Elkhishin and Australian Community Pharmacy Authority
[2008] AATA 1134
•18 December 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 1134
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/2941
GENERAL ADMINISTRATIVE DIVISION ) Re MONA ELKHISHIN Applicant
And
AUSTRALIAN COMMUNITY PHARMACY AUTHORITY
Respondent
DECISION
Tribunal Senior Member Bernard J McCabe Date18 December 2008
PlaceBrisbane
Decision The Tribunal:
1. sets aside the decision under review; and
2. decides in substitution to recommend to the Secretary to the Department of Health and Ageing that the applicant be permitted to supply pharmaceutical benefits from the premises at Tenancy L1-1, 28 Cocoanut Point Drive, Zilzie, Queensland.
......................[Sgd]........................
Senior Member
CATCHWORDS
HEALTH AND COMMUNITY SERVICES – Pharmaceutical benefits – Application for approval for supplying pharmaceutical benefits – Catchment area – Whether the resident population of the catchment area for the proposed pharmacy is, for most of the year, at least 3000 – Significant number of people from within area will naturally and reasonably gravitate or flow to proposed pharmacy – Statutory requirement met – Decision set aside
National Health Act 1953 (Cth), s 99L
Re Hargreaves and Australian Community Pharmacy Authority (1995) 41 ALD 147
Strutt v Australian Community Pharmacy Authority [2006] FMCA 1245; (2006) 92 ALD 608
Re Fraser Coast Pharmacy Pty Ltd and Australian Community Pharmacy Authority [2007] AATA 1472
Re Maryborough/Hervey Bay Friendly Society Chemists Ltd and Australian Community Pharmacy Authority [2008] AATA 932
REASONS FOR DECISION
18 December 2008 Senior Member Bernard J McCabe 1. Ms Mona Elkhishin, the applicant, is a pharmacist. She wants to establish a new pharmacy in the seaside community of Zilzie in central Queensland. She has already acquired premises. She spent a good deal of money fitting out the shop. She is ready to commence trading. But one cannot establish a pharmacy that dispenses pharmaceutical benefits without the permission of the Secretary to the Department of Health and Ageing. That permission will only be granted on the recommendation of the respondent, the Australian Community Pharmacy Authority. The respondent administers an elaborate set of rules made under s 99L of the National Health Act 1953. The rules are found in the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 (PB 23 of 2006) as amended by the National Health (Australian Community Pharmacy Authority Rules) Amendment Determination 2007 (PB 30 of 2007) (“the Rules”). The Rules regulate the location and operation of pharmacies. The respondent has recommended that Ms Elkhishin not be approved to supply pharmaceutical benefits from her premises.
2. Ms Elkhishin has asked the Tribunal to reconsider the respondent’s decision. The parties agreed that the only dispute between them arises out of the requirement in item 113(2)(a) of the Rules that “the resident population of the catchment area for the proposed premises is, for most of the year, at least 3 000”. As a practical matter, it will be necessary for me to decide whether the “catchment area” for the proposed pharmacy in Zilzie includes the populace of Emu Park, which lies immediately to the north of Zilzie. If the catchment area extends beyond Zilzie to include Emu Park, it is agreed more than 3000 people live in the catchment. If the catchment area does not extend to Emu Park, it is clear there are not enough people in Zilzie and other areas nearby to meet the requirements of the Rules. It follows that the meaning of the expression “catchment area” lies at the heart of this case.
The local area
3. Emu Park is located about 40 kilometres to the east of Rockhampton on the Capricorn Coast in central Queensland. Yeppoon, the nearest large town, is located about 20 kilometres to the north. Zilzie is located immediately to the south of Emu Park along a coastal strip. The only way into Zilzie is via Emu Park along Hartley Street. Hartley Street is a well-established thoroughfare. It is straight, paved and not especially busy.
4. Ms Elkhishin proposes operating her pharmacy in the new Seaspray residential development in Zilzie. The Seaspray development is located approximately three kilometres from the retail precinct of Emu Park. There is another pharmacy operating within that retail precinct.
