Martin and Secretary, Department of Health and Ageing
[2004] AATA 902
•27 August 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 902
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2003/751
GENERAL ADMINISTRATIVE DIVISION ) Re JOHN MARTIN Applicant
And
SECRETARY, DEPARTMENT OF HEALTH AND AGEING
Respondent
DECISION
Tribunal Senior Member McCabe Date27 August 2004
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ...................[Sgd]......................
Senior Member
CATCHWORDS
HEALTH LAW – cancellation of pharmaceutical approval – applicant holds pharmaceutical approval – approval is in respect of pharmaceutical business that is not functioning – whether it is appropriate for the respondent to allow an extension of time for applicant to begin business – decision affirmed
National Health Act 1953
Shaffer v Secretary, Department of Health and Aged Care [2002] FCA 1028
The Pharmacy Guild of Australia v Australian Community Pharmacy Authority [1996] 1001 FCA 1
REASONS FOR DECISION
27 August 2004 Senior Member McCabe introduction
1. A pharmacist is only permitted to dispense pharmaceutical benefits within the meaning of the National Health Act 1953 from particular premises if the pharmacist is approved by the Secretary of the Department of Health and Ageing: s 90, National Health Act 1953 (“the Act”). This case deals with a decision by the Secretary to cancel an approval issued to Mr John Martin in respect of his premises at 110 Enoggera Rd, Newmarket.
2. Mr Martin acquired the pharmacy premises in question in April 2000. The pharmacy had already been closed for over 12 months at that point, and Mr Martin has never carried on a pharmacy business from that site. (He operates another pharmacy further down the road.) He has asked the Minister not to cancel the approval that he was given in April 2000 because he plans to open a pharmacy across the road in a new shopping centre. But the centre has not been built yet. The developer says the project will proceed but cannot give a firm date when construction will commence, let alone when it will be finished. The Minister’s delegate has given a number of extensions (that is, the delegate has agreed on a number of occasions not to cancel the approval). It appears the delegate’s patience has been exhausted.
3. I think the decision to cancel the approval is the correct and preferable one in the circumstances. I will explain my reasons below.
The material before the tribunal
4. The Tribunal was provided with the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. A number of other documents were also tendered in evidence:
• Two maps of the local area [exhibits 2, 7];
• A statement of the applicant dated 24 March 2004 [exhibit 3];
• A statement of Steven Holzberger dated 24 March 2004 [exhibit 4];
• A statement of Mark Stockwell dated 24 March 2004 [exhibit 5];
• An undated statement of Mark Greer [exhibit 6];
• Two statements of Ms Readell [exhibits 8, 11] ;
• A letter from Stockwell Developments to the applicant dated 15 March 2000 [exhibit 9];
• The lease agreement schedule [exhibit 10];
• The shopping centre development application [exhibit 12];
• A folder with information concerning the Pharmaceutical Benefits Scheme and approval application information [exhibit 13].
5. Several witnesses also gave evidence:
• the applicant;
• Ms Maryline Raedell;
• Mr Mark Greer;
• Mr William Stockwell.
6. I accompanied the applicant and the representatives of the parties to the site of the premises which housed the pharmacy that closed in December 1998. I also walked over the vacant lot on which the shopping centre is to be built. It is located about 200 metres from the site of the original premises. The applicant’s existing pharmacy was visible from the vacant lot.
The facts
7. The pharmacy located at 110 Enoggera Rd, Newmarket was closed in December 1998. The building that housed the pharmacy had been condemned, and is now empty. Mr Maidens was the owner of the pharmacy at the time it ceased trading. He had an approval to dispense pharmaceutical benefits under the Act. Mr Maidens asked the delegate of the Minister not to cancel the approval prior to the sale to Mr Martin. The delegate agreed, and the approval remained in place even though the business had ceased trading from that location.
8. Mr Martin purchased the pharmacy in April 2000. He asked the delegate not to cancel the approval even though he had no immediate plans to open a pharmacy on that site. He explained he was in talks with the developer of a vacant block opposite the pharmacy location, at 390 Newmarket Rd. The developer proposed the construction of a large shopping centre. Mr Martin wanted to establish a pharmacy in the centre, and he foreshadowed an application to the delegate to transfer the approval in respect of the existing site to the new centre.
9. The applicant’s purchase of the pharmacy from the previous owner was in substance the purchase of an approval granted under the Act in respect of those premises for use elsewhere.
10. The shopping centre development is taking a long time to come to fruition. The project manager is WA Stockwell Pty Ltd. Mark Stockwell gave evidence on behalf of the applicant about the progress of the development. Mr Stockwell said there had been long delays because of planning changes and because of the need to obtain a commitment from Reading International Inc, the company on whose behalf the property was being developed. Early plans for the centre involved the construction of a number of cinemas. Those plans changed. Copies of the most recent approvals from the Brisbane City Council were tendered in evidence.
