Newman and Australian Community Pharmacy Authority
[2010] AATA 1055
•23 December 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 1055
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/0287
GENERAL ADMINISTRATIVE DIVISION ) Re MATTHEW NEWMAN Applicant
And TERRY FOOTE Applicant
And
AUSTRALIAN COMMUNITY PHARMACY AUTHORITY
Respondent
DECISION
Tribunal Senior Member Bernard J McCabe Date23 December 2010
PlaceBrisbane
Decision The Tribunal sets aside the decision under review and decides in substitution that a recommendation be made for the application to be approved. ...............[Sgd]...............................
Senior Member
CATCHWORDS
HEALTH AND AGEING – pharmacists – application for approval to supply pharmaceutical benefits from proposed premises – whether fewer or more than 3000 people reside in the catchment area – definition of a catchment area – issue of gravitation towards a pharmacy – expert reports – minimum population of catchment in excess of 3000 – decision set aside.
National Health Act 1953 (Cth), ss 90, 99K, 99L
Trade Practices Act 1974 (Cth)
Elkhishin and Australian Community Pharmacy Authority [2008] AATA 1134
Re Fraser Coast Pharmacy Pty Ltd andAustralian Community Pharmacy Authority [2007] AATA 1472
Re Hargreaves and Australian Community Pharmacy Authority [1995] AATA 326
Re Maryborough/Hervey Bay Friendly Society Chemists Ltd andAustralian Community Pharmacy Authority [2008] AATA 932
Strutt v Australian Community Pharmacy Authority [2006] FMCA 1245
REASONS FOR DECISION
23 December 2010 Senior Member Bernard J McCabe 1. Matthew Newman and Terry Foote are pharmacists. They have applied for approval to supply pharmaceutical benefits from proposed premises at Willowbank, near Ipswich in Queensland. The respondent, the Australian Community Pharmacy Authority, recommended that the application not be approved. The Authority says the applicants have not satisfied the requirements in the National Health (Australian Community Pharmacy Authority Rules) Determination 2006 (“the Rules”). In particular, the Authority says fewer than 3000 people reside in the catchment area for the proposed pharmacy. The applicants disagree. They have presented their own evidence suggesting more than 3000 people reside in the area.
2. I am satisfied at least 3000 people live in the catchment area. In those circumstances, the reviewable decision dated 18 December 2009 must be set aside and the Tribunal recommends that the application be accepted. I explain my reasons below.
The rules
3. Section 90(1) of the National Health Act 1953 (“the Act”) says a person may apply to open a pharmacy that supplies pharmaceutical benefits (ie, medicines which are subsidised by the government through the pharmaceutical benefits scheme) at a particular place. The decision to grant an approval under s 90 is vested in the Secretary although the decision is typically made by a delegate. In either event, the application is referred to the Authority to obtain a recommendation pursuant to s 99K. Section 99K(2) says the Authority must observe any rules laid down by the Minister pursuant to s 99L. The Rules I have already mentioned are rules for the purpose of s 99L, which means they are binding on the Authority, and upon the Tribunal when standing in the Authority’s shoes on review.
4. Item 113(3)(a) in Schedule 1 Part 2 of the Rules provides that the Authority must be satisfied “the resident population of the catchment area for the proposed premises is, for most of the year, at least 3000”.
The catchment area
5. The expression “catchment area” is not defined, but it has been discussed in a number of cases including Re Hargreaves andAustralian Community Pharmacy Authority [1995] AATA 326, 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. All of these cases were cited to me in argument, along with my reasons in Elkhishin and Australian Community Pharmacy Authority [2008] AATA 1134. The cases reflect a range of views on the Tribunal as to the correct approach to the expression “catchment area”.
6. In Hargreaves, DP Forgie observed (at [101]) that “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.” DP Forgie added that the expression is typically used in relation to reservoirs and other geographical features. In the pharmacy context, she said (at [101]) the expression means “that area from which people may flow or gravitate to the pharmacy.” She explained (at [103]):
In determining [the catchment] 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 not 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.
