Federal Court of Australia

Koutsouroupas v Minister for Health and Aged Care [2024] FCA 677

ORDERS

THE COURT ORDERS THAT:

1.    The originating application be dismissed.

2.    The applicants pay the respondent’s costs as agreed or assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

KENNETT J:

1    The applicants are the proprietors of pharmacy businesses and franchisees in the Chemist Warehouse chain of pharmacies. Most are approved pharmacists under the National Health Act 1953 (Cth) (the Act) in respect of particular premises but also operate from other premises under the Chemist Warehouse name. The lawfulness of their operations is potentially affected by amendments that were made to the National Health (Pharmaceutical Benefits) (Conditions of Approval for Approved Pharmacists) Determination 2017 (Cth) (the Determination) by the National Health Legislation Amendment (Conditions of Approval for Approved Pharmacists) Instrument 2023 (Cth) (PB17 of 2023) (the Instrument). They seek declarations that items 5 and 18 of the Instrument are invalid. Because the applicants seek declarations only as to the validity of the Instrument, and their standing to do so is not contested, it is not necessary to discuss their individual circumstances in detail.

The Act

2    Part VII of the Act provides for pharmaceutical benefits. Section 85(1) provides that “[b]enefits shall be provided by the Commonwealth, in accordance with this Part, in respect of pharmaceutical benefits”. “Pharmaceutical benefits” (defined in s 84) are, in substance, drugs in various forms. However, the “benefits” referred to in s 85 (to be provided “in respect of” pharmaceutical benefits) are forms of financial assistance.

(a)    Section 86 provides for a person who is an eligible person under the Health Insurance Act 1973 (Cth) to “receive pharmaceutical benefits under this Part without the payment or provision of money or other consideration other than a charge made in accordance with section 87”.

(b)    Section 87(1) provides that an approved pharmacist (or other practitioner) is not to demand or receive payment for provision of a pharmaceutical benefit, other than a payment from the Commonwealth, subject to the succeeding provisions of s 87. The other subsections of s 87 govern the amounts that may be charged from various categories of person.

(c)    Under s 89, a person is (with limited exceptions: see s 89A) “not entitled to receive a pharmaceutical benefit” unless it is supplied:

by an approved pharmacist, at or from premises in respect of which the pharmacist is for the time being approved, on presentation of a prescription written by a PBS prescriber in accordance with this Act and the regulations, or, in such circumstances as are prescribed, on communication to that pharmacist, in the prescribed manner, of a prescription of a PBS prescriber

(d)    Division 3 of Part VII establishes a regime for the determination of prices for medications and for payments to approved pharmacists and approved medical practitioners. Section 99 confers on such a practitioner an entitlement to be paid, by the Commonwealth, the relevant amount determined for each pharmaceutical benefit supplied.

3    Generally, therefore, it is only an “approved pharmacist” who can supply a pharmaceutical benefit under the Act and receive payment from the Commonwealth in respect of the provision of that pharmaceutical benefit under s 99.

4    Section 90 provides for the approval of pharmacists by the Secretary. The relevant provisions of s 90 for present purposes are as follows.

(1)     Subject to this section, the Secretary may, upon application by a pharmacist for approval to supply pharmaceutical benefits at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at those premises.

…

(2)     Where a pharmacist desires to supply pharmaceutical benefits at more than 1 premises, a separate application under subsection (1) shall be made in respect of each of the premises and, where approval is granted in respect of 2 or more premises, a separate approval shall be granted in respect of each of the premises.

(3)     Subject to this section, where an approved pharmacist desires to supply pharmaceutical benefits at premises other than premises in respect of which approval has been granted, the Secretary may on application by the approved pharmacist, grant approval in respect of those other premises.

…

(3A)     Subject to subsections (3AA), (3AE) and (13), an application under this section must be referred to the Authority.

(3AA)     Subsection (3A) does not apply to an application for an approval arising out of a change in the ownership of a pharmacy situated at particular premises if the change results or resulted from:

(a)     the sale of the pharmacy; or

(b)     the acquisition, following the death of a person who was the owner or one of the owners of the pharmacy, of that person’s interest in the business of the pharmacy; or

(c)     a change in the constitution of a partnership that owned the pharmacy;

if the pharmacy is to continue to operate at the same premises.

…

(3AE)     Subsection (3A) does not apply to an application for an approval if:

(a)     the application arises out of an expansion or contraction of particular premises (the original premises) at which a pharmacy is situated; and

(b)     the expanded or contracted premises occupy any of the space occupied by the original premises.

