Guide to understanding the PSA - Pharmacy Guild of New Zealand

Guide tounderstandingthe PSAAn overview of the 2012Pharmacy Services Agreement.Dedicated to member pharmacies

This guide presents an overview of the 2012 Community Pharmacy Services Agreement (the PSA or theAgreement). It explains in broad terms each part of the PSA. There is an emphasis on aspects of the Agreementthat are different from the previous one. Particular points of note are also highlighted. The guide is best readin conjunction with a copy of the Agreement. The PSA should be read in full for a complete understanding ofcontractors’ rights and obligations. At the end of this guide you will find a list of the acronyms and abbreviationsused in this document.Overview of Parts – in order of appearance.These Parts and Schedules (*) appear in full after Schedule N1 in this order:• Part C *• Schedule C1 *• Schedule C2 *• Part H *• Schedule H1 *pharmacy guild of new zealand

Guide to understanding the PsaPart A:Guide to this AgreementPart A is an introduction and overview of theAgreement as a whole. It is not legally binding. Itstates the parties’ fundamental responsibilities whichare respectively to fund, and to provide, pharmacyservices to Eligible Persons according to the termsof the Agreement (A2.1, A2.2). Aspects of theAgreement’s structure are explained, for instance:• Parts cover specific topics and the firstclauses of a Part identify key obligations(A3.1).• Schedules contain more technical orspecialised information on a topic (A3.2).• Part E contains the definitions for expressionsthat are identified in the Agreement with aninitial capital letter (A2.3).• Part P contains Provider specific terms andconditions that add to, or depart from,the standard terms, and in the event of aconflict override any other provisions in theAgreement (A5).Part B:Key terms and executionof this AgreementIn this section there is an agreement to provide andfund pharmacy services according to the terms of thePSA and four other documents (B1.1). In any conflictbetween the documents’ provisions, priority is givenin the following order (B1.2):• Pharmaceutical Schedule (the Schedule)• Pharmaceutical Transactions DataSpecification• Long Term Conditions (LTC) PharmacyServices Protocol (LTC Protocol)• PSA• Procedures Manual.Through PHARMAC, District Health Boards (DHBs)will supply pharmacies with one hard copy of theSchedule. Pharmacies agree to comply with any“refinements” made to Services, payment provisions,or the LTC Protocol during the transition period,by the Community Pharmacy Services GovernanceGroup (CPSGG) or the Community PharmacyServices Operational Group (CPSOG) (B1.5). Part Balso sets out the commencement (1 July 2012) andtermination (30 June 2012) dates (B2) and records theparties’ signatures (B3).Page 1

Part C:Summary of Services to beprovidedAppears in full after Schedule N1.Part D:General purposes,principles (and Statementsof Purpose Covering thethree year transition ofthis Agreement)This Part aims to clarify the intentions andcommitment of the parties in order to assist withinterpreting and implementing the PSA’s provisions.The broad purposes are to establish a workingrelationship between the parties that, within thefunding envelope for community pharmacy services,allows improvements in the health of Eligible Peopleas “contemplated” by the New Zealand Public Healthand Disability Act 2000 (D2). The Part lists Servicedelivery principles, such as providing equity of accessto evidence-based, comprehensive, quality andprofessional standard services. There is to be userchoice and the aim of equity of outcomes (D3).The Relationship principles say that the parties shouldact in an open and transparent manner, and foster along term co-operative and collaborative relationship.This relationship should adhere to the principle ofgood faith, and good faith negotiations should takeplace within reasonable and set time frames (D4).Part D contains several new Statements of Purpose(D5). This is because the new PSA radically changesthe pharmacy services delivery model and becausethere are associated uncertainties during thetransition period. The Statements concern:1. Risk sharing.The fixed Annual Funding Envelope (the Envelope)poses risks to one or the other party when thequantity of pharmacy services being supplied,and paid for, either increases or decreases. If itincreases, pharmacies receive less funding peraverage unit of activity. If it decreases, the DHBspay more for the average unit of activity. Thisstatement recognises those risks. The unit ofpharmacy guild of new zealandPage 2