5. The consultants retained by both sides prepared a joint-economic report that analyses some of the population data. The consultants agree that an estimated 1293 people are “usual residents” of the three census collection districts that cover the Zilzie area. The consultants estimate 2223 people are “usual residents” of the five Emu Park census collection districts. The experts agreed on a healthy 5.65% population growth in the area.
6. The population growth in the Emu Park-Zilzie coastal strip has resulted in a good deal of development over the last few years. While there are some older dwellings, a large number of new homes have been erected in the area. Several new housing estates have been developed along and to the south of the Emu Park-Zilzie strip and in adjacent areas. A large aged-care facility has recently been established in Zilzie near the Seaspray estate – although I note it is technically located outside the Zilzie census collection district, so that its residents have not figured in the population estimates for Zilzie and Emu Park.
7. The Seaspray estate includes a sporting facility known as the “Rec Club” and a hotel. The Rec Club incorporates an elaborate gymnasium which includes a lap pool, tennis courts, enclosed areas for fitness classes of various kinds and conference facilities. The Rec Club also houses a restaurant, an automatic teller machine, a doctors’ surgery, a consulting room for a pathology service and the premises to be occupied by Ms Elkhishin’s pharmacy.
8. The proposed pharmacy has already been fitted out in anticipation of a speedy approval by the respondent. Although the shelves remain empty, the fit-out makes it clear Ms Elkhishin intends the retail component of her operation will be slanted towards customers with an interest in weight-loss and healthy living – customers who might be expected to use the services of the gymnasium immediately next door. The link between the two businesses finds concrete expression in the consulting room within the pharmacy premises that is accessible from the gymnasium. Ms Elkhishin explained that she anticipated the room might be used by a dietician or other specialist to see clients of the gym who were also seeking products supplied by the pharmacy as part of a fitness regime.
9. I had the opportunity to spend the better part of a day in the company of the parties’ representatives as we visited the proposed pharmacy site and the surrounding area. The view was instructive. In particular, it enabled me to appreciate the high rate of growth in the area and the ease of access between Emu Park and Zilzie along Hartley Street.
10. The view also included a visit to the existing pharmacy in Emu Park. That pharmacy appears to offer a conventional range of products used by local people and visitors, including hats, diet products, vitamins and other non-prescription medicines and supplements. Many of the items, like pain-killers, sunscreens and Aerogard, could also be found in the nearby general store. There are a number of other retail outlets in the centre, including a bakery, a laundry and several real estate agencies. A number of the shops were empty, and the supermarket had recently closed.
The medical practices in the area
11. The applicant provided me with information about the membership of the gym located in the Rec Club adjacent to the proposed pharmacy. The information was said to be important because of the synergies flowing from the co-location of the two businesses. I accept the applicant intends promoting the link by offering a range of products that might appeal to health-conscious individuals in an attempt to build up a loyal customer base. I was told that membership records from the gym suggest people travel to the Rec Club from all over the local area, including Emu Park, and from as far away as Yeppoon.
12. The relatively small membership of the gym – it has only been opened comparatively recently – and question-marks over the synergies between the two businesses make it difficult to draw firm conclusions from the gym’s membership data.
13. The evidence supplied by the medical centre located adjacent to the proposed pharmacy is more helpful, if only because there is a more obvious connection between the core business of a pharmacy and a doctor.
14. The Family Practice at Zilzie is conducted by doctors from Yeppoon. It was established in April 2008. As of June 2008, it had one full-time equivalent doctor practicing from the premises five days per week. The practice manager indicated in a letter dated 11 June 2008 that she anticipated a second doctor would be added in the short term.
15. I was provided with a list of patients attending the Zilzie practice between April and September 2008. (For privacy reasons, the names of the patients were redacted. Only their addresses were provided. I have made an order under s 35 of the Administrative Appeals Tribunal Act 1975 directing that copies of Exhibit A7 not be published to any person apart from staff of the Tribunal and the representatives of the parties.) Mr Malkiewicz, an economist engaged by the applicant, helpfully produced a map showing the distribution of patients of the Zilzie practice with addresses in Emu Park. That map is Exhibit A6.