…

(3B)     An approval may be granted under this section in respect of an application that has been referred to the Authority under subsection (3A) or (3AF) only if the Authority has recommended the grant of the approval, but the Secretary may refuse to grant an approval even if the grant has been recommended by the Authority.

(3D)     The Secretary must not grant approval under this section to a pharmacist in respect of particular premises if the Secretary is satisfied that on or after the day the approval would otherwise be granted:

(a)     the pharmacist would be unable to supply pharmaceutical benefits at the premises; or

(b)     the premises would not be accessible by members of the public for the purpose of receiving pharmaceutical benefits at times that, in the opinion of the Secretary, are reasonable.

(4)     Nothing in this section authorizes the Secretary to grant approval to a pharmacist in respect of premises at which that pharmacist is not permitted, under the law of the State or Territory in which the premises are situated, to carry on business.

…

(5AA)     If, under this section, a pharmacist is granted approval to supply pharmaceutical benefits at particular premises, the pharmacist may also supply pharmaceutical benefits from those premises.

…

(6)     For the purposes of this section, a reference to a pharmacist is taken to include a reference to a person who owns, or is about to own, a business for the supply of pharmaceutical benefits at particular premises.

…

5    In these reasons I will refer to premises in respect of which a pharmacist has been approved under s 90(1), (2) or (3) as “approved premises”.

6    Four things will be observed at this point.

(a)    Section 90 assumes the existence of State and Territory laws that govern practice as a pharmacist including the right to practise at particular premises (s 90(4)). This serves as a reminder that the Act regulates the availability of a Commonwealth subsidy, not the lawfulness of any particular things done or not done in the supply of medications. Correspondingly, “pharmacist” is defined in s 4 of the Act as a person registered as a pharmacist under a law of a State or Territory providing for such registration. Thus, the persons who may apply for approval, and become “approved”, for the provision of pharmaceutical benefits under the Act are a subset of the persons registered and permitted to practise as pharmacists under State and Territory law.

(b)    Approval is sought and granted in respect of particular “premises” (s 90(1)-(3), (3D), (4)). A pharmacist is not approved under s 90 in any general sense, but only for the purpose of supply at specified premises. Approval is not to be granted in respect of premises if pharmaceutical benefits cannot be supplied to members of the public “at” those premises (s 90(3D)) or if supply at those premises is not permitted under State or Territory law (s 90(4)).

(c)    Except in cases where an application involves continued use of “premises” already approved (s 90(3AA), (3AE)), the application must be referred to “the Authority” (which is the Australian Community Pharmacy Authority established by s 99J). The Authority is to make recommendations to the Secretary. It must frame those recommendations in accordance with “rules” which the Minister must determine under s 99L. Since 1991 (at which time the Authority was known as the “Pharmacy Restructuring Authority” and the rules were styled as “guidelines” (Commonwealth of Australia Gazette (No GN 3, 23 January 1991) 280), those rules have required close attention by the Authority to the location of premises for which approval was being sought, including by reference to the distance of those premises from existing pharmacies.

(d)    Although approval is necessarily granted for the supply of pharmaceutical benefits “at” particular premises, it is expressly provided that such approval brings with it permission to supply pharmaceutical benefits “from” those premises (s 90(5AA)). The distinction between supply “at” and supply “from” premises is important in this case.

7    Further to the last of these points, before the commencement of the National Health Amendment (Pharmaceutical Benefits) Act 2007 (Cth) (the 2007 Amendment Act), s 90(1) provided:

(1)     Subject to this section, the Secretary may, upon application by a pharmacist who is willing to supply pharmaceutical benefits on demand at particular premises, approve that pharmacist for the purpose of supplying pharmaceutical benefits at or from those premises.

(Emphasis added.)

8    Subsections (2) and (3), similarly, referred to supply “at or from” premises in respect of which approval was sought.

9    The 2007 Amendment Act also inserted s 90(5AA).

10    Section 92A of the Act provides that approval as an approved pharmacist is subject to conditions. Section 92A(1) sets out certain conditions (not relevant here) to which an approval is always subject, together with:

(f)     any other condition (including, but not limited to, a condition relating to premises) determined by the Minister under subsection (1A).

11    Section 92A(1A) then provides that, for the purposes of s 92A(1)(f), “the Minister may, by legislative instrument, determine conditions”.