Guide to understanding the Psawork that will be used to measure the quantity ofpharmacy services delivered is initial prescriptionitems which are /0 and /1 dispensings of aprescription. The start point is the actual numberof initial items in the year to 30 June 2012. Ifthere is more than a 5% annual cumulativeincrease in initial items, the size of the Envelopewill be reviewed as per Part H23.3. If initial itemsdecrease to a point lower than the start point, areview will determine what additional pharmacyservices could be funded from the Envelope. Thestatement contains several expectations, suchas 2.5% annual growth in initial items due todemographic changes, a five million decrease inrepeats, that the DHBs and pharmacies will takereasonable steps to avoid triggering a review, andthat changes to the funding Envelope will be fairand reasonable.2. Ensuring the dispensing ratio is fairer.Higher dispensing ratios increase the TransitionPayment per initial prescription item and couldlead to unfair, unintended consequences. Highratios (over 2.5), or those that have grown themost in the past four years, will be reviewed by 1October 2012.3. Ensuring a balance between the servicefee levels within the funding Envelope.Because the size of the Envelope is fixed, excessspending on one service reduces funding forothers.• There are commitments to keep the CorePharmacy Services (Core Services) ServiceFee (Fee) (Core Service Fee + Handlingfee + Transition Payment) consistent withthe previous $5.30 dispensing fee and tomaintain a balance in the Envelope with theLTC Fee.• Maximum funding levels for CommunityPharmacy Anti-coagulation Management(CPAM) Services are set at:– 2012/13: $1.5 million– 2013/14: $2.5 million– 2014/15: $3.5 million.• Quality: The Quality Incentive Payment thatwill be paid from 1 February 2013 is set at amaximum 5% of the Envelope.• Brandswitch: Any unspent funding remainsin the Envelope for reallocation throughTransition Payments.• New Services: These will only be paid fromthe Envelope if they are in replacement ofa previously funded service or if they areincluded as a result of a D5.1 review, or ifnew funding is introduced into the Envelope.4. Ensuring that high LTC registrations donot impact on the balance of funding toCore Services or compromise LTC Servicedelivery.Because their patient population means theyare unable to register sufficient LTC patients tomaintain their income, some pharmacies willbecome reliant on Core Service Fees. CPSOGis charged with monitoring LTC PharmacyServices (LTC Services) registrations – both tomaintain the balance of spending within theEnvelope and to ensure that registrations are ofpatients who will “significantly benefit” fromthe services. It is expected that no more than200,000 Service Users will significantly benefitfrom LTC Services (Statement D5.1). When LTCregistrations are forecast to exceed 150,000,CPSOG must actively review the LTC ServiceEligibility Assessment Form (the LTC EligibilityForm) including the threshold for access.5. E-enabling of the LTC Service EligibilityAssessment Form.The LTC Eligibility Form and “new contract datarequirements (Feb 2013)” are to be e-enabledas soon as possible. These electronic systemsmust have been in place for three monthsbefore LTC Service Fees can begin to be paid.This e-enablement timing commitment has thecapacity to delay the indicative start date of 1February 2013 (Part H1.1 (c)) for the payment ofLTC Service Fees. Funding for this e-enablementPage 3

and any multi-disciplinary team sharedinformation platforms, or the e-prescribingproject, will come from outside the Envelope.6. High risk/Mental Health and Addiction/Disability Service Users.The statement acknowledges that over thefirst seven months of the PSA, the TransitionPayments make funding for pharmacy to servicethis group relatively stable. During this time,CPSOG will address the issue of at-risk groupsthat may not be adequately catered for underthe new PSA.7. Audit.This statement of purpose acknowledges thatefficient audit is necessary to ensure “fundingarrangements are fair and equitable to allProviders.” As with any funding model, it wouldbe possible for Providers to modify their practiceto gain unfairly at others’ expense. Examplesmight be to register excessive numbers of LTCpatients to gain additional fees or to reducerepeat numbers more than is clinically justified.The whole PSA model will be monitored bythe CPSOG’s Audit Sub-Group for trends, butthree aspects in particular are identified in thestatement. These are:• LTC registrations• initial script numbers• ratio of initial to repeat script numbers.The Statement also goes on to indicate that animportant part of the Audit Sub-Group’s role is toensure that “suitably experienced and qualifiedcommunity pharmacy input is available forclinical audits.”8. Role of the CPSGG and CPSOG.The activities and mandate of these committeesare set out and defined in Part I of theAgreement.9. Evaluation.CPSOG will perform a process and outcomeevaluation.10. Ethical and medico-legal issues.One of the ways the expected reduction in repeatnumbers and the management of prescriptionvolume (D5.1) will be achieved is by communitypharmacists having powers to determine periodsof supply. The statement indicates that this mustbe achievable within legal requirements.11. Term.Halfway through the PSA’s three year term theDHBs and Pharmacy Agents will “review thenext stage”. There is no further elaboration onthis statement within the Agreement. The “nextstage” refers to the period following the currentAgreement.pharmacy guild of new zealandPage 4