16. Exhibits A6 and A7 show that individuals living throughout the Emu Park area visit the doctor at Zilzie. Many of them drive past the rival Emu Park medical practice in Hill Street, Emu Park, on the way. I infer they are not put off by the length of the journey or any obstacles on the way. It is also clear that many of those individuals will leave the doctor at Zilzie with a prescription that can be filled next door (if the proposed premises are approved) or back in Emu Park.
Defining the “catchment area” of the pharmacy
17. I have already explained that I must be satisfied the proposed premises have a catchment area of at least 3000 people before I can recommend an approval. The expression “catchment area” is not defined, but it has been discussed in a number of cases.
18. Deputy President Forgie suggested in Re Hargreaves andAustralian Community Pharmacy Authority [1995] AATA (1995) 41 ALD 147 (at [101]) that “[t]he catchment area is that area from which people may flow or gravitate to the pharmacy.” She accepted there may be more than one pharmacy within a catchment area: at [103]. The concept of “overlapping catchments” was confirmed in Strutt v Australian Community Pharmacy Authority [2006] FMCA 1245; (2006) 92 ALD 608, at [146] per McInnis FM.
19. Deputy President Hack SC adopted this approach in Re Fraser Coast Pharmacy Pty Ltd andAustralian Community Pharmacy Authority [2007] AATA 1472 and Re Maryborough/Hervey Bay Friendly Society Chemists Ltd andAustralian Community Pharmacy Authority [2008] AATA 932. In the latter case (at [14]), the learned Deputy President and Member Kenny formulated the test for determining whether an area fell within the catchment area as a question in the following terms:
is it likely that a significant number of people from within the area in dispute will naturally and reasonably gravitate or flow to the proposed premises?
20. I agree with that approach. Would a significant number of the residents of Emu Park “naturally and reasonably gravitate or flow to the proposed premises?”
21. There is a question over the factors that are thought to affect the flow of patronage to a pharmacy. Deputy President Forgie was reluctant to consider questions of consumer preference in Hargreaves. She explained (at [102]) that evidence about choices may be relevant to the process of a defining a market, “but a market is a different thing from the catchment area.” She said that “In determining [the catchment] area, the actual choices which people will make are not relevant.” She preferred to restrict her attention to “more broadly based considerations … which could either encourage or discourage people from travelling to that pharmacy.” She singled out “considerations of distance and the existence of other attractions in the area” as being of particular relevance.
22. I think the question formulated in Maryborough/Hervey Bay does not require that I make that sort of distinction. It focuses instead on the choices that are realistically open to all of the people in a particular area. The choice will be affected by distance and the proximity of other services to a particular pharmacy. But it will also be affected by a range of other factors, including the availability of parking, the range of other products that are sold in the pharmacy and perhaps even the identity, gender and personal qualities of the pharmacist – just to name a few factors. I do not need to identify each and every factor that might figure in a resident’s decision to choose a pharmacy, or allocate a weight to that preference. I must merely decide whether the ordinary resident of an area would regard a particular pharmacy as a reasonable and practical option in all the circumstances.
23. In this case, residents from every part of Emu Park need only travel a relatively short distance to reach the proposed pharmacy. The Emu Park pharmacy is closer for residents in the northern parts of the suburb, it is true; but the extra time and distance involved in travelling to Zilzie are not great, especially given most residents would be driving a car. (I am satisfied most residents of Emu Park are likely to use a vehicle given the low density of the housing, limited public transport, the topography and the summer heat. Patients of the Emu Park medical centre are certainly likely to travel between the medical centre and the pharmacy of their choice by car. The existing pharmacy and the medical centre are located hundreds of metres apart and separated by a hill.)