12    Conditions imposed by or under s 92A have legal significance by way of s 92A(3), which provides:

(3)     For the purposes of section 95, any conduct of an approved pharmacist that is a contravention of the conditions specified in this section shall be deemed to be conduct that is an abuse of his or her approval.

13    Conduct that is an “abuse” of a pharmacist’s approval is central to the power of the Minister under s 95(1) and (7) of the Act to suspend or revoke the approval of a pharmacist. Those steps may only be taken after receiving a report from a Committee of Inquiry to which the relevant matter has been referred, and only if the Minister is satisfied (by reference to the Committee’s report and the evidence before the Committee) that the pharmacist has “been guilty of conduct which is an abuse of the approval” (s 95(8)). (Matters arising from the present respondents’ business models, under which it appears that they supply pharmaceutical benefits to customers attending at both approved and unapproved premises, have been referred to Committees of Inquiry under s 95.)

The Determination

14    A determination was first made for the purposes of s 92A(1)(f) on 10 November 1995 (No PB 16 of 1995). The conditions set out in that determination related to standards of practice, such as compliance with relevant codes of ethics and respectful treatment of patients.

15    The Determination currently in force was made on 25 September 2017 (No PB 70 of 2017). It also contains provisions in relation to standards of practice. Section 9, as in force prior to its purported amendment by the Instrument, provided (relevantly):

9     Claims for payment

(1)     An approved pharmacist must not make a claim for payment from the Commonwealth in relation to the supply of a pharmaceutical benefit unless it was supplied at or from approved premises for the pharmacist.

(2)     An approved pharmacist must not make a claim for payment from the Commonwealth in relation to the supply of a pharmaceutical benefit if that pharmaceutical benefit was never at approved premises for the pharmacist.

(3)     An approved pharmacist must not make a claim for payment from the Commonwealth in relation to the supply of a pharmaceutical benefit unless the pharmacist, or an agent of the pharmacist, was present at approved premises for the pharmacist at the time the pharmaceutical benefit was dispensed.

(4)     An approved pharmacist must not make a claim for payment from the Commonwealth in relation to the supply of a pharmaceutical benefit on the basis of a prescription (other than a medication chart prescription) unless the pharmacist, or an agent of the pharmacist, has seen the prescription at approved premises for the pharmacist.

Note:     A supply in accordance with subsection 89A(1) of the National Health Act 1953 (supply of pharmaceutical benefit without prescription) or on an order lodged under regulation 33 of the National Health (Pharmaceutical Benefits) Regulations 2017 (prescriber bag supplies) would not be a supply on the basis of a prescription.

(5)     An approved pharmacist must not make a claim for payment from the Commonwealth in relation to the supply of a pharmaceutical benefit on the basis of a medication chart prescription unless the pharmacist, or an agent of the pharmacist, has seen the chart or a copy of the chart containing the prescription at approved premises for the pharmacist.

(6)     Subsections (2) to (5) do not limit subsection (1).

16    The pre-amendment version of s 9 thus required any supply of a pharmaceutical benefit for which a claim was to be made under the Act to:

(a)    be made “at or from” approved premises;

(b)    involve supply of a pharmaceutical benefit (that is, a drug) that had passed through the approved premises;

(c)    be made after the pharmaceutical benefit had been “dispensed” by the pharmacist (or their agent) who was physically present at the approved premises, and after the pharmacist (or their agent) had seen the relevant prescription at those premises.

The Instrument

17    Item 5 of Schedule 1 to the Instrument is one of several items that amend definitions in s 5 of the Determination or insert new definitions. The aspect of item 5 that is the subject of complaint is the definition of “dispensing step” (an expression not hitherto used, or defined, in the Determination). The definition is lengthy and its actual contents need not be canvassed here. It encompasses a large number of administrative steps associated with the supply of medications by a pharmacist. The real problem arises with later provisions (in new ss 10 and 11) which specify where relevant “dispensing steps”, if they occur, must take place.

18    Item 18 in Schedule 1 to the Instrument repeals the existing ss 8 and 9 of the Determination and substitutes new ss 8-16. The aspects of these provisions that are the subject of complaint are as follows.

(a)    New s 9 provides:

9     No purported supply of pharmaceutical benefits at or from unapproved premises

Purported supply at unapproved premises

(1)     An approved pharmacist must not purport to supply a pharmaceutical benefit at premises that are not approved premises for the pharmacist.

