A new review

Rr 2018 Jun12

The Department of Health has announced a CSO review that will look at exclusive supply arrangements, among other things


The review into the Community Service Obligation (CSO) for pharmaceutical wholesalers, which was introduced with the 4CPA in July 2006, will look into whether the CSO Funding Pool obligations continue to be appropriate.

According to the Department of Health, “the aim of the CSO Funding Pool is to ensure there are arrangements in place for all Australians to have access to the full range of PBS medicines, via their community pharmacy, regardless of where they live and usually within 24 hours.”

The CSO Funding Pool financially supports pharmaceutical wholesalers to supply the full range of PBS medicines to pharmacies across Australia, regardless of pharmacy location and the relative cost of supply.

Department of Health acting deputy secretary Penny Shakespeare says the review will look at the exclusive direct supply arrangements.

She told delegates at the PharmaDispatch conference held in Sydney on Monday that there has been a lot of discussion about the topic recently, and the government will be reviewing the evidence on the matter.

“The government needs to make a decision based on the evidence,” said Ms Shakespeare.

“That’s why we have reviews. This is not the only part of government where we have stakeholders that don’t agree with each other,” she said, referring to the disagreement between Medicines Australia and the Pharmacy Guild of Australia over the exclusive supply arrangements.

“We’re talking often about very complex medicines, and manufacturers are often best placed about how they should get to where they need to go, and in a cost-effective way,” Medicines Australia chair Wes Cook told delegates.

“Medicines Australia think manufacturers should be able to choose, each member company.

“The [CSO] review is welcome to look at the evidence. The different models and variations on that should tested and looked at.

“The supply chain is a competitive aspect of our companies. The view at the moment is each company has a legal right to choose how they distribute, I’m not saying anything’s impossible but that competition underlies everything that we do.”

Fellow panellist National President of the Pharmacy Guild George Tambassis said he did not agree that manufacturers should be able to choose how to distribute their medicines.

“When the government and the taxpayer puts up $2.77 billion for the supply chain… to make sure medicines come quickly and safely to pharmacies, you’ve got to have competition in the marketplace.


“The Guild is 100% against exclusive supply,” said Mr Tambassis.


“It should be a condition of PBS medicines to play in a competitive market. The pharmacists and supply chain want to look after the medicines but you can’t have exclusive direct supply in a country like this.

“We’re all for competition, that’s why our position is against exclusive direct supply.”

Mr Tambassis called on the government to use the upcoming review to make a decision – “the sooner the better”.

“We are asking the government to make a decision on this issue; it has come to a head. It’s good for the patients to know exactly what’s going on, we can run our businesses with certainty, the companies know what’s going on. With the review, the decision has to be in the government’s hands.”

He told the AJP this month that the exclusive supply arrangements were causing “heaps” of problems.

“They’re all patient-centred problems because people have problems getting some of those medicines when there’s a hiccup.”

Mr Tambassis explained that while such “hiccups” happen with non-exclusive direct supply as well, pharmacists have got “at least three other options up our sleeve there and then on a real-time basis. Because it only takes a second to go to another wholesaler for solving it.”

He says what pharmacy needs to do is get government intervention, and “stop arguing that it’s a pharmacy problem, that it’s creating problems for us as pharmacists – it’s actually creating problems for our patients.”

Mark Hooper, chair of the National Pharmaceutical Services Association (NPSA), agreed it is an issue that needs to be dealt with.

“Our big concern is exclusive supply. Why you would introduce another level into the supply chain, I’m not sure,” said Mr Hooper.

“The CSO was introduced initially [to provide] nationwide coverage for medicines. We’d like to see those principles preserved,” he said at the inaugural PharmaDispatch conference, ‘What future, the PBS?’

“We want manufacturers to have the option of direct supply but not the exclusive direct supply model.”

He noted concerns with manufacturers “cherry picking” higher volume products to supply exclusively.

Chair of the Generic and Biosimilar Medicines Association (GBMA) Sylvain Vigneault agreed that this could be of concern, stating that if only the high-value products were removed, this would mess with the “equilibrium” of the system.

Reaching out an olive branch, Mr Cook told the audience: “One thing I agree with George [Tambassis] is it has to be about the patients, getting medicines to them where they need it, when they need it.”

However he added: “I think there’s lots of different models to get there.”