Guide to understanding the PsaPart E:Definitions andconstructionThis Part defines wording that is used to refer tothe parties to the Agreement. For example, “We”and “our” refers to the DHB while “You” and“your” refers to the Provider (E1.2). It clarifiesthe construction of some references to help theinterpretation of the Agreement, for example“notice” periods, exclude the day given and includethe day of expiry (E2.1). There is also an alphabeticallist of definitions of expressions that are usedelsewhere in the Agreement and are identified byan initial capital letter (E1.3). Some notable definedexpressions are:Part F:Māori Health and otherpopulation groupsThis Part is largely unchanged from the previousPSA. While it clarifies that there is no preferentialaccess to services on the basis of race (F1.1), it setsout various commitments to address inequalitiesand improve health outcomes in Māori (F2), andany other priority population groups (F5). There areagreements to recognise cultural values (F2), consult(F2) and plan to improve service quality (F3).• ARRC Facility, Provider, Service User andPharmacy Services• Consult• Contribution to Cost Pressure (CCP). This maybe used in the calculation of any increase inthe size of the funding Envelope• Dispensing• Eligible Person• Handling fee. Pharmacy contractors wereable to cross out the second sentence if theydisagreed with it• Long Term Condition, LTC: Access Criteria,Exit Criteria, Pharmacy Services, PharmacyServices Protocol, Service Fee Claim andService Patient Eligibility Assessment Form• Market, Market Share• Named Patient Pharmaceutical Assessment(NPPA), Services A and Services B• Pharmacy Agent• Records• Specific Pharmacy Services (Specific Services)• Transition Payment• Uncontrollable Event.Page 5

Part G:Quality SpecificationsThis Part also remains largely unchanged from theprevious PSA. There is an agreement to provideServices that accord with the specified QualitySpecifications (G1). Topics covered are quality andquality improvement planning, incorporation ofMāori perspectives, risk management (Health andSafety, Civil Defence, Health Emergency), ServiceUsers rights, access to Services, staff, facilities,Service User surveys, records and administration(G3 - G13).Part H:Payments for Services andPharmaceuticals, claimingprocedure and paymenttermsAppears in full after Schedule N1.pharmacy guild of new zealandPage 6

Guide to understanding the PsaPart I:Meetings, reporting andinformationAs in the previous PSA, either party may request ameeting to discuss the contractual relationship, orwider primary care issues (I1.1). The DHB may requesta special meeting that the pharmacy contractormust make reasonable endeavours to attend (I1.2).DHB requested relationship or special meetings maybe held as group meetings (I1.3). In addition, theDHBs are still able to reasonably require pharmaciesto supply additional Service related informationwith the costs borne by the pharmacy (I2). Thebulk of this Part sets out the constitution androles of CPSGG and CPSOG. The CPSGG’s role is tooversee implementation of the new model throughthe transition period, with the particular focus ofensuring that the Statements of Purpose in Part Dare upheld. The CPSOG will manage the operationalaspects of the implementation using a range of workgroups to undertake the specific tasks and reviewsof its work programme. The two groups are to workaccording to a list of principles (I1.4 (c)).Part J:AuditsThe old and the new Part J are similar. References tothe old Pharmacy Advisory Committee have beenremoved and the further audit purpose of examiningLTC assessments and registrations against criteria inthe LTC Protocol has been added (J1.1). Pharmacieshave a material obligation to co-operate and providereasonable assistance to ensure an audit is properlycompleted (J1.3). Failure to perform any materialobligation may breach the Agreement and allow theDHB to seek various remedies or termination (O2).Audits should meet the principles and follow theprocess guidelines set out in Schedule J1 (J1.2).Page 7

Part K:Dispute resolutionThis Part sets out the good faith process and methodsby which the parties are to endeavour to resolvecontractual disputes without litigation (K2.3); first byagreement, then arbitration (K2.2). It is largely thesame as in the previous PSA but now the parties mayagree to refer the matter to the CPSOG or CPSGGrather than the Pharmacy Advisory Committee (K2.1).There is the capacity for disputes to be resolved atthe collective level (K2.1 (b)). The dispute resolutionprocesses in K2 do not apply to certain disputes,including those relating to a review or variation of,or negotiation in relation to, the Agreement (K3.1).If such disputes are not resolved by agreement,either party may initiate an independently facilitatednegotiation process (K3.2).Part L:Variation of AgreementJust as in the previous PSA, the grounds for variationare classified as either voluntary (mutual agreement)or compulsory (Crown direction or law change)(L2.2). Processes are set out for negotiation andagreement, or imposition of variations (L3 to L6).However, there is an additional Transitional ChangeMechanism (TCM) (L7) to support the transition to thenew pharmacy funding and service model. The PSAhas a fixed funding Envelope and transition period.It will be necessary for some Services provided (andthe associated funding mechanisms) to be refinedwhile the Agreement is in place (L7.1). In any conflictbetween clauses L2 to L6 and the provisions of theTCM, the TCM will be applied (L7.4). It is only the20-DHB collective or the CPSGG that can makeproposals to use the TCM (L7.2). A proposal canonly be either to refine the nature and scope ofServices provided in Part C and Schedules C1 and C2,or to amend the payment provisions in Part H andSchedule H1 (L7.1). The TCM itself is that pharmaciesor their agents will be presented with proposedchanges to Services or payment provisions and thenhave 20 days to provide feedback (L7.3 (b) (c)). Thefeedback will be considered by CPSGG which willmake a recommendation for endorsement by the20-DHB collective (L7.3 (d)). The Agreement willbe deemed to be varied and documentation will beprovided to pharmacies (L7.3 (e)).pharmacy guild of new zealandPage 8

