Sayegh and the Australian Community Pharmacy Authority

[2005] AATA 1078

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1078

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   N2004/1258

GENERAL ADMINISTRATIVE DIVISION		)
Re		JOHN SAYEGH

Applicant

And THE AUSTRALIAN COMMUNITY PHARMACY AUTHORITY

Respondent

DECISION

Tribunal   Professor I. A. Shearer, Senior Member

Date  28 October 2005

Place  Sydney

Decision   The decision under review is affirmed.

[Sgd]  Professor I. A. Shearer , Senior Member

CATCHWORDS

PHARMACEUTICAL BENEFITS – supply of pharmaceutical benefits – disputed interpretation of Ministerial Rules – proximity of Applicant’s proposed premises – measuring of distance between two premises – the context of Rule 6(b) – the decision under review is affirmed.

National Health Act 1953 – sections 90(3A), 99K(1), 105AD

Smoker v Pharmacy Restructuring Authority (1994) 53 FCR 287

Wood v Australian Community Pharmacy Authority (Fed.Ct, Unreported, 19 December 2002)

Re Levis and Australian Community Pharmacy Authority (Fed. Ct, Unreported, 1 May 1998)

REASONS FOR DECISION

28 October 2005                  Professor I. A. Shearer, Senior Member

1. The applicant, Mr. John Sayegh, seeks review of the decision of the respondent, the Australian Community Pharmacy Authority, made on 24 September 2004 to recommend that the applicant’s application under section 90 of the National Health Act 1953 (“the Act”) to supply pharmaceutical benefits from premises to be located at Shop 4, St. Martin’s Village, 6 St Martins Crescent, Blacktown NSW be not approved by the Secretary, Department of Health.

2. The Secretary is required by section 90 (3A) of the Act to refer applications to the Australian Community Pharmacy Authority. Section 99K (1) of the Act provides that the functions of the Authority are:

“(a) to consider applications under section 90;

(b) to make, in respect of an application under section 90:

(i) a recommendation whether or not the applicant should be approved under that section in respect of particular premises; and

(ii) if an approval is recommended – recommendations as to the conditions (if any) to which the approval should be subject; and

(2) In making a recommendation under subsection (1), the Authority must comply with the relevant rules determined by the Minister under section 99L.”

3. Such a recommendation by the respondent is made reviewable by the AAT by section 105AD of the Act.

4.      The applicant was represented by Mr. H. Woods, instructed by McCarthy Holzberger, Solicitors, South Brisbane. The respondent Authority was represented by Ms. R Henderson, instructed by the Australian Government Solicitor.

FACTS

5.      The applicant, Mr. John Sayegh is a pharmacist registered in New South Wales. He made an application to the Secretary, Department of Health and Ageing, on 14 May 2004 for approval to supply pharmaceutical benefits from a premises in Blacktown NSW. The application was in the nature of a re-location from an approved premises in Cairns Queensland to the proposed premises in Blacktown NSW.

6. The procedure for obtaining an approval pursuant to section 90 of the Act is as follows:

”(a)The applicant pharmacist must apply to the Secretary, Department of Health and Ageing, pursuant to section 90(2) of the Act.

(b)The Secretary must in accordance with section 90(3) of the Act refer the application to the Australian Community Pharmacy Authority;

(c)The Authority is required by section 99K(1) of the Act to consider the application and to make a recommendation whether or not the application should be approved. It may only make a recommendation if the application complies with the relevant Ministerial Rules made by the Minister pursuant to section 99L of the Act. The Rules relevant to the present application are PB8 of 2000, PB9 of 2002, PB13 of 2002, and PB14 of 2004;

(d)The Secretary may pursuant to section 90(3B) of the Act grant approval only if a favourable recommendation has been received from the Authority.”

7.      The application by Mr Sayegh was referred by the Secretary to the Authority on 27 May 2004. The Authority considered the application at its meetings held on 25 June 2004, 23 July 2004, 10 August 2004, 27 August 2004, and 24 September 2004. The outcome of this consideration was that the Authority recommended that the applicant be not approved, on the basis that the requirements of paragraph 6(b)(ii) of the Rules were not met.

8.      On 29 September 2004 the applicant applied for a review of that Decision to this Tribunal. On 4 February 2005 the Tribunal, by consent, ordered that the matter be remitted to the Authority for re-consideration.

9.      The Authority re-considered the application at meetings held on 8 February 2005 and 18 March 2005. It again recommended that the applicant be not approved on the basis that the requirements of paragraph 6(b)(ii) were not met.

