This appeared a few days ago.
Australian government seeks to slash funding for escripts by up to 80% and may acquire IP
A request for tender by the Department of Health has caused alarm in the industry with its plan to shake up the nation's most successful digital health infrastructure project.
By Lynne Minion
April 14, 2022 03:57 AM
Australian companies behind the most successful and widely used digital health infrastructure programme, the nation's electronic prescription network, could face a drastic reduction in profits or may lose their projects due to a new Commonwealth Department of Health request for tender.
The implications of the government's move has sent shockwaves through the industry, with about 100 representatives of digital health organisations attending a closed door meeting held by the Medical Software Industry Association (MSIA) on Tuesday.
The department's RFT – issued without consultation with industry – is seeking companies to apply to provide prescription delivery services and an active script list registry.
These services are currently provided by eRx (owned by Fred IT) and MediSecure, which developed the systems over 10 years.
The companies also created the National Data Exchange that is the foundation of the real-time prescription monitoring systems being rolled out nationally.
But according to the RFT, funding is expected to drop from 18 Australian cents per valid escript to as low as three Australian cents, representing a loss of up to 80 per cent.
The intellectual property of the systems could also be handed over to the Department of Health.
According to procurement rules, no companies planning to submit a tender – including incumbent companies – are able to speak publicly about the issue. Others are unwilling to risk getting the department offside by commenting on the record.
Behind the scenes, however, many industry insiders claim the RFT could damage the Australian companies that have built the systems that save lives and lower health expenditure. It also risks the industry losing confidence in dealing with the Department of Health, and has implications into broader technology procurement by the federal government.
In response to questions, the Department of Health told Healthcare IT News that "no decisions have been made in regards to funding" and that it will take into account the anticipated increase in the use of escripts, presumably due to growing uptake and an ageing population, and will also consider any improvements to existing systems.
"The Request for Tender proposes both fixed and variable funding options for tenderers, and allows for tenderers to propose alternative models. The variable option reflects the anticipated exponential growth in the number of electronic scripts generated," the department said.
"The RFT also outlines that tenderers must outline specific initiatives and innovations that would or could drive continuous improvement including those initiatives that would require additional funding to supplement implementation.
"The Department will negotiate the terms, including the rates associated with fixed and variable components of any future contract, with short-listed tenderer(s)."
The four-year term draft contract included in the RFT proposed that companies relinquish their intellectual property but the department said it would be subject to negotiations.
"No decisions have been made regarding IP. The IP regime will be a matter for contractual negotiation with short-listed tenderer(s)."
Boston Consulting Group was commissioned by the department to advise it on "future funding and models to support electronic prescribing" in 2021 but the report has not been made public.
The alarm within the industry at the RFT is compounded by the relatively low cost to the government of eprescribing despite its widespread use.
More here:
There is also a lot of coverage here.
Liberal government decides it might just nationalise our digital health industry
Strange thing to do just prior to an election, but a tender just released by the Department of Health for the future running of the electronic scripts ecosystem in Australia technically outlines a plan to nationalise one and perhaps even a few of our privately (and well) run digital health companies in Australia.
Just when you thought things couldn’t get much stranger in how much micro-control the Department of Health (DoH) seeks to exert over every part of our healthcare system (GP education and training, PHN influence and power, rural health doctor placements, to name a few).
Just six weeks out from a federal election, the Department have put out a tender which overtly expresses the intent of the government to exert near complete control of two well running and successful private digital health companies, and with them, a crucial and evolving piece of our digital health infrastructure; electronic scripts.
You’d have thought that a Liberal government seeking to radically rewrite a pricing deal and appropriate all the IP and commercial value of one (or both) of two long running privately held eScript exchanges might be a risky play in the run up to an election.
The idea that a federal government department is setting out to, in essence, have a go at nationalising a few key private companies that run a major part of our e-health infrastructure, should scare the whole business sector – not just those in health tech.
At the very least, the existence of a tender with this intent will significantly dent the confidence of anyone thinking about investing privately into digital health innovation in Australia.
It will also have come as a shock to the many long established private local medical software vendors and their investors that underpin much of our healthcare system with key EHR, billing and other patient data platforms.
Who will be next to be subsumed by the DoH at a whim when they want something more to their liking?