24. I do not think distance is an issue for the residents of Emu Park considering whether they might patronise a pharmacy in Zilzie. There are no other physical barriers that would obstruct residents from any part of Emu Park from accessing the site of the proposed pharmacy in Zilzie if they chose to do so.
25. The respondent pointed out that a range of other services was available in the Emu Park shopping centre. As I understand the argument, a person seeking to have a prescription filled was more likely to attend a pharmacy that was adjacent to other services in the course of a multi-purpose journey. The applicant offered a variation on this argument. It was said on her behalf that many patrons of the gym and other services available in Zilzie could be expected to visit the site of the proposed pharmacy in the course of a multi-purpose journey.
26. I have some difficulty with the argument from both sides about the relevance of related services. I accept a visit to the pharmacy for the purpose of having a script filled was likely to be associated with a trip to the doctor. But it is not obvious to me that a person who is sick enough to require medication would feel like shopping or going to the gym, although I acknowledge that not everyone who requires prescription is necessarily debilitated by illness. In any event, I note that the range of services available in the Emu Park shopping centre is very limited. I visited the shopping centre. I cannot accept residents in any part of Emu Park would regard the presence of the adjacent services as a significant reason to prefer the Emu Park pharmacy over an easily accessible alternative in Zilzie. On the other hand, I also doubt whether a significant number of people (apart from members of the gym at the Rec Club and – more importantly – the patients of the Family Practice at Zilzie) would regard the adjacent services as a reason for preferring the applicant’s business.
27. I am satisfied individuals residing throughout Emu Park would regard a pharmacy in Zilzie as a reasonable and practical alternative to the existing pharmacy in Emu Park. I will not speculate as to the motivation of each individual who might prefer one pharmacy over another. It is enough that I anticipate all of the residents of Emu Park would realise they do, in fact, have a realistic and accessible choice if the pharmacy in Zilzie is allowed to commence trading. It follows I accept “a significant number of people from within the area in dispute [ie, Emu Park] will naturally and reasonably gravitate or flow to the proposed premises [in Zilzie]”.
28. In reaching this view, it will be apparent I am not persuaded by the evidence of Mr Meulman, an expert called by the respondent. Mr Meulman insisted in his oral testimony that distance was the most important factor in defining the catchment area. He did not accept that residents of Emu Park would drive past the pharmacy in the shopping centre to patronise a new establishment in Zilzie. He agreed with me that the whole of Emu Park would be regarded as being in the catchment area of a pharmacy located in Zilzie if the existing pharmacy in Emu Park were to close. On that analysis, he would presumably accept Zilzie currently falls within the catchment area for the existing Emu Park pharmacy. His evidence appeared to be premised on the assumption that pharmacies could not share a catchment area. That is wrong.
29. Mr Meulman was also unable to offer a convincing response to the evidence contained in Exhibits A6 and A7 that residents from all over Emu Park were prepared to drive to Zilzie to visit the doctor. The applicant says the data offers powerful support for her contention that people are prepared to travel to access services. I agree with that submission.
Conclusion
30. I am satisfied the catchment area of the proposed pharmacy in Zilzie includes at least:
·The three census collection districts incorporating Zilzie; and
·The five census collection districts incorporating Emu Park that were referred to in the joint-economic report.
31. I do not accept there is any basis for excluding the northern areas of Emu Park from the catchment area. I am satisfied the considerations I have identified would not deter or prevent any person residing in those areas from accessing a pharmacy in Zilzie if he or she chose to do so.
32. Given the concessions that were properly made by the respondent, I have decided to set aside the decision under review and recommend that the applicant be permitted to supply pharmaceutical benefits from the proposed premises.
I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
Signed:................................[Sgd]..............................................
Michael Buckingham, AssociateDates of Hearing 19-21 November 2008
Date of Decision 18 December 2008
Counsel for the applicant Mr C Hughes SC
Solicitor for the applicant Anderssen LawyersSolicitor for the respondent Australian Government Solicitor
4
3
0