The federal health department has been criticised by the Australian National Audit Office for its administration of a $15 billion agreement with pharmacists.
The report on the Fifth Community Pharmacy Agreement, tabled in parliament on Thursday, comes as the department negotiates a new five-year deal with the powerful Pharmacy Guild of Australia.
The current agreement provides $15.4 billion over five years to pay pharmacies to dispense medicines, pay pharmaceutical wholesalers to deliver medicines to pharmacies, and to fund professional programs. It expires on June 30.
The audit office identified several shortcomings in the department's administration of the agreement, including miscalculating the amount of savings to be delivered by the agreement, failing to fully realise a number of government negotiating objectives, and poor record keeping.
The agreement states that it will produce $1 billion in savings over the life of the deal, but audit office analysis found the net savings were closer to $400 million.
The audit office found instances when the department had reallocated funds within the agreement without prior ministerial approval, including the reallocation of $5.8 million which was supposed to be spent on professional programs to a communications strategy to be delivered by the Guild.
It also noted there was no documentary evidence that a $127 million increase to the budget for professional programs had been authorised.
And while ministers considered it "non-negotiable" that the agreement would provide the government with access to the full range of Pharmaceutical Benefits Scheme data, the agreement did not ensure it received cost information.
The report found limited departmental information and deficiencies in the department's performance reporting and evaluation frameworks meant the department could not assess whether the Commonwealth was receiving value for money.
The audit office found pharmacy remuneration, which accounts for $13.8 billion or 90 per cent of the funding under the agreement, has not been fully reviewed since 1989.
The report documented "persistent shortcomings in departmental record-keeping," including a failure of the department to keep a formal record of its meetings with the Pharmacy Guild during negotiations and discussions about contracts.
Consumers Health Forum chief executive Adam Stankevicius called for a public inquiry into the agreement.
"We call on the federal Parliament's powerful Joint Committee of Public Accounts and Audit to conduct a full and public inquiry into this report and its critical findings," Mr Stankevicius said.
"It beggars belief that a program of such financial significance and health importance has been beset by such fundamental administrative deficiencies."
"The federal government has no choice but to extend (the agreement) for one year, while the Parliament enquires into this report and it reviews its handling of the arrangements with the Pharmacy Guild."