Guide to understanding the PsaPart M:Terms governing yourdealings with third partiesThe provisions in this Part, covering subcontracting(M2), liability for others (M2), transfer of rights/obligations with consent (M4), confidentiality andpublicity (M5), and incentives for prescribers (M6),are the same as the previous PSA. A new clause M1.3prevents pharmacy contractors from offering EligiblePersons any gifts, prizes or financial inducements(including waiving Co-payment charges) to seekServices from the pharmacy. Services means servicesspecified in Part C (E1.3).Part N:Other miscellaneous termsgoverning our relationshipThe provisions in this part covering contractorindependence (N1), insurance (N2), indemnity (N3),warranty (N4), compliance with law (N5), waiver(N6), entirety (N7), enforceability (N8), third partybenefits (N9), counterparts (N10) and governing law(N11), are the same as the previous PSA. Email and itsdeemed timing of receipt has been added to the listof means of communication (12.3 (d)).Page 9

Part O:Failure to perform andtermination of AgreementThis Part is largely the same as the previous PSAexcept that referrals to the Pharmacy AdvisoryCommittee have been replaced with referralsto CPSOG or CPSGG. The Part as a whole dealswith remedies that are available to the parties ifone or the other fails to perform its obligationsunder the Agreement (O2 and O3). Issues coveredare termination (O4 and O7 - O12), suspension,reinstatement, dispute (O4), alternative arrangements(O5) and uncontrollable events (O6).Part P:Provider specific termsand conditionsThis Part contains any Provider specific terms andconditions that are additional to, or depart from,the standard terms in the rest of the Agreement.Provisions in Part P arise from negotiation andagreement between the pharmacy contractor andthe DHB. Local variations that may be dealt with hereare the provision of, for example, rural or after-hoursservices. In the event of any conflict, the specialterms and conditions that are included in Part Ptake precedence over those found elsewhere in theAgreement (P1.2).SchedulesSchedule C1: Service specifications *Appears in full after Schedule N1.Schedule C2: Clozapine DispensingProtocols *Appears in full after Schedule N1.Schedule H1: Payment terms *Appears in full after Schedule N1.Schedule J1: Audit FrameworkThe framework provides general guidelines,principles, processes and time frames for the conductof audits. The terms are the same as the frameworkin the previous PSA and it is to be read in conjunctionwith Part J (Schedule J1.1).Schedule N1: Bank account detailsThis is where the pharmacy provides its bank accountdetails for payment by the DHB.pharmacy guild of new zealandPage 10