11. Mr Stockwell said the project was (at the time of the hearing) at the detailed design and documentation stage of the development. Major tenants, including Coles, had already indicated their intention to take space in the centre. The next step was to call for tenders, which would take several months. Construction would take at least 12-15 months to complete after the construction work began. At the time of the hearing, the commencement date had not been (and could not be) determined.
12. Mr Martin said he had been repeatedly assured by Mark Stockwell that the project would go ahead, but it had been plagued by unanticipated delays. I am satisfied Mr Martin has accepted those assurances in good faith. He made it plain in his statement that he is very enthusiastic about the project. He thinks the centre will become the focal point for retail activity in the area. Mr Greer, a real estate agent with whom Mr Martin had been dealing, gave evidence that he shared the applicant’s optimism. Mr Martin is frustrated by the delays, but he said in evidence he had already paid a deposit on the new shop in anticipation of the centre being completed. Lease documentation was tendered in evidence.
Mr Martin communicated the assurances about the imminent commencement of the project to the respondent in order to convince it that the approval should not be cancelled. The history of Mr Martin’s dealings with the respondent are set out in his statement, in paragraph 10. It is not proposed to detail the chronology here - it shows a history of decisions made by the respondent between April 2000 and August 2003 to exercise the discretion not to cancel the approval. The last two decisions that effectively granted extensions of time were made on the basis that the Australian Community Pharmacy Authority (the ACPA) would recommend an approval be granted in respect of the new premises. The ACPA did not make the recommendation sought.
13. The respondent’s notice of cancellation and reasons for decision were included in a letter to the applicant’s solicitor dated 30 July 2003 (document T3). Mr Ciocca, the delegate, says in the letter:
I am satisfied that the approved pharmacists are not now and have not been carrying on business as pharmacists at the approved premises since 10 April 2000. I consider that allowing this situation to continue would involve an unacceptable delay in the supply of pharmaceutical benefits to the community that is serviced by Newmarket, and that I would be derelict in my duty to facilitate the efficient distribution of pharmaceutical benefits within the community if I were to further postpone the making of a decision under s 98(3) of the Act.
the legislative scheme
14. Part VII of the Act regulates the provision of pharmaceutical benefits. In particular, the Act establishes a scheme under which the Commonwealth pays benefits in respect of medicinal preparations declared by the Minister and supplied by pharmacists. The Pharmaceutical Benefits Scheme is very expensive to operate. The Commonwealth is understandably concerned to ensure the scheme operates efficiently. One way in which it exercises control is through the approval of pharmacies who distribute the benefits.
15. Section 90 of the Act provides the respondent may grant an approval to a pharmacist to supply pharmaceutical benefits from particular premises. An application under s 90 might be new or it might be an application from the holder of an existing approval to effectively transfer his or her existing approval to a new location. As a formal matter, a transfer is effected by cancelling the old approval and issuing a fresh approval in respect of the new premises.
16. Section 90(3A) says most applications must be referred to the Australian Community Pharmacy Authority (ACPA) before an approval may be given by the respondent. (Section 90(3AAA) contains an exemption, but that is not relevant for present purposes.) The ACPA is established under Division 4B of Part VII of the Act. If the ACPA considers an approval ought to be given, it makes a recommendation to the Secretary pursuant to s 99K. The Secretary cannot grant an approval without a positive recommendation.
17. Section 99L of the Act says the Minister may determine the rules which must be applied by the ACPA when deciding whether or not to make a recommendation. The relevant determination is No PB 8 of 2000. The Determination provides for the grant of new approvals where there is a “definite community need”, or where the application relates to a remote location. The Determination also addresses the relocation of existing pharmacy approvals.
18. Section 98 deals with situations where a pharmacist has ceased to carry on business from approved premises. Section 98(3) gives the Secretary the discretion to cancel an approval by notice in writing where the holder of the approval has ceased to carry on business from the premises in question. The Secretary is not obliged to cancel the approval. The discretion is broad: see Shaffer v Secretary, Department of Health and Aged Care [2002] FCA 1028.
19. The decision will ordinarily be made by a delegate of the Secretary. The Secretary has issued guidelines to assist the delegate - although the decision must be made in each case having regard to all the relevant circumstances. A document titled “Deactivation of Pharmacist Approvals made under s 90 of the National Health Act 1953 - Guidelines” are set out at document T6 ff13-19.
20. The guidelines note “deactivation” is an administrative concept that is not recognised by the statute. “Deactivation” is a short-hand term used to describe a process in which the Secretary refrains from revoking an approval temporarily where it is anticipated the pharmacy will re-open “within a reasonably short time frame (not more than 6 months).” If the deactivation is permitted to allow the applicant to move to new premises, the Secretary would cancel the existing approval once the new premises were ready and issue a new approval (assuming the ACPA had made a recommendation in those terms).
