The King Review – WHAT LIES BENEATH!

The King Review panel has currently reached an interim report stage that discloses a range of options which form up into four major groupings – cosmetic positive, cosmetic negative, industry alternatives and future government policy direction (documented and undocumented).
Overlaps occur between these groupings and perspectives will obviously vary depending on their interest segment.

My perspective is from an individual pharmacist perspective.
My belief is that as a product, the PBS has reached the end of its life-cycle.
Or in other words the PBS is fully commoditised, homogenised and in a state of profitless prosperity – not a blueprint for pharmacy stability or profitability.
Judging from the comments made by Professor Stephen King pharmacy is liable to stay in the above state at a lower level of existence.

Where endpoints have not been fully reached, the King Review will fill the gaps to pharmacy disadvantage.

A product endpoint cycle can be “stretched” through modification but nothing can avoid its pre-ordained demise.

The first group of Review recommendations ( the Cosmetic Positive) include the recommendation to remove the $1 discount (very bad government policy), the recommendation to automate the Safety Net process (has been feasible for years),  a two-part dispensing fee, a cap on prices for high-cost medicines,  funding for evidence-based services, and the recommendation that consumers get appropriate medication information.
All these particular recommendation items can stretch the PBS lifecycle, the most important being “appropriate” medication information and funding for evidence-based services.
Appropriate medication information is actually a component of an emerging segment of a health service defined as “Health Literacy” which is all about the ability of a patient to research and acquire knowledge of illness management, wellness management and overall health maintenance.
Health researchers have uncovered large pockets of chronic illness that become embedded in low socioeconomic populations that also correlate with low levels of health literacy.
With the initial introduction of the PBS came a redirection of health consumer flow.
Free GP service combined with free PBS prescriptions caused the original consumer flow of the pharmacist being the first port of call followed by a referral to a GP or the prescribing of a pharmaceutical product (mostly compounded using primary ingredients – rarely a manufactured patented medicine).
During this original process the pharmacist mentored the patient and helped patients to achieve higher health literacy levels focussed on their own health conditions.
The change in this flow created an ever lowering of opportunity to improve health literacy levels, and an increase in manufactured doctor prescribed medicines and government policy always focussed on lower-priced solutions.
So we saw simple solutions like compounded antacids like calcium and magnesium carbonate mixtures (also doubling as mineral supplements) replaced by Mylanta which disrupted digestive processes and created the potential for aluminium toxicity and higher population levels of Alzheimer’s Disease.
So the blindside of government in its drive to reduce costs, actually increased costs massively by generating drug-induced illnesses and created much higher costs as a result.
And the King Review is about to repeat this same process through not providing proper solutions and positive input for sound government policy.
Consumer information PBS style relates only to the drug information basically provided by drug manufacturers.
It is only a segment of “health literacy” which is prized by patients and seen by researchers investigating its effects on illness, as providing major health solutions and benefit to government by allowing the patient to self-manage with a little mentoring help from their pharmacists.
Appropriate medication information as mentioned in the King Review need to be properly defined as information that pertains to lifestyle, nutrition and diet, supplements and complementary medicines, and PBS medicines.
The broadest landscape of practical information that can be appropriately absorbed by patients to become internalised as practical knowledge applications.
It could also form the basis of a fully revitalised PBS system that creates win-win situations all-round for patients, government and pharmacist.
Note that the original model for Health Literacy service provided by a pharmacist pre-PBS, was paid for in the mark-up of a prescribed product.
Government, by paying for patient Health Literacy consultations can simultaneously limit their investment for the maximum return, part of which would automatically include a reduction in doctor and other health professional visits.
It would also allow pharmacists to deal with the PBS in a commercial sense as a “loss leader” (counter-balanced by health literacy consultation payments) and that more fully aligns with government thinking in their policy views.

The Cosmetic Negative group of recommendations include minimum levels of products and services by all pharmacies (homogenisation), Community Pharmacies being regarded as agents of government funded to deliver PBS medicines to consumes (overtones of civil conscription and ownership of pharmacy dispensing practices, complementary medicine internal display recommendations (intrusion into non PBS marketing activities), remuneration for dispensing as being business model neutral (homogenisation), flat PBS dispensing fees, scrapping of price variation, a cap on price of high cost medicines

All the above intrude into the creative and innovation processes of pharmacists that have always driven the value components in pharmacy.
Note how all the “experts” proclaim superior knowledge regarding pharmacy when pharmacists themselves are the only true knowledge-holders for the profession.
Non-pharmacists, as advisers to government, simply create political expedients that tend to impede beneficial improvements for the profession, because they do not have the deep understanding required.
However they do see the value of pharmacy particularly if they can graft that value to one of their own specific business models they fully own and control.
It is no coincidence that everybody wants to “own” pharmacy and believe they can provide cheaper and better pharmacy services.
The truth is that they can only perform variations of service segments depending on their financial resources.
Fewer still provide their “variations” at an overall, more economic price to consumers.