7. Significantly, the Tribunal concluded in Hargreaves that more than one pharmacy might operate within a catchment area (at [101]). The potential for overlapping catchments was confirmed in Strutt v Australian Community Pharmacy Authority [2006] FMCA 1245 at [146] per McInnis FM. That conclusion is obviously correct – but it does call into question whether the expression “gravitate” is the best one in the circumstances. My difficulty with the word “gravitate’ in the analysis of a catchment area is that it carries with it an implication that residents are guided by unseen, inexorable forces akin to gravity. That approach may not do enough to focus attention on the choices that are practically open to the residents of a particular area who consume pharmaceutical benefits.
8. I note that the Explanatory Statement issued by the Minister to accompany the Rules (exhibit one at pp 35-59) uses the word “gravitate” (at p 46). For better or worse, the word has become a feature of the process.
9. DP Hack used the word ‘gravitate’ in the course of his reasons in Re Fraser Coast Pharmacy Pty Ltd andAustralian Community Pharmacy Authority but emphasised the importance of looking at what residents are likely to do in the face of a choice. The learned Deputy President also accepted the distinction made in Hargreaves between analysing a catchment area and the market definition process. That makes sense. Defining a market for the purposes of Part IV of the Trade Practices Act 1974 is a more sophisticated inquiry directed to a different end – although the two processes have enough in common that the market definition process might hold some lessons for those inquiring into catchment areas. DP Hack also acknowledged that difficulties would arise if too much regard was had to subjective factors that affected individual choices.
10. Subsequently, DP Hack and Member Kenny refined the analysis in Re Maryborough/Hervey Bay Friendly Society Chemists Ltd andAustralian Community Pharmacy Authority. In that case, the Tribunal put the question like this (at [14]):
“[I]s 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. I acknowledged that test in the course of my reasons in Elkhishin although I added (at [22]):
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.
12. Mr O’Donovan, for the respondent, urged me to apply the test articulated in the Maryborough/Hervey Bay case. He said the comments I made in Elkhishin were unhelpful to the extent that they suggested an open-ended inquiry into consumer preferences and other matters was warranted. If my comments in Elkihishin are thought to require an investigation into the idiosyncratic preferences of individuals, I would say at once that was not my intent. I think the extract I have reproduced in these reasons makes it clear that the decision-maker should have regard to evidence about the area and its occupants that might shed light on whether the residents were likely to regard the proposed pharmacy as a reasonable and practical option, so that they could be expected to gravitate towards it. Evidence about the size and distribution of the population and traffic networks and other physical features of the area may well be relevant. But the decision-maker might also derive some assistance in particular cases from the results of surveys of residents and other information that might also be gathered for the purpose of defining a market.
The evidence in this case
13. As it happens, the definition of the catchment area in this case is relatively clear-cut. It can be decided on the basis of the evidence presented by the parties. I also had the benefit of undertaking a view of the relevant area.
14. The applicants submitted a report prepared by Foresight Partners. That report proposed a catchment area that includes Harrisville and an area to the south-east of Rosewood which extends along the Rosewood-Aratula road for several kilometres. Foresight Partners said the catchment did not include most of Amberley. On that basis, Foresight partners estimated that 3270 persons lived within the catchment area at March 2010.
15. The respondents submitted a report prepared by Macroplan Australia, another firm of consultants. That report concluded the catchment area included the resident population at RAAF Amberley, which is located to the north of the proposed pharmacy. Mr Turnbull, the consultant who wrote the report, estimated that 171 people resided at Amberley. He identified an additional 175 persons who were within the Macroplan catchment but who were excluded from the Foresight Partners catchment. But the Macroplan report said the residents of Harrisville and a large area to the southeast of Rosewood should be excluded. 2711 people resided within the catchment identified in the report.
16. The authors of each report gave evidence at the hearing. Mr McCracken, of Foresight Partners, and Mr Turnbull, of Macroplan Australia, were questioned about their assumptions, methodology and conclusions. Mr McCracken said the area south-east of Rosewood that was in dispute included around 330 persons, with about 240 of those individuals living to the north of Lairhopes Road, closer to Rosewood. The disputed area around Harrisville was home to another 300 people. During cross-examination, Mr McCracken conceded that a large area along the Rosewood-Aratula Rd to the south-east of Rosewood should not have been included in the catchment area. In the witness box, he drew a line on the map running roughly parallel to the Rosewood-Aratula Rd but further east – but not as far east as the boundary of the Macroplan catchment. He agreed that the residents of the area to the west of his revised boundary were more likely to go to the pharmacy in Rosewood given the ease of access and other services that were available there.