In eScripts, the DoH is the primary direct funding body for both companies involved, so it has always had a large degree of power in the background of our eScripts ecosystem.
But, this tender proposes pricing up to 65-80% less than what the government has been paying for eScripts for 10 years now, which threatens the two existing long term vendors with extinction if they don’t behave. It suggests the Department can pick a new provider if they like, and mandates that anyone who wins their tender will have to hand over all of their hard earned IP to the Department (though this is a boiler plate type term in federal health contracts, it’s a real consideration for anyone wanting to tender their services and offer up their IP).
The reality is the DoH thinks they indirectly fund a lot of our other important healthcare tech vendors, like our patient management system companies, via the MBS.
A tender like this makes one think the department is developing a God complex.
If this tender process keeps going, and the price paid for eScripts in the country is reduced by 65-80%, a big chunk of that reduction will come off the margins of our PMS vendors and our pharmacy dispensing vendors. This is because, of the current 15c per valid script that the DoH pays the Rx exchanges today, nearly 60% is remitted by the Rx exchanges to other vendors as key partners in the ecosystem.
The tender is not only threatening to stifle the two main Rx exchange vendors; it is going to rip away good chunks of margin from at least six other key PMS and dispensing vendors in the country.
In other words, there is going to be a very bad ripple effect.
In this awkwardly timed and constructed tender, the DoH is pulling the rug from under our entire commercial digital health sector, their investors, and anyone thinking of investing in the sector.
Who would privately invest in building anything of import to our digital health infrastructure – and we need a lot of new investment, innovation and thinking, given we have stranded ourselves on the rocks of the My Health Record legacy – if they thought that at any point the DoH might move the goal posts using their funding power (direct or through the MBS), radically attempt to rewrite pricing to suit the government, and even appropriate all your IP in the process, which is what this tender describes?
You can’t build and run a business with this sort of uncertainty.
If you’re not familiar with our electronic script ecosystem, how it has evolved, and what it has done for you as a patient, a doctor, a tech entrepreneur, an investor or company, here is a quick potted history of eScripts in Australia, all the way up to this tender.
The really weird thing in this story is that eScripts is probably the only truly successful digital health interoperability project that the government has been involved in in the past 20 years. It is demonstrably saving lives and money (see further down for some stats).
Why is the DoH is happy to put a wrecking ball through what has been achieved so far and with it, other key parts of our digital health sector?
See if you can work out the logic in what the DoH is doing.
History
Showing some admirable foresight, the DoH decided more than 10 years ago that having some form of centralised electronic script exchange in order to facilitate far more efficient and accurate medication management across the healthcare system (although not hospitals) was a good idea.
The Department seed funded a couple of private companies to build the exchanges, with the promise of funding at 15c per valid electronic script that was used in the system. Ten years ago we started using the system via bar codes on all scripts, which when taken to a pharmacy could be validated as being correct against the scriptwriter.
In the last ten years the DoH might have paid these companies about $100m, which maybe the DoH thinks entitles them to be ghost owners of these companies.
Along the way, the Australian Digital Health Agency (ADHA) provided moderation and guidance, as eventually the government wanted scripts to be fully electronic (as they now can be).
Between the DoH and the ADHA, and the two vendors who took the risk on such a complex and important infrastructure project – ERx and Medisecure – we managed to develop a ‘point of the spear’ medication management interoperability project. This means that today, after covid forced the hand of various parties to get their act together even faster, we have a system where a patient can accept a token on their mobile from their GP, go to any Pharmacy in the country, and get their script.
It’s an amazing system with a lot of potential still to build out better healthcare services for patients, doctors and pharmacists. Already there is quite a bit of innovation riding on the back of system – in things like aged care medication management, consumer-controlled management, and in things like end-to-end script delivery for patients through services such as Chemist 2U.
If you think about the importance of medication management in avoiding clinical decision making and system error, this was a great project to pick and move to full operational capability within just 10 years.
Kudos is due to all parties involved. It works, and it is saving us a mass of money in things like avoidable hospital admissions, controlling problems like doctor shopping for opioids and benzodiazepines, and in time and effort of pharmacists, doctors and patients.
But the best bottom line of this set up is that it is saving a lot of lives.
