Fail-Safe Measures for Pharmacies.


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Fail-Safe Measures for Pharmacies.

A proposed change to the law will ensure that the essential services provided by Australian Pharmacies will be maintained, even if an individual business experiences financial problems.

Pharmacists provide services that are a vital part of our health system. It is therefore important that any disruption to the public’s access to the supply of PBS medicines should be avoided, particularly in rural and more remote parts of Australia.

With that in mind, the Government is proposing a change in the law, which would ensure the continued operation of a pharmacy if the business itself were to encounter financial difficulties or failure.

If the pharmacist goes bankrupt, or the company through which the pharmacy operates goes into liquidation, it might be necessary for the pharmacist to be replaced. In that event, under our insolvency law, an insolvency practitioner (IP) is appointed to take control of the pharmacy business and either try to save the business or sell it to allow creditors to be repaid to the extent possible.

What will the change mean? 

The proposed new law – in the form of the National Health Amendment (Pharmaceutical Benefits) Bill 2019 – is yet to go through Parliament.

  • The change in the law would give the Secretary of the Commonwealth Department of Health the power to grant permission to an appointed insolvency administrator to manage the supply of PBS medicines at the pharmacy premises for such time as the business options are being worked out.
  • The practitioner would not, of course, be involved in the actual process of dispensing medicines; an authorised pharmacist – who might be the original pharmacist, or another pharmacist – would need to be engaged.
  • The proposed law would say that while the IP ‘is not as a matter of law an approved pharmacist’, the IP ‘is treated as such’.

Specific issues related to pharmacies: 

According to the Explanatory Memorandum, about 20 pharmacies enter insolvency each year.  This might happen for a variety of reasons including competition, business pressures and external factors.

Recent court proceedings with regard to one of these have revealed a concern about the existing legal approaches, given that the registration of a pharmacist is personal, based on his or her qualifications and experience, and does not pass to a trustee or liquidator as a matter of law.

Given their highly regulated nature, pharmacy businesses present particular concerns for an IP. Regulation necessarily covers:

  • The high security and careful dispensing of specialised medicines
  • Issues connected with pharmacists’ dealings with the medical profession and their patients and with government health regulators
  • The high standards that must be met with regard to pharmacy premises and the public’s access to them.

dVT Group has wide experience with pharmacies, in the role of insolvency appointee as either external administrator or trustee. Despite the wording of this proposed law, it is certainly not appropriate for the practitioner to assume the role and responsibility of a registered pharmacist.

Some basic steps in the process:

Engaging a pharmacist

In cases where we have been appointed, if the bankrupt pharmacist or company director pharmacist is not available (and this will depend on the particular circumstances) then a registered locum pharmacist is engaged to assist with the process. If we can engage the existing pharmacist, we are careful to ensure that all financial matters remain under the control of the trustee or the liquidator.

Taking a stock count

This is an important initial task in any pharmacy administration. A detailed stock count should be taken, at the date of appointment, in conjunction with the wholesaler (if the pharmacy is vertically integrated/branded). The perpetual stock count list should be adjusted as and when prescription medications are sold. If there is no wholesaler, then the bankrupt, if he or she is the registered pharmacist, should oversee the stock count under supervision

We see this process as similar to that followed in other regulated industries, to which we have been appointed. There is a need to focus on the complexities of the regulated business, as well as the financial side of the business and its insolvency.

Health services generally, and pharmacies in particular, provide examples of the balance between ensuring there is minimum disruption to important health services and resolving the financial difficulties of the individual business.

Should you require assistance in relation to the above, please contact David Solomons or Mark Robinson from dVT Group on 02 9633 333 or email mail@dvtgroup.com.au