Guide to understanding the PsaPart C:Summary of Services to beprovidedFirst, this Part lists all of the Pharmacy Services thatmay be provided by contractor pharmacies and willbe publicly funded (C2.1):• Core and LTC Services• Specific Services (Class B Controlled Drug(Class B CD), Aseptic Pharmacy (Aseptic),Sterile Manufacturing (Sterile), Special Foods,Pharmacy Clozapine (Clozapine), ARRC,CPAM, Extemporaneously CompoundedPreparations (Extemp), NPPA A and B)• Other pharmacy services, if any – Part P.The detailed particulars that each Service consistsof, are found under the name of the Service inSchedule C1. At C2.2 (a) there is an agreement thatpharmacies will provide and claim for Core Services,unless the Service User is eligible for LTC Servicesor a Specific Service (C2.2 (a)). If a Service User isregistered for LTC Services or meets the criteria fora Specific Service, then the pharmacy will provideand be funded for those Services (C2.2 (b) and (c)).Some Specific Services, such as NPPA A, NPPA Band Extemp, will be funded in every communitypharmacy and are in effect part of Core and LTCServices. Some others, such as Aseptic, Sterile,Special Foods, Clozapine and CPAM services willonly be funded if the Specific Service is found at C2in Schedule C1 in the pharmacy’s particular PSA.To include an additional Specific Service at C2 inSchedule C1, pharmacies may be required to providesufficient information to demonstrate their ability toperform the Service (C2.3).Part C includes a commitment from both partiesto work together in good faith to support thetransition to the new model and refine the Servicesprovided under the Agreement (C2.4). There is alsoan agreement by Providers to participate in peerreview of Services provided by other Providers, andto work with CPSOG to develop audit and peerreview programmes (C2.5). Service User eligibilityis still determined against the same legislation, butthe clause on deciding eligibility to receive Serviceshas been expanded (C3.1). The method to determineeligibility and the entitlement to rely on prescribers’information is stated (C3.1 (b) (c)) and a websiteaddress to provide guidance is provided (C3.1 (d)).The clauses dealing with disputes (C3.2), providingServices to ineligible persons (C3.3) and changeof Premises (C4.2) remain the same. There is stilla restriction on providing services outside theDHB’s geographical area but the method to obtainpermission to do so is stated, as is the exception forthe occasional provision of Services to travellingnon-residents (C4.1 (b)).Schedule C1: Service specificationsCore Pharmacy Services – This Service Specificationreplaces “Base Pharmacy Services” from the previousPSA and is characterised by the DHBs as being largelyunchanged (CPSA 2012 Summary of Changes tothe Agreement). There are provisions dealing withopening hours (5.2) and waiting times (6.2). Theclause concerning dispensing specific brands reflectsrecent regulatory changes. The prescriber’s consentis no longer required for a pharmacist to substitutea generic for a Specific Brand unless “No brandsubstitution permitted” or similar is written (3.2(b)). Core Services include dispensing, advice andcounselling, record keeping, reporting to prescribers,administration according to the Procedures Manual,filling Practitioner Supply Orders (PSO), filling BulkSupply Orders (BSO) and Nicotine ReplacementTherapy (6.1). Pharmacy Methadone Services forOpioid Dependence (Methadone Services) areincluded in Core Services if provided on an adhoc or intermittent basis at patients’ request (6.1(i)). Methadone Services must still be provided inaccordance with the Service specification but unlessit is listed in clause 2 of Schedule C1, you can haveno more than two patients using the service at anyone time (6.1 (i) (iii)).Page 11

The Core Service specification commits pharmaciesto assessing patients, who were formerly on closecontrol under the old Pharmaceutical Schedule rule,for LTC Services by 31 January 2013 (6.1 (j)).From the indicative date of 1 February 2013, everyclaim for payment for Core Services will have toinclude the Service User’s NHI number (6.1 (l)).Service Users receiving Core Services may alsoreceive Class B CD, Aseptic, Sterile, Special Foods,Clozapine, CPAM, Extemp, NPPA A and NPPA BServices. Pharmacies will only be able to claim forAseptic, Sterile, Special Foods, Clozapine, CPAM andMethadone Services for more than two patients,if the relevant service specification is found in clause2 of Schedule C1 of their PSA (10.1). LTC and ARRCPharmacy Services are excluded from the CoreService Specification (8).LTC Pharmacy Services – Pharmacies will be paidto provide LTC Services to Service Users who areeligible under the LTC Protocol (1.1). Both partiesacknowledge that the LTC Protocol will evolve duringthe term of the PSA (1.3 (a)). The Protocol is outsidethe PSA to facilitate the process for its evolutionarychange. Pharmacy contractors will be consulted butif the LTC Protocol (1.3 (b)) is amended they mustreview the status of LTC Service Users against Accessand Exit Criteria to determine ongoing eligibility(1.3 (c)). Using LTC Access Criteria and the LTCProtocol, pharmacies are to determine Service Usereligibility for the appropriate level of LTC Servicesin good faith (3.1 (c)). The specifications detailprocesses and requirements for changing Providers(3.2), exiting the programme (3.3), record keeping(5.1) and reporting (5.2). 4.1 lists the essential LTCservices to be provided to each Service User,as appropriate.LTC Service Users can receive Class B CD, Aseptic,Sterile, Special Foods, Clozapine, CPAM, Extemp,NPPA A and NPPA B Services (4.5). Pharmacies willonly be able to claim for Aseptic, Sterile, SpecialFoods, Clozapine, CPAM and Methadone Servicesfor more than two patients if the relevant servicespecification is found in clause 2 of Schedule C1 oftheir PSA (8).Pharmacies must ensure that LTC Services areprovided to a Service User by appropriate staffmembers in accordance with their scopes of practiceand the identified needs of that Service User (6).Apart from appropriate Specific Services (4.5),pharmacies may not claim for providing any otherServices (Core Services) to their LTC patients (7(a)). Pharmacies are not to claim for providing LTCServices to people who have not been “approved”(assessed) as eligible for LTC Services or those whoare ARRC Service Users (7 (b)).pharmacy guild of new zealandPage 12

