Commission Issues Warning Over ‘No Discounting’ Clause
Commission Issues Warning Over ‘No Discounting’ Clause
Issued 13 February
2014
The Commerce Commission has warned
all New Zealand District Health Boards (DHBs) and pharmacies
nationwide that “no discounting” clauses in the 2012
Community Pharmacy Services Agreement (CPSA) are likely to
have breached s 27 of the Commerce Act 1986.
The
Pharmacy Guild has also been warned for its role in
advocating for the inclusion of the clauses in the
CPSA.
The CPSA is a standard form agreement between
each DHB and each community pharmacy for the provision of
pharmaceutical services to the public. The Commission
believes that two of the clauses in the 2012 agreement had
the effect of prohibiting pharmacies from waiving, or
discounting, the $5 pharmaceutical co-payment paid by
patients for the dispensing of each prescription
item.
Commerce Commission Chairman Dr Mark Berry said,
“On receiving notice of our investigation, the DHBs took
action and removed the restrictive clause from the
agreements at the start of 2013. This meant that a warning
letter was an appropriate response.”
Dr Berry said
that removing this clause was also an excellent outcome for
consumers who stand to benefit from pharmacies being able to
compete on prescription charges.
“Once the no
discounting clause was removed, two pharmacies in lower
socio-economic areas in Christchurch and Auckland advertised
discounting again and noticed an increase in the number of
prescriptions being dispensed.”
“The outcome of
this investigation sends a number of important messages to
the parties involved. Government agencies must consider the
effects on competition when entering into procurement
contracts,” Dr Berry said.
“Pharmacies and other
health providers must also remember that they are in
competition with each other despite the collegial nature of
their professions. And professional associations, such as
the Guild, are also subject to the Act and need to give
attention to complying with the competition laws,” said Dr
Berry.
A copy of the warning letter to DHBs,
pharmacies and the Pharmacy Guild can be viewed athttp://www.comcom.govt.nz/business-competition/competition-enforcement-outcomes/commerce-act-enforcement-actions-register/
Background
Community pharmacy
services are funded by the Government via a standard
services agreement, the CPSA. The CPSA is entered into by
each DHB and service provider (ie, pharmacy) and typically
re-negotiated every three years. The CPSA covers the
provision and funding of core pharmacy services, as well as
certain other specified pharmacy services. The 2012 CPSA,
which came into effect on 1 July 2012, overhauls the way
pharmacists are paid by DHBs and is being phased in over a
two year transition period.
The 2012 CPSA caps
nationwide payments to pharmacists at $370.5m per year.
Under the 2012 CPSA, pharmacists will be paid by the
government via DHBs for services provided rather than for
the number of items
dispensed.