Managing transfers in pharmacy ownership

Report 4: 2018-19

Audit objective

On 3 May 2018, the Legislative Assembly of Queensland referred an inquiry to the Health, Communities, Disability Services and Domestic and Family Violence Prevention Committee (the Committee). The terms of reference were: 

That the Health, Communities, Disability Services and Domestic and Family Violence Prevention Committee inquire into and report to the Legislative Assembly, by 30 September 2018, on:

  • the establishment of a pharmacy council, and
  • all transfers of pharmacy ownership in Queensland over the past two years to ensure compliance with existing legislation.

The chair of the Committee wrote to the Auditor-General on 14 May 2018 to request an audit of how the Department of Health assessed transfers of pharmacies from 1 January 2016.

The Auditor-General agreed to conduct a reasonable assurance audit as per the Australian Auditing and Assurance Standards.

The objective of the audit was to assess whether the Department of Health (the department) ensured the transfers complied with the requirements of the Pharmacy Business Ownership Act 2001 (the Act). Refer to Appendix D for extract of the Act.

We assessed:

  • the effectiveness of the current systems and processes in regulating pharmacy business ownership in Queensland
  • compliance with the Act for a sample of transfers of pharmacy ownership.  

Overview

Community pharmacies provide services to over 4.9 million people in Queensland, and in 2017-18 dispensed over 39.3 million medicine items under the Pharmaceutical Benefits Scheme.

In Queensland, only a pharmacist or an entity owned by a pharmacist can own a pharmacy business. The government regulates this by limiting:

  • ownership of pharmacies to pharmacists or a combination of pharmacists and their relatives only
  • the number of pharmacies each pharmacist or entity can own
  • the control of pharmacies to pharmacists only.

Between 1 January 2016 and 31 July 2018, 316 pharmacies changed ownership in Queensland. 

Recommendations

We recommend that the Department of Health (the department):

1. clarifies its role and obligations in the administration of the Pharmacy Business Ownership Act 2001 Act (the Act) and the skills and resources it needs to fulfil its functions effectively

2. re-designs its internal controls so it can effectively administer the Act

This should include:

  • revising the Pharmacy Ownership Business Rules and the notification checklist to include all relevant information relating to the notification process  
  • determining whether decision support tools such as the Monitoring of Drugs of Dependence System (MODDS) database can be modified to better support its notification process or if new tools are required
  • defining checks to detect whether pharmacists have undeclared ownership interests in a pharmacy through a corporation.

3. Better defines the type of documents pharmacy owners need to provide to support the notification process.

This should include:

  • requiring owners to provide documents that allow the department to thoroughly test all ownership requirements of the Act, including circumstances under which ownership of pharmacies can be made not legally binding due to control issues (139I)
  • requesting all relevant documentation at the time of the notification submission, including information to validate an individual’s identity such as date of birth
  • keeping sufficient records to enable process validation

4. implements a process to monitor pharmacies’ ongoing compliance with the Act

This should include establishing a monitoring and compliance program to review pharmacy ownership at regular intervals, for example, conducting random inspections of pharmacies at the department’s discretion.

5. develops and implements a risk-based strategy for testing that existing commercial arrangements comply with sections 139B, 139H, and 139I of the Act.

Note: these recommendations assume the Health, Communities, Disability Services and Domestic and Family Violence Prevention Committee’s inquiry does not result in any changes to the legislation or governance arrangements. If changes are made, the accountable parties will need to revisit these recommendations.

Other reports and resources

The National Disability Insurance Scheme (Report 14: 2017-18)
Health: 2016-17 results of financial audits (Report 7: 2017-18)
Confidentiality and disclosure of government contracts (Report 8: 2017-18)