Vastly more here:
Coming from different perspectives both of the article authors have it right. In essence this tender is totally disruptive – and probably destructive – of the private Digital Health ecosystem in Australia as it basically says that if you have an operational and working implementation we will take it over, take all you intellectual property (I/P) and can choose to leave you high and dry with no business. All other players are basically killed off straight away!
Here is the key points of the tender.
https://www.tenders.gov.au/Atm/Show/f318621c-7a5e-4a7f-8337-8e6a74114f6a
Current ATM View - RFTHealth/E21-576909
Request for Tender – Electronic Prescription Services
Contact Details Procurement Lead
Email Address:
eprescribing@health.gov.au
ATM ID: RFTHealth/E21-576909
Agency: Department of Health
Category: 85101700 - Health administration services
Close
Date & Time: 2-Jun-2022 2:00 pm (ACT Local Time)
Show close time for other
time zones
Publish Date: 31-Mar-2022
Location: ACT, NSW, VIC, SA, WA, QLD, NT, TAS
ATM Type: Request for Tender
Description:
The Department of Health is issuing this Request For Tender (RFT) to engage providers of Electronic Prescription Services, specifically, Prescription Delivery Services (PDS) and an Active Script List Register (ASLR).
Since 2010, there has been significant development and growth in the electronic prescribing ecosystem and the Department has engaged with service providers and stakeholders to fund and operate the environment. Approximately 91% of dispensed scripts are now digitally supported.
To ensure continued optimisation, value for money and quality customer experiences, the Department is issuing this RFT with a view to engaging a single or multiple Prescription Delivery Services (PDS) providers and a single Active Script List Register (ASLR) provider, for an initial term of four years and three optional further terms of one year each.
Tenderers may offer to supply PDS AND/OR the ASLR as part of their Tender.
---- End Extract.
You can log in to read the full tender documentation.
The two present providers (ERx from Fred IT and Medisecure) are both incurring significant costs delivering the services and the anticipated drop in return be script would make them unviable financially and prevent ongoing delivery of the service which is the clearly the most effective in Digital Health in Australia.
Basically what industry is being told – out of the blue, and within days of an election being called – is that you have done well, invested for a decade and built a very useful service but now is the time for the Department of Health to take it all over!
This really is more like Communist Cuba than Liberal Australia and strongly to suggests to all to avoid the digital health space as if you do well we will take you out and you will loose you business!
Note the ADHA/DoH has form for doing this twice before at least – no names, no pack drill – but I am sure the older hands reading here know who I am talking about.
To me there has to be fierce and co-ordinated resistance to this take-over/ expropriation and the Tender needs to be withdrawn as it is a clear and present danger to evolving Digital Health in Australia.
All changes need to be negotiated on a fair basis with the incumbent players and evolutionary improvement fostered.
What do you think? Is the DoH the enemy of Digital Health innovation in OZ? I also wonder whether some form of political discussions,and pressure, with both sides during the election period might bear fruit?
David.
What is COAG's involvement in all this? Or is the DoH doing it alone?
ReplyDeleteZilch, AFAIK. Anyway it would be National Cabinet as COAG seems to have died I think?
ReplyDeleteDavid.
The Government underwrites the PBS. That's a huge amount of money. The Government has always believed that by funding this vital part of the health system it is entitled to use every tool at its disposal to manage, deliver, and control the system in whatever way it considers appropriate.
ReplyDeleteThat includes design, delivery, control and oversight, of all the information technology software and infrastructure required to achieve an efficient and cost-effective PBS for the benefit of every Australian.
Software vendors seeking to play in this space should do so with eyes wide open, acknowledge and accept the Government's role in delivering the PBS and be prepared to accept Government's absolute right to exercise 100 percent control of this part of the market.
I think this system (PDS's) is just infrastructure to deliver scripts and is unrelated to the PBS which existed for decades before e-prescribing. This is just a new way of delivering drug prescriptions. Totally separate from PBS fund flows.
ReplyDeleteWhat do other think?
David.
I think 5:09 PM makes a lot of sense. However, if you want to draw a line in the sand then 5:17 PM makes a reasonable case with one major qualification, viz:-
ReplyDeletehealth technology vendors seeking to transmit eScripts, either directly or through a Prescription Exchange Service [PES], need to ensure they do so using a viable business model. One which makes commercial sense over the long term and which is not dependent on government funding, but rather on funds contributed by their medical practice and pharmacy clients through a 'subscription' model.
