Fred IT’s e-scripts ‘monopoly’ a dangerous precedent

6 minute read

MediSecure says it’s still in business but former ACCC chair Alan Fels urges for more transparency.

MediSecure has less than four weeks to transfer its eScripts catalogue to Fred IT but its interim chief executive has told HSD the company is future-focused and just “getting on with it”.

In May, the DoHAC awarded a tender to Fred IT’s eRx as sole provider of prescription exchange services for PBS-listed drugs.

Fred IT Group is owned by Telstra Health and the Pharmacy Guild of Australia. Telstra Health also owns Medical Director, a market leader in GP practice management software.

DoHAC had tendered for national electronic prescribing systems and said that up to three providers could be awarded the job. In a controversial move, the $99.2 million contract was awarded to just one provider, FredIT.

Medisecure had also submitted a bid for the tender. They were established nearly 15 years ago when the federal government directed that electronic prescribing should be a part of the national health infrastructure. Both Medisecure and Fred IT’s eRX solutions were incentivised by the government.

The recent tender win makes FredIT’s eRx the future sole provider of prescription exchange services for PBS-listed drugs pushing Medisecure out of the Australian script market.

Mark Bouw, MediSecure’s interim CEO, said that with regard to the current “market forces at play” his focus was on ensuring that Australian patients can access their medication throughout the transition.

He told Health Services Daily that the focus right now was on MediSecure’s people and the consumers. He said that commercially his view was a broad one.

“We have a very strong balance sheet and a strong focus on moving forward. Our technology has global applications and not just for electronic prescribing.

“We’re focused on our next phase of development. Our board and shareholders are very excited about the future,” Mr Bouw said.

In a business pivot since the decision, MediSecure elected to focus on private scripts. Paul Frosdick from Medisecure said previously that scripts for non-PBS listed and off-label drugs formed about 30% of the electronic prescription market.

However, HSD understands that this has now been kyboshed by the DoHAC.

Mr Bouw said he would not comment on the private script opportunity but that he wouldn’t take anything off the table.

“We’ll turn over every rock on the beach in terms of growth opportunities. You won’t see this brand go away,” he said.

Professor Allan Fels, former chair of the Australian Competition and Consumer Commission, warned that transparent governance was needed. 

“The fact is that granting exclusivity can create monopoly power and therefore needs very careful consideration,” he told HSD.

He confirmed that as the Fred IT decision was a government decision it was exempt from ACCC scrutiny. However, he cautioned for transparency.

“Under the National Competition Policy we had 20 years ago government decisions that restricted competition had to be subjected to independent transparent review.

“This does not seem to be happening with respect to this decision and among other things I urge more transparency about this kind of decision,” he said.

A DoHAC spokesperson told HSD that the existing electronic transfer of prescriptions arrangements were no longer fit for purpose. They said that costs were rising without incentivising innovation, and that the existing arrangements “did not recognise nor promote the growth of electronic prescriptions”.

The department spokesperson also said that there were currently “limited controls to give certainty to health consumers around the security, safety and availability of prescriptions”. They said finances were also a factor in the decision making.

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“The best value-for-money outcome for health consumers was determined to be a single provider, Fred IT,” the DoHAC spokesperson said.

They added that DoHAC was working closely with Fred IT to ensure “higher standards of service than were possible under previous arrangements”.

The DoHAC said that the decision would improve competition in the market.

“For instance, there are now transparent and common arrangements for funding for software vendors connected through eRx,” the DoHAC spokesperson said.

David Dahm, founder of the International Healthcare Standards and Ethics project, said that software vendors have cause for significant concern and that the government decision was a “dangerous precedent”.

“It sends a really bad market signal to anybody who’s developing software for the government. It’s an absolute warning signal to the entire industry that if you do business with the government, you could lose the shirt off your back,” Mr Dahm said.

Mr Dahm, who is also a chartered accountant, said the lack of redundancy of a critical system created a risk and that the creation of a monopoly was a hazard.

“It’s just an absolute commercial hazard, and a financial, social, and legal hazard. Some framework has to exist so that all stakeholders have confidence in the openness and transparency in how this platform will promote a level playing field for both consumers and third party vendors,” he said.

Mr Dahm said he was also concerned that the patient management system Medical Director was owned by Fred IT which will have the electronic script exchange monopoly come 30 September. There may be advantages afforded Medical Director in its integration with eRx that limit the competitiveness of other vendors, he said.

Mr Dahm also pointed out that the Pharmacy Guild, which has a vested interest in prescriptions, owns a large share of Fred IT and has financially supported the current government via donations to political parties.

He said concerns were raised from the significant amount of money that has been donated to the Labor party by the Pharmacy Guild, “which could call into question the impartiality of the process”.

“This is an important issue that the whole of Australia needs to listen to carefully. It’s a gateway to creating monopolies across all medical and allied health software systems.

“Without appropriate government oversight it could lead to reduced and suboptimal systems in third-3arty software programs which can impact on patient care,” Mr Dahm said.

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