The Australian Medical Association Limited and state AMA entities comply with the Privacy Act 1988. Please refer to the AMA Privacy Policy to understand our commitment to you and information on how we store and protect your data.



18 Mar 2015

Almost one in five community pharmacies raked in more than $1 million from taxpayers in dispensing fees, incentive payments and other entitlements last financial year, a Commonwealth Auditor-General report has shown.

In a rare glimpse into the public funding arrangements for retail chemists under the multi-billion dollar Community Pharmacy Agreement, the Auditor-General found that 941 of the nation’s 5371 retail pharmacies received more than $1 million in Government payments in 2013-14, while a further 500 received between $800,000 and a $1 million.

On average, pharmacies received $12 from the Government for every prescription they filled in 2013-14.

In all, the Auditor-General found that of the $15.4 billion going to pharmacies under the current Community Pharmacy Agreement, $11.6 billion comes from the Commonwealth in remuneration payments, $2.2 billion comes from the pockets of patients in direct co-payments, $950 million is disbursed from a Government fund for medicine wholesalers and $663 million is provided for professional development programs.

Worryingly, given the scale of the largesse, the Auditor-General found significant flaws in the Health Department’s administration of the scheme, including an inability to accurately track medicine costs and pharmacy remuneration.

The Auditor-General sought to fill this gap by using Department of Human Services data to calculate the value of Pharmaceutical Benefit Scheme and Repatriation Schedule of Pharmaceutical Benefit prescriptions.

It found that, for 2013-14, the “actual cost of prescriptions was $459 million higher than the sum of the cost components as derived by Health”.

“Health has been unable to identify actual expenditure on the components of pharmacy remuneration for a growing number of prescriptions subsidised by the Australian Government,” the Auditor-General said.

Among the findings, the Auditor-General reported that the Premium Free Dispensing Incentive, introduced to encourage greater uptake of generic medicines by compensating pharmacists for dispensing drugs that do not have the premium of branded medicines, is being claimed regardless of whether or not a substitute was provided. The incentive, worth $1.50 per prescription, is automatically paid on 4500 (83 per cent) of PBS branded items.

These and other findings have fuelled accusations that tight restrictions on pharmacy ownership and location have undermined competition in the industry and created outsized profits for a select few at enormous cost to patients and taxpayers, with some calling for an inquiry into the sector.

Under current laws, pharmacies must be owned by a licensed pharmacist, and new pharmacies are not allowed to open within 1.5 kilometres of an existing outlet. The rules have effectively blocked other retailers, particularly the major supermarket chains, from entering the industry.

Pharmacy ownership is tightly held – of around 27,000 registered pharmacists, fewer than 4000 own stores.

But the Pharmacy Guild of Australia has vehemently rejected what it said were attempts to portray pharmacies as “millionaire factories”, instead insisting that many are instead under significant financial pressure.

“It is offensive and unacceptable that this false impression of profiteering should be put about at a time when the Guild is negotiating a new five-year Community Pharmacy Agreement with the Government to ensure local pharmacies remain viable,” the Guild said. “Community pharmacies are under stress, and this kind of vicious, prejudiced and ill-informed journalism is reprehensible.”

Adrian Rollins



Published: 18 Mar 2015