-payment.
- The $1 discount is allowed on prescriptions endorsed with Regulation 24 or ‘hardship conditions apply’. A discount may be applied to each patient co-payment for a prescription supplied under Regulation 24 (where repeats are supplied at the same time as the original prescription).
- The $1 discount of the PBS patient co-payment is allowed for workers compensation prescriptions.
- The $1 discount is not available for patients who obtain an early repeat supply within less than a specific period (the precise period is subject to the specific medication being prescribed). The safety net cap is also not available for those obtaining an early repeat supply.
A pharmacy may advertise that it provides discounts to the patients’ co-payment. However, any advertising must comply with the relevant advertising requirements, including those contained within the National Health Act 1953 and the Therapeutic Goods Act 1989. Please contact us if you would like advice on the advertising of the $1 discount.
The policy thinking
The Department of Health suggests that the $1 discount will provide a net benefit to those obtaining PBS medications. The amendment is designed to:
- foster greater competition between pharmacies and drive value for customers;
- support increased substitution of generic medicines;
- provide immediate benefits to patients through the reduction of out of pocket costs;
- allow concessional patients access to the discounting benefits which are already provided to many general patients;
- reduce the cost that the average concessional patient accessing PBS medications must bear. The average concession cardholder uses 17 scripts per year and most do not reach their safety net;
- benefit high volume users with upfront lower costs. High volume users will still receive medicines for free after reaching the safety net. While these measures will increase the length of time taken for concessional patients to reach their safety net threshold for the year, the safety net threshold remains the same; and
- reduce the cost to the average general patient who obtains medication costing more than $38.30.
A contentious issue
There has been resistance to the $1 discount regime.
The Pharmacy Guild of Australia has stated that it supports the wider PBS Package “with the exception of the discounted co-payment.”
Professor Henry Ergas and Professor Pincus of Green Square Associates, engaged by the Pharmacy Guild of Australia to undertake economic analysis, predict that pharmacists will incur a substantial loss in revenue due to the discount. Professors Ergas and Pincus suggest that over 200 pharmacies across Australia will be financially challenged with losses in gross margins.
The Pharmaceutical Society of Australia suggests that the increase in affordability is unlikely to be felt across the board by all patients accessing PBS medication. Moreover, proposed increases in the patient co-payment will likely negate any discount.
The Hon Sussan Ley MP, Minister for Health, suggested that “consumers should also be aware that the PBS safety net threshold is a dollar amount … not a set number of scripts.” Effectively, the dollar amount required to be contributed by a patient to reach the safety net threshold does not change with the discounting. Rather, a script will cost less to fill therefore taking more scripts to reach the safety net threshold. Further, if a patient fills less scripts in a given year than necessary to reach the threshold, then the overall cost to the patient will be less per script.
Pharmacists should be aware that the requirement to report the actual amount paid by patients will continue.
If a pharmacy discounts a patient’s co-payment, the following data must be included in the pharmacies’ PBS claim:
- the actual price paid by the patient; and
- the actual amount of the discount applied to the patient’s co-payment.
If a pharmacy does not discount a patient’s co-payment, the following data must be included in the pharmacies’ PBS claim:
- the actual price paid by the patient; and
- the value of the discount to the patients’ co-payment as “zero” or leave the field as blank.
When considering whether you should pass the discount on to your PBS patients, it is important to consider the value proposition of the pharmacy concerned.
In our view, the crucial question is whether the pharmacy competes on price or whether it differentiates itself by providing a broader offering of services including other healthcare and consultation services. If applied, discounts may be passed on in part, not at all, or even on selected prescriptions. The passing on of the discount is an important commercial consideration for the pharmacy.
Cowell Clarke can provide you with specific, tailored information to assist you in making the right decision for your pharmacy.
 National Health Act 1953, s 99G; PBS website, ‘2016 PBS co-payment and safety net amounts’ http://www.pbs.gov.au/info/news/2016/01/2016-pbs-co-payment-safety-net-amounts.
 National Health (Pharmaceutical Benefits) Regulations 1960, part 5, reg 25.
 National Health (Pharmaceutical Benefits) Regulations 1960, part 5, reg 24.
 Department of Health, ‘Discounting the PBS Patient Co-Payment and new data requirements’, Pharmaceutical Benefits Scheme.
 National Health Act 1953, s 84AAA (3); Department of Health, ‘Discounting the PBS Patient Co-Payment and new data requirements’, Pharmaceutical Benefits Scheme.
 National Health Amendment (Pharmaceutical Benefits) Bill 2015, Second Reading, 27 May 2015, Sussan Ley MP, p 4709.
 Pharmacy Guild of Australia, ‘Sixth Community Pharmacy Agreement delivers for patients’, 27 May 2015.
 Green Square, ‘PBS co-payment discount – a cost benefit appraisal’, Report for the Pharmacy Guild of Australia, 15 December 2015.
 Pharmaceutical Society of Australia, Consumer impact of PBS savings measures, May 2015.