Neelabindu Pty Ltd and Australian Community Pharmacy Authority

[2009] AATA 532

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 532

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/3151

GENERAL ADMINISTRATIVE  DIVISION		)
Re		NEELABINDU PTY LTD

Applicant

And AUSTRALIAN COMMUNITY PHARMACY AUTHORITY

Respondent

DECISION

Tribunal Ms A F Cunningham (Senior Member)

Date17 July 2009

PlaceHobart

Decision The decision under review is affirmed.

.[Sgd Ms A F Cunningham]

Senior Member

CATCHWORDS

HEALTH AND COMMUNITY SERVICES - pharmaceutical benefits - application for approval for new pharmacy (definition of catchment area) - whether the resident population of the catchment area for the proposed pharmacy, for most of the year, at least 3,000 - decision under review affirmed

National Health Act 1953, ss 90, 99K, 99L

National Health (Australian Community Pharmacy Authority Rules) Determination 2006 as amended, Item 113 contained in Part 2 of Schedule 1, Item 201 of Schedule 2

Fourth Community Pharmacy Agreement (the Agreement) entered into on the 16 November 2005, (amended on 2 March 2007)

Re Hargreaves and Australian Community Pharmacy (No 2) [1995] 39 ALD 147

Re Fraser Coast Pharmacy Pty Ltd and Australian Community Pharmacy Authority [2007] AATA 1472

Uzuncakmak and Australian Community Pharmacy Authority {2008] AATA 472

Re Maryborough/Hervey Bay Friendly Society Chemists Ltd and Australian Community Pharmacy Authority [2008] AATA 932

Drake and Minister for Immigration and Ethnic Affairs No 2 (1979) 2 ALD 634

Strutt v Australian Community Pharmacy Authority & Ors (2006) 92 ALD 608

REASONS FOR DECISION

17 July 2009 Ms A F Cunningham (Senior Member)   

1.      The applicant, Neelabindu Pty Ltd applied for approval to supply pharmaceutical benefits from premises located at 1A Veronica Crescent (part of 22 Norwood Avenue), Norwood in the State of Tasmania.  In accordance with the applicable legislation, the application was referred to the Australian Community Pharmacy Authority (the Authority) who considered the application and made a recommendation that it not be approved.  The Authority was not satisfied that the catchment area for the proposed premises contains a resident population of at least 3,000 for most of the year.  This was an application for review of the Authority's decision. 

The Legislation

2. The application is made pursuant to section 90 of the National Health Act 1953 (the Act). This section makes provision for the Secretary to approve a pharmacist to supply pharmaceutical benefits at particular premises. Sub-section 90(3A) of the Act requires that applications be referred to the Authority. In accordance with section 99K the Authority is to consider applications made under section 90 and make a recommendation as to whether or not the application should be approved. The Secretary is not bound by a favourable recommendation but may not grant approval without one. In making the recommendation, the Authority must comply with the relevant rules determined by the Minister under section 99L. The relevant rules are the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 (as amended) (the Rules).

3.      For an application for a new pharmacy not involving cancellation of an existing approval, Item 113 contained in Part 2  of Schedule 1 is relevant and reads as follows:

"New Pharmacy (general)

1.  The proposed premises are at least 1.5 km, in a straight line, from the nearest approved premises..

2.   The Authority is satisfied that:

(a)   the resident population of the catchment area for the proposed premises is,         for most of the year, at least 3,000; and

(b)   there is the equivalent of at least 1 full-time prescribing medical practitioner          practising in the catchment area for the proposed premises".

4.      It was agreed and the Tribunal accepts that the application complies with paragraphs 1 and sub-paragraph 2(b). 

5. The issue for the Tribunal's determination is whether the requirements of sub-paragraph 2(a) are met. Item 201 of Schedule 2 regarding operational aspects of the proposed pharmacy is also relevant. The Tribunal was informed and accepts on the basis of the material presented, including the T Documents submitted pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, that these requirements have also been satisfied.