10.     On or about 6 April 2005 the applicant requested the Tribunal to proceed with the review of the Authority’s decisions.

RELEVANT LEGISLATION

11.     The relevant law, the interpretation of which is in dispute between the applicant and the Authority, is contained in Rule 6 of the applicable Rules. That Rule requires that:

“(b) The proposed premises [that is, the premises specified in the application] are situated at least:

(i)1.5 kilometres by straight line measurement from the nearest other premises in respect of which a pharmacist is approved under section 90 of the Act; or

(ii)2 kilometres by the shortest lawful access route measured from mid point at floor level of the public access door opening of the proposed premises nearest to the mid point at floor level of the nearest public access door opening of the nearest other premises in respect of which a pharmacist is approved under section 90 of the Act.”

The disputed interpretation of Rule 6(b)

12.     It is agreed between the parties that two existing pharmacies come into consideration, when measuring their proximity to the applicant’s proposed premises. The first of these is Fegents Pharmacy, located at Main Street Blacktown. The second is Chemworld Chemist at Seven Hills.

13.     The distance between the proposed premises and Fegents Pharmacy measured in a straight line (Rule 6(b)(i)) was found in three of the four survey reports obtained to be 1,500.2 metres. The fourth survey report found the distance to be 1,500.34 metres. The difference is immaterial. The distance between Fegents Pharmacy and the applicant’s proposed premises by the shortest lawful access route (Rule 6(b)(ii) was variously found, in the surveys conducted, to be 1,823.1, 1,823.2, 1,832.6, 1,993.4, 1.999, and 2006 metres. The applicant conceded that the last survey could be disregarded for the purposes of these proceedings, and that the measurement could be taken to be less than 2 km.

14.     The distance between the proposed premises and Chemworld Chemist measured in a straight line was conceded by the applicant to be less than 1.5 km and thus it is not necessary to consider the survey reports in this regard. The distance between the proposed premises and Chemworld by the shortest lawful access route was the subject of two surveys, yielding 2,492 and 2,493 metres. The difference is immaterial; and in any event the distance measured in that way exceeds the distance of 2 km set out in Rule 6(b)(ii).

15.     The applicant contends that his proposed premises satisfies the distance requirement from existing pharmacies in the following way. He argues that the words “nearest other premises” in Rule 6(b)(i) and (ii) refer to the same premises. Thus, as a first step in applying the Rule, one locates the nearest premises by means of a straight line measurement. This is Chemworld. However, persons hypothetically considering whether to purchase their pharmaceutical needs from one or the other premises would be unable to travel between the two by a straight line (as the crow flies), but would need to navigate streets and circumvent natural and artificial obstacles. They would thus need to cover the distance by means of the shortest lawful access route. In the case of Chemworld this route exceeds 2 km and thus satisfies limb (ii) of the Rule. On this construction of the Rule it is unnecessary to consider Fegents Pharmacy since it is not the “nearest other premises”.

16.     Ms Henderson for the respondent Authority argued that this was not the proper reading of the Rule. She contended that limbs (i) and (ii) of Rule 6 could refer to different existing premises. Limb (i) would apply where the distance between the proposed premises and an existing pharmacy is less than 1.5 km measured in a straight line. Limb (ii) would apply where the distance between the proposed premises and an existing pharmacy was 1.5 km or more, measured in a straight line, but less than 2 km when measured by the shortest lawful access route.  On this reading of the Rule Chemworld Chemist is “the nearest other premises” by straight line measurement, and Fegents Pharmacy is the “nearest other premises” measured by the shortest lawful access route.

The context of Rule 6(b)

17.     Mr Woods for the applicant argued that the present wording of Rule 6(b), which came into force in July 2002, must be read in the context of the Community Pharmacy Agreement which sheds light on the purpose of the Rule. Cases decided under the old Rule were no longer pertinent to the issue under consideration.