The next identified segment of “industry alternatives” really represents disruptors that may or may not provide benefit for pharmacists.
These recommendations include harmonisation of legislation across all jurisdictions, changes to CSO supply, future composition of Community Pharmacy Agreement negotiators.
The most important of these is the composition of the composition of the Community Agreement negotiators to include the Consumer Health Forum which is an artificial construct for a consumer organisation that doesn’t directly represent consumers.
It is also a targeted group that Skeptics Australia wish to dominate. They seem to front for global pharma’s and thus is not a desirable organisation to be in a position to directly influence pharmacy policy.
They are already a component of the King Review and that does not give me any comfort, confidence or trust as to the integrity of the Review.
It has already compromised itself by using consultants associated with other lobby organisations directly involved with influencing policies of control.

The fourth grouping involves future government policy, some of which is being developed but not officially available to the Review, so I will attempt to fill in the gaps.
Primary matters for the Review to consider were the Location Rules and the Ownership Rules.

I have access to i2P research that points to both Location Rules and Ownership Rules disappearing within a decade.
The primary motivation is the cost of managing the PBS due to the aging population demographic steadily increasing.
It is this demographic that consumes the greater number of drugs, particularly in the last seven years before death.
Being medication intensive it is obviously of interest to global pharma’s and they have an intense political lobby system paid by the marketing budget in the current version of their business model.

Many senior decision-makers in the Australian political system (both sides) have succumbed and carry on daily activities that are a clear conflict of interest.
These activities are adverse to a range of patients and the fact that they can be performed quite openly is testament as to how deeply the health system has become infected.

Government has been influenced to privatise Medicare and the PBS.
The outcry that occurred when the privatisation process began temporarily delayed this process, so the policy changed to one where overseas equivalents could be gradually introduced.
This change involves the gradual introduction of private equivalents called Patient Benefit Managers (PBM’s) and they manage best prices for private health services and drugs.
Thus, Medicare and PBS can be sustained but slowly stripped of resources, so that eventually PBM’s are seen to be more attractive.
Thus Australia ends up with a global Pharma-controlled health system identical to the US – going from one of the world’s best health systems to one of the worst, as exemplified already in the US.
To achieve this transition at the cheapest price, government has to own Australia’s dispensing business in total.
Currently it virtually controls Australia’s dispensing system through the PBS but ownership is through a public/private partnership.
In a video presentation discussing the interim report, Professor King states that the review panel believes community pharmacies are agents of government and should not be guaranteed undue profits for dispensing PBS medicines.
And that is when the suggestion of a flat dispensing fee comes in.

Warning bells should be ringing loudly at this point!
Pharmacies are not agents of government because that implies government already owns the dispensing practices in Australia.
It also implies that civil conscription is the order of the day!
And if flat fees become a component of an agency agreement, they will devalue over time as they are never appropriately reviewed in a timely fashion.

Professor King then delivers a knockout opinion:
“Appropriate remuneration for community pharmacy does not mean that any community pharmacy regardless of its efficiency of operations should make a profit,” he says.

“The remuneration for dispensing paid by government and consumer co-payments to community pharmacy should be based on the costs of dispensing for a best-practice pharmacy.”

What planet is this person from?

It is time that the PGA gets rid of any conflict-of-interest relationships with government and start representing the best interests of its members, pronto!

PGA Members must ensure that their executive not sign any agreement that could legally purport to be an agency agreement.
The following is an outline of what an agency agreement should embrace.
Government is not a trusted principal and would always hold the balance of power

The law of agency is an area of commercial law dealing with a set of contractualquasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, that is authorized to act on behalf of another (called the principal) to create legal relations with a third party.
Succinctly, it may be referred to as the equal relationship between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work under his or her control and on his or her behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him or her and third parties into contractual relationship.
This branch of law separates and regulates the relationships between:

* agents and principals (internal relationship), known as the principal-agent relationship;

* agents and the third parties with whom they deal on their principals’ behalf (external relationship); and

* principals and the third parties when the agents deal.