Catchment Area

6.      The term is not defined in the Act or the Rules.  It is referenced in the Explanatory Statement for the Rules with respect to applications for relocation of an additional pharmacy to a rural locality.  Under Item 107 the catchment area required is for a resident population of at least 8,000.  In the Note it is stated: 

"The catchment area of a pharmacy is generally considered to be one in which the population would naturally and reasonably gravitate toward the pharmacy.  In considering a catchment area, the Authority will take account of matters such as traffic networks and natural barriers.  It will also consider other services or attractions in an area which may influence the flow of the population (eg people may be likely to travel further to a shopping centre for their shopping needs rather than to a single corner store that might be closer).

In areas where there is one or more existing pharmacies, the catchment area of the proposed pharmacy is likely to overlap, to some degree, with those at the existing pharmacy". 

7.      The term has been considered by the Tribunal on several occasions.  Deputy President S A Forgie's interpretation of the term in Re Hargreaves and Australian Community Pharmacy (No 2) [1995] 39 ALD 147 at 169 has been adopted by the Tribunal in subsequent decisions. Deputy President Forgie said at paragraph 101:

"In the context of the Act and of the scheme of pharmaceutical restructuring it seeks to achieve, it seems that the words "catchment area" should be accorded their ordinary dictionary meaning. That is to say, the catchment area serviced or to be serviced by a pharmacy is the area populated by those people who may be serviced by the pharmacy.

...

The catchment area is that area from which people may flow or gravitate to the pharmacy.  It is not the area over which the pharmacist may range".

Deputy President Forgie went on to say at paragraph 103:

"A catchment area, by way of contrast, is concerned with the area populated by those who may come to the pharmacy.  In determining that area, the actual choices which people will make are not relevant.  What is relevant in identifying the catchment area are many matters which people consider relevant in making their choice as to the area in which they will available themselves of a particular service.  It is all a matter of degree.  It seems to me that considerations of price and substitutability of other goods are too peculiar to each individual to be relevant in determining a catchment area which is concerned with people who may use the pharmacy rather than with those who will. Considerations of distances and the existence of other attractions in the area are more broadly based considerations and do seem to me to be relevant in determining the catchment area.  They are features which could either encourage or discourage people from travelling to that pharmacy.  Other features which would tend to do the same would include the distribution of the population in the area, people's ease of access to Walloon, geographical features of the area and other services and attractions located in the area.  The existence of other pharmacies in the general area is not relevant in itself for that is more associated with the consumer's choice, with competition and with a market than with a catchment area".

8.      Earlier in the decision, Deputy President Forgie commented that people will make choices about "the direction in which they flow" and "the services to which they gravitate" based on various factors.  However some of those influential factors are more relevant to determining a market than the catchment area.  Deputy President Forgie considered issues such as distance and the existence of other attractions in the area relevant in determining the catchment area as they would either encourage or discourage people from travelling to a particular pharmacy. 

9.      Deputy President Hack SC in Re Fraser Coast Pharmacy Pty Ltd and Australian Community Pharmacy Authority [2007] AATA 1472 made the following comments when considering the concept of those persons who might gravitate to a particular premises:

"Entire areas would be sterilised, proper competition would be prevented and community needs would not be met if the test for determining a catchment area was based solely upon the mere possibility of use. And equally, potential use by only a small proportion of persons within a given area could not be regarded as, of itself, creating a catchment area defined by reference to the place from whence those persons came. Something more, beyond the mere possibility of use, is required to give meaning to the term “catchment area” in its present context.

In my view, when the issue is whether a particular area is within or without the catchment area of a proposed pharmacy the question that needs to be considered is this – “is it likely that a significant number of customers from within the area in dispute will naturally and reasonably gravitate or flow to the proposed premises?”

10.     This decision and that of the Tribunal in Uzuncakmak and Australian Community Pharmacy Authority [2008] AATA 472 were considered by the Tribunal in Re Maryborough/Hervey Bay Friendly Society Chemists Ltd and Australian Community Pharmacy Authority [2008] AATA 932, where the Tribunal concluded at paragraph 14:

"We are satisfied that the appropriate question to be asked in determining a catchment area is this:  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?"

11.     Senior Member Handley in Uzuncakmak (supra) rejected the use of the word "significant" noting that it was not used in the Hargreaves decision and does not appear in the policy documents published by the respondent.

