Pharmacy funding proposal might not breach laws

Southland health providers will be consulted over a proposal to distribute drug funding to community pharmacies through bulk-funding of primary health organisations.

This follows Commerce Commission comments on the proposal and legal advice to the Otago and Southland district health boards which indicates it might not breach price-fixing and anti-competitive laws, although the matter is not straight-forward.

Earlier this year, the boards were asked to support a proposal which was similar but which would have bulk-funded the pharmacies.

Management was concerned funding through the PHOs could be seen as anti-competitive behaviour under the Commerce Act.

Otago District Health Board chairman Richard Thomson considered the pharmacy option the second-best one and asked for Commerce Commission comments on the PHO model.

Both boards have been considering pharmacy funding in a bid to save money by reducing wastage, including over-prescribing and unnecessary prescribing and dispensing.

The idea is that through incentive payments, pharmacies and PHOs and general practices would be encouraged to work together to make drug spending more efficient.

To date, opinions expressed on the plan have not been favourable.

The amount of money saved would depend on how many PHOs and pharmacies were involved, with participation optional.

The Otago board is expected to consider the legal opinion at its October meeting.

After consideration last week, the Southland board decided to proceed with consultation with community health providers, which will close in late November.

In its letter, the Commerce Commission said PHOs should be advised not to negotiate collectively with community pharmacies but individually with each pharmacy.

Legal advice by Anderson Lloyd partner Lesley Brook stated that it seemed to be possible, given the comments of the Commerce Commission, for the board to contract with a PHO to provide pharmacy services, but no representatives of any pharmacy practice would be able to take part in the contracting process.

In contracting with pharmacists, the PHO would need to avoid the situation where two or more pharmacists came to an arrangement between themselves about contracting with the PHO.

"This has to be possible in theory. The risk of it not "holding true" in practice is not a risk over which the DHB has any real influence, as it depends on the actual behaviour of PHOs and pharmacists individually and collectively."


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