Guide to understanding the PsaPharmacy Services to ARRC Service Users inARRC Facilities – ARRC Service Users qualify“under the Social Security Act 1964 as requiringlong-term residential care in a hospital or rest homeindefinitely” and they receive ARRC PharmacyServices from an ARRC Provider in an ARRC Facility(see E1.3 for definitions). Other rest home or longstaycare hospital residents, or other residents ofARRC Facilities, do not qualify for ARRC Servicesunder the Agreement (3). ARRC Service componentsinclude dispensing according to the processoutlined in 6.1 (a) to (e) of the Core Services servicespecification (5.1 (a)). Other aspects of the ARRCService specification are access (4), information andadvice, profiling, synchronisation, reconciliation,review, education (5.1), facilities (5.2) and waitingtimes (5.3). All claims for payment for ARRC Servicesmust include the Service User’s NHI number and fromthe indicative date of 1 February 2013, the date ofbirth (5.4). Within one month of starting to service anARRC facility, the pharmacy contractor must informthe DHB in writing of the name of the ARRC facility.Pharmacy Methadone Services for OpioidDependence (Class B Controlled Drug Services) –These are the detailed service specificationsfor pharmacies that regularly dispense methadone(for more than two patients) (5.2 (a)).Next are the service specifications for: AsepticPharmacy Services (including Syringe DriverServices), Sterile Manufacturing Services, SpecialFoods Services, CPAM, Pharmacy ClozapineServices. Then, Schedule C2 Clozapine DispensingProtocols.ARRC Service Users can receive Class B CD, Aseptic,Sterile, Special Foods, Clozapine, CPAM, Extemp,NPPA A and NPPA B Services (5.5). Pharmacies willonly be able to claim for Aseptic, Sterile, SpecialFoods, Clozapine, CPAM and Methadone Servicesfor more than two patients if the relevant servicespecification is found in clause 2 of Schedule C1of their PSA (10.1).Page 13

Part H:Payments for Services andPharmaceuticals, claimingprocedure and paymenttermsDuring the transition, pharmacies will automaticallybe paid a Transition Payment, in advance, on thefirst business day of every month (H1.1 (d)). Themethod of calculation is found in H22.3. CoreService and LTC Service Fees are not being paid inthe first stage of the transition and are due to bepaid from the indicative date of 1 February 2013.Pharmacies will continue to make claims for the costof Pharmaceuticals and Handling Fees (H1.1) in thesame way as the previous PSA. There are consistentprovisions concerning claim periods (H3.1), timelimits (H9) and time frames (H12).A notable change is found in the provisionsconcerning Co-payments at H4.4 (a). During thetransition, pharmacy contractors must charge ServiceUsers the full Co-payment with the only exceptionbeing in situations of hardship when the Service Userwould not otherwise collect the pharmaceuticals.Pharmacies may still charge product premiums (H4.5)and the circumstances when other pharmacy chargesmay be made are found in H4.6.Despite remaining in the text, clause H4.8 –the requirement to provide a receipt that recordsthe cost to the Government for the provisionof the pharmaceutical – has been recognised asproblematic. It is hard to calculate this cost to theGovernment because, with Transition Paymentsbeing made, much of the funding is not attachedto the particular pharmaceutical being dispensed.Software providers have eliminated the functionfrom their programmes but the clause remains forfuture application.There are some clarifications about cost and volumeshifting under the new model at H6. The PSA doesnot allow arrangements that result in paymentsbeing made more than once for the provisionof a prescription item for a Service User (H6.1).A pharmacy claiming for the provision of CoreServices to a Service User already registered as anLTC patient at that pharmacy is given as an exampleof a disallowed arrangement (H6.1 (a)). Anotherdisallowed arrangement is referring an LTC registeredpatient to another pharmacy to receive a CoreService (unless to obtain unavailable urgently neededmedication) (H6.2 (b)). Artificially increasing revenueis prohibited (H6.3) and that might cover the serialdispensing of items to a Core Service patient overseveral days to obtain multiple payments of the Coreservice fee (paid per patient, per pharmacy, per day).There are new requirements for the submission ofService Users’ information. Claims for the provisionof LTC Services and ARRC Services must include thepatient’s NHI number and from an indicative date of1 February 2013, the date of birth (H7.4). Also fromthe indicative date of 1 February 2013, every claimitem (including Core Service) submitted must includethe Service User’s NHI number (H7.3).The provisions concerning Transition Paymentsbegin at H22. Information about dispensing ratiosis found at H22.2. The dispensing ratio is calculatedby dividing the total number of prescription itemsdispensed in the 2011 year by the number of initialprescription items (/0,/1 items) (H22.2 (c)). The ratiois designed to distribute transition funds amongall pharmacy contractors in a way that maintainstheir overall levels of funding while they adapttheir business practice to the new model. A higherratio is attached to pharmacies that dispensedgreater numbers of repeats per initial prescriptionitem. During the early stages of the transition, allpharmacies will be able to keep providing a similarlevel of service to their patients and will receive asimilar level of funding overall. As the transitionprogresses, patient service fees begin to be paid soTransition Payments (based on numbers of initialprescription items multiplied by the dispensingpharmacy guild of new zealandPage 14