12.     The ACPA Applications Handbook published in March 2007 defines the catchment area at clause 4.1 as follows:

"The catchment area of a pharmacy is generally considered to be one in which the population would naturally and reasonably gravitate toward a pharmacy.  In considering a catchment area, the ACPA will take account of matters such as traffic networks and natural barriers.  It will also consider other services or attractions in an area which may influence the flow of the population (eg people may be likely to travel further to a shopping centre for their shopping needs rather than to a single corner store that may be closer)".

13.     Mr Holzberger submitted that adoption of the adjective "significant" is suggestive of a quantitative measure of persons who may be expected to actually use the pharmacy and is a process fraught with peril where the attractiveness of the proposed premises is not readily apparent. 

14.     Interpretative references in the policy documents to the term catchment area as used in the Rules are consistent in referencing a population which would naturally and reasonably gravitate towards the pharmacy.  The Tribunal has no hesitation in referencing policy documents in these circumstances where the term is not legislatively defined and where the references are not inconsistent with the term as it appears in the legislation (see Drake and Minister for Immigration and Ethnic Affairs No 2 (1979) 2 ALD 634).

15.     Mr Dillon, referred the Tribunal to the Fourth Community Pharmacy Agreement (the Agreement) entered into on the 16 November 2005, (amended on 2 March 2007), between the Commonwealth of Australia and the Pharmacy Guild of Australia, which he submitted, is reflective of an overarching policy intent being the creation of a network of viable pharmacies.  Mr Dillon maintained that Deputy President Hack's interpretation of the term is consistent with this policy intent.  Mr Dillon argued that the Rules requirement that the catchment contain 3,000 people for a new pharmacy does not provide for the exercise of any discretion.  Further that the number proposed is a minimum which must be satisfied by the application and supporting evidence.  The ACPA's Handbook says in relation to Rule 113:

"The Rule aims to address community need for pharmacy services.  It targets areas where there is no local pharmacy, which contains a population sufficient to ensure the viability of a pharmacy and in which PBS prescriptions are being generated".

16.     The Act has the affect of regulating premises from which pharmaceutical benefits may be supplied and has no application to pharmacy premises that do not administer PBS prescriptions.   The overarching intention of the scheme is to create a sustainable and viable network of viable pharmacies across Australia to ensure that the population has reasonable access to PBS pharmaceuticals.  Mr Dillon submitted that the Tribunal must have a high degree of satisfaction that the resident population of the catchment is 3,000 or otherwise the viability of the proposed pharmacy must be in doubt.  Mr Dillon maintained that for these reasons the Tribunal should be satisfied that:

"It is likely that a significant number of people form within the area in dispute will naturally and reasonably gravitate or flow to the proposed premises". 

17.     Mr Dillon further contended that it is the applicant who bears the evidentiary burden of satisfying compliance on the balance of probabilities.  The Tribunal accepts this proposition which is consistent with the approach formulated by Deputy President Forgie in Re Hargreaves (see para 92). 

18.     Both parties approached the task of calculating the resident population of the catchment area using the Australian Bureau of Statistics (ABS) Census Collection Districts.  This approach is an accepted means of calculating the resident population referred to in the Rules.

19.     It is the applicant's contention that the catchment area of the proposed pharmacy constitutes the entire suburb of Norwood and includes ABS Collection Districts 6022103, 6022106, 6022107, 6022108, 6022109, 6022110, 6022205. 

20.     The respondent contends that the catchment area of the proposed premises is more limited than that proposed by the applicant.  It is submitted that only one half of collection districts 6022108 and 6022110 should be included and that collection district 6022205 should be excluded form the catchment.  

The Evidence 

21.     Dr Robert Johnstone, Consultant Town Planner, gave evidence on behalf of the applicant.  Rob Milner, General Manager for Planning with Coomes Consulting Group, gave evidence on behalf of the respondent.  Both expert witnesses submitted written proofs of evidence and gave their evidence concurrently to the Tribunal following a site visit. 

22. David Pearson, Director with the Community Pharmacy Branch of the Pharmaceutical Division in the ACT gave evidence by telephone. Mr Pearson has a working knowledge of the Act and Rules in that his section is responsible for the administration of section 90 of the Act and associated Rules. Mr Pearson is also a registered pharmacist and is employed in a part-time capacity at the Chapman Pharmacy in the ACT.