17. I was surprised that Mr McCracken agreed to draw a crude line on the map when invited to do so in the course of his evidence. His evidence on this point did not appear as carefully considered as one would hope. He conceded in any event that this case was finely balanced.
18. Mr Turnbull was an impressive witness. He was questioned at length about his methodology. He explained that he preferred to use the data available in relation to meshblocks rather than the larger Australian Bureau of Statistics (“ABS”) Census Collection Districts (“CCD”). A meshblock is a smaller unit comprised of around 30-60 households. Mr Turnbull explained that it was now the smallest geographical unit that is used by the ABS. He said it was a more sensitive and reliable tool for measuring population. He readily made concessions (by including the residents of Amberley, for example) and demonstrated an excellent command of the data. He said the residents to the south-east of Rosewood would find it more convenient to travel to Rosewood and were unlikely to access the proposed premises given the road network. He also opined that the residents of Harrisville were more likely to go directly to Yamanto along the Ipswich-Yamanto Rd given the relative distances and other facilities available at that centre.
19. I generally prefer the evidence of Mr Turnbull. His analysis was obviously rigorous and clearly explained. He demonstrated a superior command of the data and his methodology (most obviously the use of meshblocks) appears to offer a more accurate measure of the population. In particular, I accept his delineation of the boundaries of the catchment area to the south-east of Rosewood. My experience on the view of the area confirmed his opinion that the road network in the area directed residents towards Rosewood rather than the proposed premises in Willowbank. I am satisfied the residents of that area would not regard the proposed pharmacy as a reasonable and practical option.
20. The evidence in relation to Harrisville is less clear-cut. Mr Turnbull said residents would head for Yamanto because of the road network and the attractions of Yamanto. Mr McCracken said residents could easily access Willowbank, and were likely to do so because they might prefer the Cunningham Highway to a secondary road. It seems it is a matter of opinion on which reasonable people might disagree. For my own part, I was inclined to accept from my observations that residents of Harrisville were more likely to travel to Yamanato given the other attractions there and the fact the two centres are roughly equi-distant – but I accept it is a finely balanced decision. In those circumstances, I am inclined to accept the residents of Harrisville would gravitate towards both Yamanato and the proposed premises in the sense that either venue would be regarded as a reasonable and practical option. The alternatives are such that the choice between the two would come down to idiosyncratic preferences, and the Tribunal has repeatedly warned that those matters cannot be taken into account.
21. Mr Holzberger, for the applicants, pointed out in his submissions that Mr Turnbull did not dispute Mr McCracken’s estimate of around 490 persons living in Harrisville. My own notes of Mr McCracken’s evidence suggest he contended for a lower figure of around 300 individuals in Harrisville, but I accept his opinion was not challenged. I have no reason to doubt that at least 300 people live in Harrisville, and perhaps as many as 490.
Conclusion
22. The applicants’ case suggests the catchment area includes over 3000 residents. If the area south-east of Rosewood is excluded from the Foresight Partners’ catchment area, the resident population within the catchment falls just below the minimum. If the residents of Harrisville are also excluded, the population falls substantially below the threshold of 3000. But what if the 300 or so residents of Harrisville are included along with the 171 residents of Amberley (and perhaps another 170 persons included in the Macroplan assessment that lived outside the Foresight Partners’ catchment area), albeit that the residents living south-east of Rosewood are included? In other words, what if the Macroplan assessment were accepted with the proviso that the residents of Harrisville should be included in the catchment?
23. By my calculations, the Macroplan estimate of 2711 plus at least 300 residents of Harrisville results in a minimum population of just over 3000 persons.
24. In those circumstances, the decision under review must be set aside. I decide in substitution that a recommendation be made that the application be accepted.
I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
Signed: ........................[Sgd]...................................................
Patrick MacDonaldDates of Hearing 29 and 30 September 2010
Date of Decision 23 December 2010Solicitor for the Applicant Mr S Holzberger, Maunsel Pennington Solicitors
Counsel for the Respondent Mr D O’Donovan
Solicitor for the Respondent Mr D Lukic, Australian Government Solicitor
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