Guide to understanding the Psaratio) will become a less significant proportion of apharmacy’s funding. Pharmacies whose income reliedon high numbers of repeats will need to changetheir business practice to maintain the same level offunding. H22.2 also details methods of calculationfor dispensing ratios of pharmacies in non-standardsituations (H22.2 (c)), the Dispensing Ratio Sub-Group’s ability to impose a ratio (H22.2 (e)) and theappeals process (H22.2 (f), (g) and (h)).The Envelope is split into monthly Transition Pools(H22.1 (b)) and actual Transition Payments are takenfrom that. They are based on forecast numbersof pharmacies’ initial prescriptions (the /1 or /0dispensing). No Transition Payments are triggeredby repeat dispensings (/2,/3 and so on). A nationaltransition fee is derived ($4.2879 in July 2012) andmultiplied by the pharmacy’s dispensing ratio andforecast number of initial prescription items tocalculate the actual Transition Payment. In effect,the impact of the dispensing ratio on a TransitionPayment is to increase it to pre-pay for the averagenumber of repeats that an initial prescription itemgenerated in 2011 at that pharmacy.Four months after the forecast-based TransitionPayment is made, an adjustment is calculated basedon actual prescription numbers dispensed andthe next Transition Payment adjusted accordingly(H22.3).Clause H23 deals in detail with adjustments to thesize of the Envelope. From $375.5 million in 2012/13it will remain static or be adjusted upwards annuallyby the lesser of 1.5% or the CCP – see Part E for adefinition (H23.1). The maximum annual fundingfor CPAM is specified and any unspent funds willremain in the Envelope (H23.1 (d)). The assumptionsthat have underpinned the setting of the size of theEnvelope are listed (H23.2) as are the expectationsabout any review of the Envelope’s size (H23.3).DHBs and Providers are expected to take reasonablesteps to avoid triggering a review of the Envelope(H23.3 (a)). Any review would be conducted bythe DHBs collectively on the recommendation ofthe CPSGG that will have considered the advice ofthe CPSOG (H23.3 (b)). The precise circumstancesthat would cause a recommendation to reviewthe size of the Envelope are found in H23.4.These circumstances are based on growth in thenumbers of initial items dispensed. If the 20-DHBcollective decides to vary the size of the Envelope,the adjustment must be by a fair and reasonableamount (H23.3 (c)) according to the principles setout in clause H23.6 (H23.3 (d)). Once the DHBs havereached a view on a fair and reasonable adjustment,pharmacy contractors will be notified and the revisedEnvelope used in the calculation of further TransitionPayments (H23.5 (d)).Schedule H1: Payment termsThis Part begins with the provisions that are intendedto apply to payments under the PSA after thetransition period is over (clauses 2.2 to 2.6). Thetransition will end no earlier than 1 July 2014 (H2.1).Transition Stage 1 is intended to be from 1 July 2012to 31 January 2013 (3.1). Stage 2 is intended to befrom 1 February 2013 to 30 June 2013 (3.2) andStage 3 from 1 July 2013 to 30 June 2014 (3.3).Throughout the entire period of the PSA, payments topharmacies include a Handling Fee for each medicinedispensed to recognise community pharmacy’smedicines handling function (2.1). This is currentlyset at $1, but may be varied by applying the TCMin clause L7 (2.2 (a)). The Handling Fee is givena Handling Fee Multiplier (Multiplier) that differsaccording to the Service under which the medicine isbeing dispensed (for example, 5.3 for ARRC, 6.89 forClass B CDs). In later stages, the level of the HandlingFee itself may be subject to variation under the TCM(3.3 (h)).From Stage 2 onwards, payments to pharmacieswill include patient Fees that differ according to theService being provided (for example, LTC Services orCore Services). Again, patient Fees may be subject tovariation under the TCM (2.2 (c)).During all stages of the transition period, paymentsto pharmacies will include a Transition Paymentbased on market share and calculated according toclause H22 of Part H (3.1 (h)).Page 15