23.     Mr Pearson stated that the basis of the catchment requirement for 3,000 people arises from the provisions of the Fourth Community Pharmacy Agreement.  The Agreement's objective is to ensure a commercially viable and sustainable network of community pharmacies dispensing PBS medicine.  The Agreement was reached following negotiations between the Commonwealth and the Pharmacy Guild who proposed the minimum numbers to ensure viability based on their extensive experience. 

24.     The suburb of Norwood is a discrete area substantially encircled by open space.  To the north is a sports ground and recreation reserve, to the west lies the Launceston Golf Club, Carr Villa Reserve and the Carr Villa Memorial Park.  To the south lies the Tasmanian Techno Park and further south is the Youngtown Regional Park.  The North Esk River flows along the eastern side of the suburb.

25.     Norwood is located approximately seven kilometres south-east of the Launceston Central Business District.  It is a residential suburb, characterised by conventional residential densities and principally single detached dwellings.  The suburbs which surround Norwood are Newstead to the north, St Leonards to the south-east, Kings Meadows and Sandhill to its south-west and Punch Bowl to its west.

26.     There is no existing pharmacy within the suburb of Norwood.  The proposed site at 1A Veronica Crescent is located on the corner of Norwood Avenue and Veronica Crescent.  The existing building houses a general convenience store offering groceries and newsagency supplies as well as a dry-cleaning service within that part of the building facing onto Norwood Avenue.  The proposed pharmacy is to be located within a vacant section of the building which fronts Veronica Crescent.  The two properties have access to a ten space shared car park which is accessible from Veronica Crescent.  The use of the site as a pharmacy is permitted under the provisions of the Launceston Planning Scheme.  Council is thus required to issue a permit and may impose any conditions it deems appropriate.

27.     There are four other pharmacies which operate proximate to the proposed site, three being within the Kings Meadows shopping district and a fourth at Newstead.  During the course of the site visit as well as visiting the proposed premises, the Tribunal visited each of the existing four pharmacies.  The Tribunal agrees with Mr Milner's summary that the three pharmacies at Kings Meadows are co-located with a range of health related and retail attractions, are highly visible and accessible from the main arterial Hobart road.  Further, that the interplay of accessibility by car, shopping opportunities and medical facilities makes Kings Meadows a strong attraction for residents in the south of Launceston to gravitate to for their pharmaceutical needs.  The existing pharmacies offer synergies with other medical and personal purposes. 

28.     The pharmacy in Newstead is situated on a highly exposed and accessible site on Penquite Road.  It is adjacent to the Newstead Medical Centre which has twelve medical practitioners and Newstead X-Ray.  The other services within the Newstead Shopping Centre include a newsagency, post office, Coles supermarket, video hire, fashion retailers, take-away foods and restaurants.  There is also accessible car parking.  On the other hand Norwood has no notable activity centre and is serviced by isolated local shops.  At the proposed location apart from the adjacent convenience store, a new small supermarket development has recently opened on the corner of Penquite Road and Norwood Avenue.  This development is directly opposite the Peace Haven Masonic Gardens, an aged care facility and adjacent to the Presbyterian Care Tasmania Retirement Village.  On the south side of the Presbyterian Care Village, there is a doctor's clinic and a mini-mart and take-away shop. 

29.     Whilst the proposed premises would be the closest pharmacy for virtually all existing residences within the suburb of Norwood in terms of direct distance, the road network within the suburb is complicated and anything but direct.  The major arterial road, Quarantine Road, lies east-west and cuts through the lower portion of the suburb from Penquite Road to Hobart Road which runs through the Kings Meadows shopping district.  A collector road, Boiton Hill Road which runs into Opossum Road, runs east-west through the suburb of Norwood and also connects with Hobart Road.