The question for the respondent: how long is too long?
21. The existing approval was deactivated at the request of the former owner of the pharmacy when it closed. The applicant asked the Secretary to preserve the status quo while the new premises were established in the shopping centre. It was a proper request when it was first made, and the respondent was right to accede to it. But the Secretary says the delay is now unacceptable. The Guidelines contemplate deactivation for six months. The approval has languished since December 1998, and the applicant has been foreshadowing a move to the new premises since April 2000. At the time of the cancellation decision – indeed, at the time of the hearing before the Tribunal – the construction of the shopping centre had not even commenced. It is unclear when the centre will be ready, assuming it is completed. If construction started today, it would still not be open for business for at least 1-15 months, according to Mr Stockwell.
22. None of this is the applicant’s fault. Even so, the decision-maker must decide how much time an approval should be permitted to languish before it exercises the discretion to cancel the approval. That necessitates consideration of the policy objectives underlying what the applicant refers to as the “relocations scheme”. These objectives can be gleaned from the terms of the Act itself, the relevant Determination and the terms of the Third Community Pharmacy Agreement (exhibit 13).
23. The Third Community Pharmacy Agreement (“the Agreement”) is based on a number of principles identified in clause 4.1 of the document. One of the principles is the provision of “a stable and predictable environment for community pharmacy”. A second principle is “maximising the value to the taxpayer by encouraging an effective and efficient community pharmacy network.” The principles also include a reference to the desirability of building on the cooperative approach evident in the Second Community Pharmacy agreement. (I note that agreement, which was described in The Pharmacy Guild of Australia v Australian Community Pharmacy Authority [1996] 1001 FCA 1, refers to the desirability of a system which permits the relocation of a existing pharmacy approvals.) The Agreement goes on to identify a number of more specific objectives. Clause 4.2 refers to the desirability of:
· “…a network of well-distributed, accessible, and viable community pharmacies…”(cl. 4.2(a));
· “…an effective, efficient and well-distributed community pharmacy service…” (cl. 4.2(c));
· “…the fostering of a stable and viable community pharmacy sector in Australia” (cl. 4.2(j)).
24. I think the Act, the Determination and – in particular – the associated documents evince an intention to permit pharmacists to readily relocate pharmacies. Part of that process may involve “selling” approvals. If a market in approvals exists, it is particularly important that the regulator makes approval decisions in a principled and predictable way. The respondent says that has occurred in this case: if anything, it has erred in favour of extending the approvals even though the policy provides deactivation was a temporary state of affairs lasting no longer than six months.
25. There is good reason for the six month time limit on deactivation. Approval holders should not be able to close their pharmacy and “sit” on approvals. The market is recognised and tolerated because it allows the efficient and timely “reallocation” of approvals. Allowing approval holders to close pharmacies and withhold approvals from the market until they identify an advantage for themselves would only encourage strategic behaviour that is not necessarily consistent with the objects of the scheme.
26. The decision-maker should not exercise the discretion inflexibly, of course. Circumstances may arise where it is appropriate to extend the deactivation. The delays in this case are a good example: the applicant was genuinely frustrated by the delays, although they might have been predictable in a project that was still in the planning stages. There is also good reason to believe a pharmacy in the shopping centre would promote more efficient and convenient distribution of pharmaceutical benefits, as the applicant asserts. I note the ACPA approved the relocation from August 2001 until July 2003, although it declined to give further approvals after that date. But there will come a point where additional extensions become inappropriate given the objectives of the scheme.
27. The applicant’s interests must also be taken into account. If the decision to cancel the approval is affirmed and is assumed to take effect on 8 August 2003, he will not be able to “on-sell” the approval and recover the investment he made in “purchasing” it in 2000.
28. I think we have reached the point in this case where further extensions are inappropriate. The applicant requires an indefinite extension, and that is not justified. The cancellation of the approval will cause him to suffer a loss, but the investment he made was necessarily speculative – he took a gamble on the completion of the shopping centre within a reasonable time frame. The respondent has been generous in allowing him a good chance to recoup his investment. But the gamble has not paid off. If and when the centre is completed, the respondent and the ACPA might consider whether a fresh approval ought to be given in respect of the premises. In doing so, they will no doubt consider the interests of the local community and the rights of the applicant and his partner who run another pharmacy nearby. In the meantime, the local community continues to be served by that pharmacy.
conclusion
29. The respondent’s decision to cancel the approval is affirmed.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member McCabe.
Signed: [Sgd]
Associate: Thomas RitchieDate/s of Hearing: 25 March 2004
Date of Decision: 27 August 2004
The applicant was represented by Mr Holzberger.
The respondent was represented by Mr Collins.
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