If 18 cents per script is considered 'acceptable' then the PES vendors need to 'claw' 9 cents per script from the prescriber and the dispenser. How the prescriber and the dispenser passes that relatively minor charge on to the 'customer' (client / patient) should not be their concern.
On the other hand if it is of concern, to the extent that they (the PES') want government to pay the 9+9=18 cents then the argument posited at 5:09 PM has merit.
What do others think?
5:09 must work for the DoH. Surely can't own a business.
ReplyDeleteIt seems insensitive to suggest the companies that have produced the most successful digital health infrastructure project in Australia should simply accept it when the government decides to save money as the population ages by slashing payments from 18c to 3c – and may even take their IP.
It's theft, in my view.
I agree with David's line: "This really is more like Communist Cuba than Liberal Australia."
Surely the cost of the Prescription Exchanges and both trivial and irrelevant to the cost of the PBS. To suggest otherwise is pure nonsense. They are totally separate issues!
ReplyDeleteDavid.
If Government wants to see one Prescription Exchange then it makes a lot of sense for eRx and Medisecure to amalgamate and merge their operations, then to negotiate with DOH a mutually satisfactory outcome to strengthen and grow the one central PES with the Government being a part, minority, shareholder (say 33%) and agreeing to underwrite 18 cents / script for the next decade (among other irrevocable Ts&Cs).
ReplyDeleteADHA interoperability- the ability for a single solution to coexist with itself, creating an unimaginative framework designed to constrain innovation through the propping up of obsolete solutions embedded in essential infrastructure, operated by some with very questionable values and ethics.
ReplyDeleteReading and listening to the ADHA and DoH in recent years I discovered depths of bad policy, strategy, bad design, and unoriginality I never even knew existed. We would be better off being lead by someone who though Medicare was unsustainable and as for the sick - well let them eat cake.
The first principle of ADoHA should be “Fantasy seldom correlates with reality”
"We would be better off being lead by someone who thought Medicare was unsustainable and as for the sick - well let them eat cake."
ReplyDeleteYou mean Senator Anne Ruston?
Anne Ruston defends past comments that Medicare ‘is not sustainable’ after PM names her as health minister if re-elected
https://www.theguardian.com/australia-news/2022/apr/17/anne-ruston-defends-past-comments-that-medicare-is-not-sustainable-after-pm-names-her-as-health-minister-if-re-elected
They’ll have the Bernie and Frank show running standards next. I doubt there is anything scientific or strategic behind this. My money is on a natural conclusion of a funding model setup to “nudge” the market and give it time to establish a workable business model. Somewhere along the way those behind the scheme have moved on and context and intent has been lost.
ReplyDeleteIt is not clear from all this what impact the Government's apparent attack on the prescription exchanges [PES] will have on Real Time Prescription Monitoring [RTPM]. It would be very interesting to hear peoples considered vies on this. RTPM has taken a huge amount of effort and money to get it deployed (some states are still dragging the chain). My fear is it will get bogged down in the sludge and eventually buried. Does anyone have a more optimistic perspective?
ReplyDeleteFederally directed Digital Health initiatives have been huge costly and embarrassing failures for Governments of both persuasions. The politicians know it, the DOH bureaucrats know it, and the ADHA Board knows it. All have been equally complicit in contributing to the failures through inadequate oversight, governance and accountability, including incompetent policy directives and strategies at all levels.
ReplyDeleteOver $3 billion expended and little to show for it in the most politically sensitive of portfolios. Treating such profligacy as a sunk cost and closing this massive healthIT failure is politically unpalatable. Too big to fail. How then to save face? Find a success story and engineer to take it over?
The DOH and the Government could quite likely see the Prescription Exchange Services as the only success story with any chance of turning the tables to get it out of trouble, solve the political embarrassment dilemma, and provide a way forward to justify the questionable existence of the My Health Record which, to date, has been a total fiasco.
So too does the ADHA Executive and its Board see light at the end-of-the-tunnel if only they can grasp control of the PES and RTPM space, and restate and reposition their mission statement, goals and objectives.
Readers might not see this as "a more optimistic perspective" albeit a distinctly pragmatic and realistic possibility.