Healthcare expenditure is increasing as a percentage of countries’ gross domestic product globally, and calls have been made for healthcare payment reform to improve performance and derive greater value. (1) (2) (3) (4) In some value-based payment models, including for pharmacy dispensing, payors retrospectively adjust the level of payment in accordance with outcome measures that reflect the provider's performance, rather than passively pay for whatever amount of service is contracted or provided. (5) (6) (7) Evidence of the benefit of adjusting payment in relation to outcome remains inconclusive however it is postulated that it positively impacts the performance of health care providers, the outcome of the care they provide and consequently, the overall value and cost of care. (8) (9) Identifying and evaluating outcome criteria with high specificity for individual care providers can be difficult and a focus by providers on more easily achieved outcomes may compromise the care of patients with more complex needs. (10) (11) (12) (13)

As in most countries, Australia pharmacies are remunerated for dispensing on a product-linked, set fee-for-service (sFFS) basis with no connection between the remuneration and the outcome of the dispensing episode. (14) (15) Demonstrating the quality and value of dispensing is opportune as the Australian Government's pharmaceutical insurance program, the Pharmaceutical Benefits Scheme (PBS) accounts for 15.5% of its health expenditure. (16) Excluding the cost of the medicine, the PBS remuneration model includes a dispensing fee in recognition of the pharmacist's expertise, and an administrative, handling and infrastructure (AHI) fee. (17) A patient contributes a co-payment towards the dispensed price of their prescription and the government pays the balance to the pharmacy at which it was processed, not to the individual pharmacist who dispensed it. (18) (19)

PBS dispensing is the major source of income for the majority of community pharmacies and subsidises a number of other services that pharmacists provide free or for minimal charge. In recent years a range of Government policies intended to limit its PBS expenditure have adversely affected pharmacies. (20) (21)

In addition to dispensing, the PBS funds a number of Community Pharmacy Programs (CPP) including Medication Adherence and Medication Management Programs. (17) Medication adherence levels for chronic therapies have been reported at approximately 50%, including in Australia. (22) (23) Higher adherence is associated with improved health outcomes and reduced overall health expenditure and pharmacists can improve adherence through patient counselling and packing medicines into dose administration aids. (24) (25)

While PBS dispensing and CPP remuneration is regulated via the Community Pharmacy Agreement, the Government's subsidy for services provided by other health professionals including consultations, diagnostic tests and procedures, is via the Medicare Benefits Schedule (MBS). (17) (26) One aim of the MBS is to utilise an evidence-based approach to achieve optimum value for money in Government funding of medical services. (26)

An ideal funding model would reward dispensing as a patient-focused clinical service with recognition of the impact of the pharmacist's contribution to the patient's health status and their ongoing care, rather than simply supply at a moment in time. (27) (28) Funding would incentivise improvement in the quality of the service with the ultimate aim of improving patient outcomes. (29) (30) Other professional services provided by pharmacists would be independently remunerated. (31)

‘Paying for value and outcomes’ is one of the seven key areas of the Australian Health Ministers’ 2021 National Health Reform Agreement. (32) Within this context, it is appropriate to evaluate the current sFFS funding for PBS dispensing, and consider alternate value-based models. (33)

The authors previously determined the key elements of a performance-based pharmacy payment model (PBPPM) in the US. (Table 1) (34)

The objective of the current work was to assess the existing sFFS PBS funding model, use the elements of a PBPPM to determine the feasibility, fit and potential of adopting performance-based funding as an alternate model, and induce quality-focused payment principles for dispensing.