From Stage 2 onwards, payments to pharmacies mayalso include a Quality Incentive Payment (3.1 (i)). Thedetails of Quality Incentive Payments have yet to bedecided but they will be dealt with as a variation,according to clauses L2 to L6 (3.1 (i)).Stage 1 - During this stage pharmacies are paid theTransition Payment and make claims for providingServices. The Handling Fee is set at $1 and Multipliersare:• Core Services 1.00• Extemp Services 7.95• LTC Services 1.00• ARRC Services 5.30• Class B CDs (including Methadone)Services 6.89• NPPA A Services 5.30• NPPA B Services 7.95The following additional Services if listed in ClauseC2 of Schedule C1:• Aseptic 26.50• Sterile 26.50• Special Foods 5.30• Clozapine 10.60The formula (3.1 (c) (i)) for calculating the payment(R) on a claim for dispensing an item under the CoreService is:• [Schedule subsidy for the PharmaceuticalPlus the stock holding cost margin (4% to$150, 5% above $150)]• Plus [Handling fee multiplied by theMultiplier]• Plus [GST]• Minus [the Co-payment.]This formula remains consistent throughout the termof the PSA (2.3 (a)). Similar formulae are found forPSO, BSO, LTC, Specific, Extemp, NPPA A and NPPAB Services (3.1 (c) (ii) to (g)). These formulae alsoremain consistent throughout the term of the PSA.Stage 2 – At this point Transition Payments (3.2(f)) will decrease and Fees will begin to be paidto pharmacies for Core Services (3.2 (a) (ii)) andLTC Services (3.2 (b) (ii)). These Fees are subject toamendment under the TCM so their exact levels arecurrently unknown (3.2 (g)). Qualifying pharmaciesmay receive a Quality Incentive Payment (3.2 (i)). Theformulae for calculating payments for PSOs, BSOs,Core, LTC, Specific, Extemp, NPPA A and NPPA BServices remain the same as in Stage 1 (3.2 (a) to (e)but the Service Fee (3.2 (g)) and/or the Multiplier maybe varied (3.2 (h)).Stage 3 – The transition process continues on thesame track. Pharmacies will receive a further reducedTransition Payment (3.3 (f)) with increased Fees forCore Services (3.3 (a) (ii)) and LTC Services (3.3 (b) (ii)).Again, these fees are subject to amendment underthe TCM so their exact levels are currently unknown(3.3 (g)) and again, qualifying pharmacies may receiveQuality Incentive Payments (3.3 (i)). The formulaefor calculating payments for PSOs, BSOs, Core, LTC,Specific, Extemp, NPPA A and NPPA B Servicesremain the same as in Stage 1 and 2 (3.3 (a) to (e) butthe Service fee (3.3 (g)) and/or the Multiplier may bevaried (3.3 (h)).Post Transition – The payment terms for this periodare found in clauses 2.2 to 2.6 and differ from Stage3 only in that there is no provision for TransitionPayments.pharmacy guild of new zealandPage 16

Guide to understanding the PsaA guide to the acronyms and abbreviationsused in this document:ARRCAseptic ServicesBSOCCPClass B CDClozapine ServicesCore ServicesCPAMCPSGGCPSOGDHBEnvelopeExtempFeeLTCLTC Eligibility FormLTC ServicesLTC ProtocolMethadone ServicesMultiplierNPPAPHARMACPSOPSA or AgreementScheduleSpecific ServicesSterile ServicesTCMAge Related Residential CareAseptic Pharmacy ServicesBulk Supply OrderContribution to Cost PressureClass B Controlled DrugPharmacy Clozapine ServicesCore Pharmacy ServicesCommunity Pharmacy Anti-coagulation ManagementCommunity Pharmacy Services Governance GroupCommunity Pharmacy Services Operational GroupDistrict Health BoardAnnual Funding EnvelopeExtemporaneously CompoundedService FeeLong Term ConditionsLTC Service Eligibility Assessment FormLTC Pharmacy ServicesLong Term Conditions (LTC) Pharmacy Services ProtocolPharmacy Methadone Services for Opioid DependenceHandling Fee MultiplierNamed Patient Pharmaceutical AssessmentPharmaceutical Management AgencyPractitioner Supply Order2012 Community Pharmacy Services AgreementNew Zealand Pharmaceutical ScheduleSpecific Pharmacy ServicesSterile Manufacturing ServicesTransitional Change Mechanism.Page 17

This report is printed on paper sourced from sustainable,well-managed and legally harvested forests.You can download a PDF of this report at www.pgnz.org.nzPharmacy Guild of New Zealand (Inc)Pharmacy House 124 Dixon Street, Te Aro, Wellington 6011PO Box 27139, Marion Square, Wellington 6141Ph 04 802 8200 Fax 04 384 8085 www.pgnz.org.nz