30.     Both Dr Johnstone and Mr Milner agreed that pedestrian journeys of between four and five hundred metres are considered acceptable.  There was agreement that the proposed pharmacy would attract patronage from persons who reside within this walking distance.  Mr Milner identified this area as extending east to Penquite Road and south to Heathfield Street.  Mr Milner also conceded a peripheral catchment area east past Penquite Road and south towards Charlton Street.  Beyond this point, Mr Milner argued that a range of choices are available to persons who travel by car.  He noted that whilst Norwood is serviced by a bus route it operates at thirty minute intervals from 7.24 am to 6.28 pm on weekdays and at two hourly intervals from 6.28 pm weekdays, Saturdays and Sundays.  He contended that therefore the most flexible, attractive and convenient mode of transport within and out of Norwood is by private vehicle.  Mr Milner maintained that once a person is in their car, the attraction of the other services afforded at Kings Meadows and Newstead become persuasive. 

31.     The site visit certainly indicated that both Kings Meadows and Newstead Shopping Centres offer a large variety of services including allied health services which are accessible and well frequented.  Both the arterial and collector roads identified above provide easy access for Norwood residents to the Kings Meadows Centre.  Penquite Road provides direct access to the Newstead Shopping Centre.   Whilst the travel distances may be slightly greater, the route is direct and uncomplicated by contrast to the road network within Norwood via which residents would reach the proposed pharmacy location.

32.     Whilst Dr Johnstone recognised the attractiveness of Kings Meadows and Newstead for multiple shopping trips, he contended that the proposed pharmacy would draw those persons embarking on more limited shopping expeditions for instance for pharmaceutical products and minimal groceries.  This may be the case, however Dr Johnstone provided no mechanism by which this proportion of the population could be measured.  

33.     Dr Johnstone conceded that there would be a proportion of Norwood residents who work in the city who would use pharmacies closer to their place of work.  Further he agreed, that the attractiveness of the proposed pharmacy diminishes for those residents located south of Quarantine Road.

34.     During the course of the site visit we stopped at a point on Charlton Street just south of Boiton Hill Road which Mr Milner suggested forms a ridge line in the topography of the district.  Mr Milner maintained that it is at this point where the land falls away to the south that residents would be more likely to make the decision to travel by car rather than walk to the proposed site.  Once the decision to travel by car is made, Mr Milner maintained that a range of other factors come into play which are likely to outweigh the attractiveness of the proposed site. 

35.     The collector districts north of this point include 6022106, 6022103, 6022109 and 6022107.   Mr Milner maintained that south of this point it could not be said that residents would naturally gravitate to the proposed premises.  Mr Milner suggested that it would be just as convenient for residents south of this point to access the pharmacies in Kings Meadows by either Opossum or Quarantine Roads.  It is for these reasons that Mr Milner had only included one half of the resident population for the collection districts 6022108 and 6022110 and excluded collection district 6022205. 

36.     It was Dr Johnstone's evidence that he had not identified the collector districts but that they had been presented to him for his consideration.  He contended that the districts identified are those from which one could reasonably expect that people would travel to the proposed pharmacy.  Dr Johnstone said that there would not be many places except for isolated rural centres where it could be expected that there would be 100% patronage from a particular collector district.  Dr Johnstone maintained that from the collector districts identified, a substantial proportion would gravitate to the proposed pharmacy except for those south of Quarantine Road where he conceded that the proportion would be less than 50%. 

37.     Dr Johnstone conceded however, that Norwood is poorly connected by the road system north to south and also to a degree west to east.  The Tribunal accepts Mr Milner's opinion that this is a relevant detracting factor for the proposed pharmacy and that the convenient and direct routes provided by Opossum and Quarantine Roads to Kings Meadows and Penquite Road to Newstead, together with the services offered at those centres would be persuasive for Norwood residents once they make the decision to travel by car. 

38.     Although Dr Johnstone argued that there is a proportion of the Norwood resident population that would choose a proposed pharmacy for limited shopping expeditions, as commented above, he was unable to identify how this could be translated to a number which the Tribunal could take into account.  Whilst the proposed pharmacy may offer a convenient alternative for a small proportion of the residents of Norwood, in the Tribunal's view, it could not be said to be offering an unmet need.  In fact there was no evidence presented by the applicant as to this factor.  It was acknowledged that the residents of Norwood are currently accessing their pharmaceutical benefits from the other pharmacies identified as well as those in other districts, including the city. 

