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8 NEWS IN FOCUS PHARMACY ‘RISK SHARE’ THE ENVY OF MANUFACTURERS By Paul Cross, Publisher of BioPharmaDispatch. M edicine manufacturers are used to the term ‘risk share’ as a euphemism for one sided deeds of agreement governing the reimbursement of new medicines on the PBS. These deeds, which began as price- volume agreements in the 1990s, have evolved to become contracts that now provide the Australian government with almost absolute certainty over its spending on a medicine. In other words, there is no real ‘risk’ to the government: a manufacturer effectively carries the entire risk if utilisation or spending on a reimbursed medicine exceeds specified caps. These ‘risk-share agreements’ would be better described as ‘agreements with penalty clauses’, with the penalty applying to the manufacturer. The recently signed 7CPA includes what has been described as a ‘risk- share’ clause. It is similar but significantly different to a ‘risk-share’ clause included in the recently expired 6CPA: it’s much better for pharmacy. The 7CPA ‘risk share’ would be unrecognisable to any medicine manufacturer. It’s an ‘agreement with a penalty clause’. Yet, in practical terms, the government carries the entire risk of the penalty. Community Pharmacy Agreements have often been underspent. Prescription volumes have been lower than forecast, with the government regularly reclaiming these underspends as part of its budget process. However, in the 7CPA, the Pharmacy Guild has secured what amounts to a ‘minimum spend’ commitment with an upward adjustment to the administration, handling and infrastructure (AHI) fee if prescription volume falls below a specified number. For the first two and a half years of the agreement, community pharmacy will be entirely compensated for the remuneration impact of a lower than forecast prescription volume. Any adjustment in this period is based on a straightforward formula. The first ‘assessment’ period for any adjustment is the six months from 1 July to 31 December 2020. The 7CPA has estimated 109.5 million subsidised PBS prescriptions for this period. Yet what if the actual volume is lower – maybe four per cent lower (105 million)? Assuming there is no significant shift of volume from subsidised to unsubsidised (under co-payment) prescriptions, which the 7CPA allows for, the tier one AHI fee (currently $4.28) paid to community pharmacy per prescription will increase by around $0.17. This is in addition to annual indexation and represents a one-year budget impact for the government of around $50 million. What if the actual volume is four per cent higher? Absolutely nothing happens. Any downward adjustment in the dispensing fee is not calculated until the actual prescription volume is five per cent higher than forecast, and it’s calculated based only on the growth above five per cent. In effect, the actual prescription volume had to increase by around 20 million (forecast increase plus actual increase) before any impact on the government’s renumeration to community pharmacy in the two and a half years of the 7CPA: a level of growth that is virtually unprecedented in the past 20 years. RETAIL PHARMACY • AUG 2020