18.     A Community Pharmacy Agreement was first concluded between the Australian Government and the Pharmacy Guild of Australia in 1990. See the discussion by Hill J in Smoker v. Pharmacy Restructuring Authority (1994) 53 FCR 287 at 293-294. Two subsequent Agreements were concluded. The currently applicable Agreement is the Third Community Pharmacy Agreement (2000). Mr Woods argued that a significant change in policy was announced in the Third Agreement in that a preoccupation with concentration of pharmacies in a particular locality yielded to a desire to introduce more competition between pharmacies. In particular he cited the following paragraphs of the Agreement as supporting that view:

“21.3 The content of the Agreement relating to pharmacy locations and new pharmacy approvals encompasses the following changes:

…

amendment of the rules relating to pharmacy relocations to enhance competition consistent with the maintenance of a viable and well distributed pharmacy network;

…

simplification of the distance measurement process both for applicants and the ACPA by measuring distance in a straight line from door to door rather than by public access routes (except in the case of pharmacies in rural locations); and

…”

19.     This change was noted by Lee J in Wood v. Australian Community Pharmacy Authority (Fed. Ct., unreported 19 December 2002, at paragraph 7:

“It can be seen that there has been a change of emphasis from the first agreement made between the Guild and the Commonwealth where rationalisation and reduction of pharmacies was the object to be achieved, to a managed form of competition that is regulated by controlling the approval of pharmacists to supply pharmaceutical benefits at particular premises.”

20.     It was further argued that effect to this policy was given, in relation to long relocations (as the present case is), in clause 28 of the Agreement which stated that the 2 km distance rule (being by shortest lawful access route) for relocating pharmacies would be reduced to 1.5 km (measured in a straight line from door to door) from 1 July 2002.

21.     However, in my view these considerations do not work to override the Rule itself, which clearly provides for alternative measurements. The applicant’s argument rests on the assumption that, by reason of the material surveyed above, the nearest pharmacy must be established by a straight line measurement, and it is that pharmacy, and only that pharmacy, that can be alternatively measured by the shortest lawful access route. This seems to me fallacious. The provisions of the Community Pharmacy Agreement are consistent with the view that the newly introduced straight line measurement is an alternative to the shortest lawful access route and that any other pharmacy less than 1.5 km distant from the proposed pharmacy measured by a straight line, or 2 km measured by shortest lawful access route, fall into consideration for the application of the Rule. Indeed that would make sense of the desire of the Agreement to promote competition and to simplify the method of determining distances between a proposed pharmacy and existing pharmacies. This simplified method would take a straight line measurement, irrespective of natural or artificial obstacles rendering such a route impractical. Only if that distance is more than 1.5 km does one then resort to Rule 6(b)(ii) to determine the distance by the shortest lawful access route.

22.     I must confess that I had some doubts about this reading of the Rule. It could lead to an injustice. I put to counsel the hypothetical case of a river bisecting a town. (A similar scenario was considered by the Tribunal in Re Levis and the Australian Community Pharmacy Authority, unreported, DP McMahon, 1 May 1998, a case decided under the old Rule.) There is an existing pharmacy on one bank; the proposed pharmacy is on the opposite bank 500 metres distant. There is no access route between the two premises other than via a bridge situated 1 km downstream. One would have thought that the distance between the two should be measured solely by the shortest lawful access route and not by a totally impractical straight line route. Yet, what then would be the point of introducing Rule 6 (b) (i) in July 2002 as an alternative to the existing shortest lawful access route criterion, which previously had been the sole determinant? To read the Rule as the applicant would have us read it would be to introduce words in 6(b)(i) that are not there, namely “only if the direct line measurement is a practical route”. This would effectively deny the force of the change, except in cases where the two premises lie along a dead straight road.

23.     It seems that the Authority may have entertained some such doubt when it confined the reasons for its rejection of the applicant’s application to a consideration of Fegent’s Pharmacy as the nearest other pharmacy measured by the shortest lawful access route under 6 (b)(ii). However, before the Tribunal in the present proceedings, which must make the correct or preferable decision, the respondent urged that both limbs of Rule 6 should be considered and that there should be a finding that Seven Hills Chemworld Chemist is the nearest premises measured in a straight line and Fegents Pharmacy the nearest other premises measured by the shortest lawful access route.

24.     In my view it would be enough to find that the nearest existing pharmacy to the proposed premises is Chemworld Chemist, which lies at a distance of less than 1.5 km. Thus Rule 6(b)(i) alone applies, and the application must fail. It is unnecessary to consider Fegents Pharmacy which lies more than 1.5 km from the proposed premises measured by a straight line but less than 2 km by the shortest lawful access route. But if Fegents Pharmacy were to be considered the application would fail by reason of Rule 6 (b)(ii).

25.     The decision under review is affirmed.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of

Signed:         Associate

Date of Hearing                   23 August 2005
Date of Decision  28 October 2005
Counsel for the Applicant                          Mr H. Woods
Solicitor for the Applicant                           Holzberger, Solicitors, South Brisbane
Counsel for the Respondent                     Ms R. Henderson
Solicitor for the Respondent                      Australian Government Solicitor