Conclusion

39.     The Tribunal accepts Mr Dillon's submission that it must be satisfied of the relevant legislative requirements on the balance of probabilities.  Further that no discretion is afforded which permits the Tribunal to construe the legislation beneficially in the applicant's favour.

40.     The requirement of the catchment area for this new proposed pharmacy is a residential population of at least 3,000 people.  The Tribunal accepts that this provision is supported by the terms of the Agreement between the Commonwealth and the Pharmacy Guild and related policy statements. 

41.     The census figures for the collector districts that are not in dispute equate to between 2,486 (on the respondent's figures) and 2,491 (on the applicant's figures).   The concession by the respondent is made on the basis that all of the residents for collector districts 6602103, 6602106, 6602107 and 6602109 will use the proposed premises.  It is accepted that catchment areas may overlap and that the population within those areas should not be apportioned.  (See Strutt v Australian Community Pharmacy Authority & Ors (2006) 92 ALD 608). The respondent further concedes that one half of the collector districts 6022108 and 6602110 could be expected to use the proposed premises. The Tribunal accepts that the respondent has not apportioned the districts but has based its measure on the population spread above and below the identified ridge line.

42.     Whilst the census figures were collected in 2006 it is accepted that it is unlikely that there would have been much change in the resident population since that date.  The collector districts in dispute are one half of 6602108 and 6602110 and the entirety of 6602205.  The Tribunal accepts Mr Milner's evidence that once people make a decision to travel by car the attractions and services offered by the shopping districts of Kings Meadows and Newstead become persuasive factors. 

43.     Whilst the proposed premises may afford a measure of convenience for a small proportion of the residents in Norwood, it is the Tribunal's view that its location on a side street and lack of associated services is unlikely to have any gravitational pull for those residents who are not located within walking distance.

44.     Dr Johnstone maintained that the proposed premises would still be attractive to those persons undertaking limited shopping expeditions.  This evidence however was not quantified and Dr Johnstone provided no evidence as to the actual likelihood of this occurring.   It is unconvincing.

45.     The other collector district in dispute is 6602205 which lies south of Quarantine Road.  For the reasons outlined above, Mr Milner maintained that the Tribunal could not be satisfied that people from within this area would naturally and reasonably gravitate to the proposed premises.  Mr Milner had undertaken a comprehensive analysis of the district and critically assessed which collector districts could be included within the definition of catchment area.  On the other hand Dr Johnstone assessed the requirements on the basis of collector districts already identified.  Dr Johnstone referred to population characteristics of the catchment but did not indicate to the Tribunal how these factors would be influential.  Dr Johnstone had not undertaken a site analysis prior to preparing his report but prepared it on the basis of written material received.  Whilst Dr Johnstone maintained that all of the collector districts identified within the suburb of Norwood should be included in the catchment area, the Tribunal is not so persuaded.

46.     The Tribunal must be satisfied that it is likely that a (significant) number of people from within the area in dispute will naturally and reasonably gravitate or flow to the proposed premises.  The Tribunal considers that Dr Johnstone's evidence amounts to little more than a mere possibility.  As stated by DP Hack in the Fraser Coast decision the test requires something more than a mere possibility of use. The Tribunal must be satisfied that "it is likely" that these customers will naturally and reasonably gravitate to the proposed premises.  The Tribunal needs to be satisfied that at least 3,000 people would gravitate towards the proposed premises.  On the respondent's figures this amounts to a deficit of some 509 people and this is on the basis that all of the people for the conceded districts will frequent the proposed premises. 

47.     The Tribunal prefers the evidence of Mr Milner that the collector districts identified by him contain those residents who would be likely to naturally and reasonably gravitate or flow to the proposed premises.  The requirement is for a resident population of at least 3,000 people.  The evidence falls well short of this number.  Accordingly the Tribunal affirms the decision under review. 

I certify that the 47 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member)

Signed:  .[Ros Hunt]...........................
               R Hunt (Administrative Assistant)

Date/s of Hearing  9, 10 June 2009
Date of Decision  17 July 2009
Counsel for the Applicant         Mr S Holzberger
Solicitor for the Applicant          Michael Flaherty Solicitor
Counsel for the Respondent     Mr A Dillon
Solicitor for the Respondent     Ms S Clifford, Australian Government Solicitor