Whatever your agency remuneration model, there are some [essential] guiding principles that should underpin every remuneration agreement.  Ignoring them, or cutting corners in your approach to defining your remuneration contract can ultimately give way to frustration, disagreement and / or dissatisfaction down the road.

So whether you’re defining a new agency remuneration package from scratch, or redefining an incumbent remuneration contract, ensure you’re operating with the following principles in mind:

  1. Trust

More than anything you want to construct and negotiate your agency remuneration agreements from a position of trust.  If you don’t fundamentally trust your agency of choice, you should be asking deeper questions about why you chose them in the first place.  Trust you’ve made the right choice and ensure that trust is reflected in your approach and discussions – you’ll get further faster.
So remember, the King Review has already breached trust by entering into a conflict of interest arrangement with consultants that already have a relationship with parties involved in submissions to the Review.

  1. Fair for all

So we’re all clear – fair doesn’t mean “lowest price”.  Approaching agency remuneration solely from the perspective of getting the lowest price is a sure way to getting your agency relationship off on the wrong foot.  “Fair” is about paying a reasonable market price for the services you’ve contracted, taking into account your scope of work and allowing the agency to make a fair and reasonable profit for the work they do.
The King Review is already proposing unreasonable forms of remuneration that do not make commercial sense.

  1. Straightforward

Any agency remuneration agreement should be straightforward.  Whether you’re working on a fixed or variable fee structure, commission, time and materials, and / or a pay by results model, your goal should be to create a remuneration model that’s straightforward and easy to understand.  Over complicating an agreement leaves room for misunderstanding and misinterpretation and potentially lengthy meetings to clarify what you’d originally intended.
While a few straightforward benefits are proposed by King they are already a result of very bad policy.
Hidden in the bulk of the Interim Review Report is  mass of complexity and disadvantage that forms part of government secret future policy of selling out to PBM’s and global pharma’s.

  1. Easy to manage

In just the same way as your remuneration agreement needs to be straightforward, it also needs to be easy to implement, monitor and manage.  Chances are, if it’s going to take time to manage, it’s probably not as straightforward as it could be and you should consider simplifying.
Note: has any dealing with government ever been simple and straightforward since the inception of PBS?

  1. Flexible

Any agency agreement needs to be flexible enough to accommodate changes without having to go back to the drawing board every time you want to adjust something.  One of the easiest ways to do this is to split out fundamental remuneration terms, pay by results terms and other business terms.  Chances are that while you may want to review one of these later – you likely won’t want to review them all.
But this has not been pharmacy’s experience and has led to annual CPA agreements that are complex and ever-changing.

  1. Long-term view

While you want to build in a measure of flexibility, you also want to take a long-term view when creating an agency remuneration agreement, for the simple reason you don’t want to re-architect a new agreement every twelve months or so.  A long-term view also underscores the trust and confidence you’re placing in your agency partner.
This should be read in context with previous comments.

  1. Clearly defined success metrics

When contemplating or including a pay by results (PBR) model within your remuneration agreement, it’s critically important all parties agree on the success metrics that will trigger – or withhold – any remuneration subject to results.
Sounds obvious, but if the definition of success or specific, measurable results aren’t clearly defined, the PBR model isn’t worth the paper it’s written on.
This comment refers to the existing dispensing model and even more so for any new evidence-based service introduction.
But as we are not really considering becoming an agent for any professional activities it is not really a consideration.

  1. Defined responsibilities

This is particularly important when you have a pay by results (PBR) component to your remuneration agreement and when you have multiple agencies on your roster.  Clearly defining boundaries and responsibilities ensures clarity of purpose and task and keeps your agencies focused, and remuneration in-line with everyone’s expectations.
And As we all know, government is notorious at changing boundaries.

  1. In writing

While trust can take you so far, this is one instance where your agreement needs to be confirmed in writing.  If nothing else, you want to ensure your handshake can withstand a changeover in resources and leadership on both sides should it happen (and it does!)

  1. Senior signatures

Finally, you should ensure you have the most senior signatures on whatever agreement you finally paper.  Completing a negotiation without the blessing of all respective parties can potentially undo everything you’ve spent time negotiating.
The above are fundamental basic principles in every agency commercial agency negotiation and remuneration agreement.
It is published for guidance only to illustrate how impractical such an approach would be for pharmacy to work under.
As repeated all through this article, run away from any agency agreement with government, no matter how it is “sweetened”.

The King Review interim report is indeed a very shabby document.


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