Note:     A reference to the supply of pharmaceutical benefits at premises is a reference to the supply of pharmaceutical benefits to people who are at the premises when the supply is made (see subsection 4(3) of the Act).

Purported supply from unapproved premises

(2)     An approved pharmacist must not purport to supply a pharmaceutical benefit from premises that are not approved premises for the pharmacist

(b)    New ss 10 and 11 provide:

10     Requirements for supply of pharmaceutical benefits at or from approved premises—dispensing steps

(1)     An approved pharmacist must not supply a pharmaceutical benefit at or from approved premises for the pharmacist if a requirement in this section is not met in relation to the dispensing of the benefit.

Benefit must be at approved premises when dispensing steps performed

(2)     The benefit must be at the approved premises when each dispensing step in the dispensing of the benefit is performed.

Registered pharmacist must dispense or supervise dispensing

(3)     A registered pharmacist must dispense, or directly supervise the dispensing of, the benefit.

Registered pharmacist must be physically present at approved premises when dispensing steps performed

(4)     The registered pharmacist dispensing, or directly supervising the dispensing of, the benefit must be physically present at the approved premises when each dispensing step in the dispensing of the benefit is performed.

11     Requirements for supply of pharmaceutical benefits at or from approved premises—prescriptions other than medication chart prescriptions

(1)     An approved pharmacist must not supply a pharmaceutical benefit at or from approved premises for the pharmacist if:

(a)     the benefit is supplied on the basis of a prescription that is not a medication chart prescription; and

(b)     the requirement in subsection (2) is not met in relation to the dispensing of the benefit.

(2)     The registered pharmacist dispensing, or directly supervising the dispensing of, the benefit must, when the step mentioned in paragraph (a) of the definition of dispensing step in section 5 is performed, see the prescription at the approved premises.

Note:     For supplies of pharmaceutical benefits without prescriptions, see the following:

(a)     subsection 89A(1) of the Act and section 46 of the Regulations (supply without prescription);

(b)     section 33 of the Regulations (prescriber bag supplies);

(c)     section 48 of the Regulations (supply before surrender of written prescription).

(c)    New ss 14 and 15 provide:

14     Approval numbers not to be used in connection with unapproved premises

An approved pharmacist must not use, or allow the use of, the pharmacist’s approval number in respect of particular premises in relation to:

  (a)     the dispensing of a pharmaceutical benefit at any other premises; or

(b)     the purported supply of a pharmaceutical benefit at or from any other premises; or

  (c)     the preparation of a repeat authorisation at any other premises; or

(d)     the preparation of a deferred supply authorisation at any other premises.

…

15     Approved pharmacists not to enter into certain arrangements

An approved pharmacist must not enter into an arrangement with the owner or operator of another pharmacy business for the supply by the approved pharmacist of pharmaceutical benefits to persons presenting at that pharmacy business.

19    For brevity’s sake, I will refer to these provisions as new sections 9, 10, 11, 14 and 15 respectively.

The issues

20    The applicants’ originating application identified the grounds of review as those stated in the supporting affidavit of their solicitor, Mr Lambros, dated 31 May 2023. These grounds were refined in the applicants’ written and oral submissions. I have treated those submissions as identifying the bases upon which the impugned provisions of the Instrument are said to be beyond power.

21    The applicants advance, in substance, two contentions. They are:

(a)    new ss 10, 12, 14 and 15 (and the associated definition of “dispensing steps” to be inserted into s 5) are inconsistent with the express provision in the Act permitting supply of pharmaceutical benefits “from” approved premises; and

(b)    new ss 10, 11, 13 and 14 go beyond the power to impose conditions in that they seek to create a new regulatory regime going beyond the policies and purposes of the Act.

Supply of pharmaceutical benefits “from” approved premises

22    It will be recalled that the pre-2007 version of s 90(1) of the Act referred to a pharmacist being approved “for the purpose of supplying pharmaceutical benefits at or from” identified premises. Those premises were premises “at” which the pharmacist was “willing to supply pharmaceutical benefits on demand”.

23    The amendments made in 2007 came shortly after the decision of the Full Court (Dowsett, Greenwood and Collier JJ) in Holzberger v Secretary, Department of Health and Ageing [2007] FCAFC 68; 158 FCR 586 (Holzberger). Holzberger was an appeal on questions of law from a decision by the Administrative Appeals Tribunal. The central issue was whether the applicant’s approval was liable to be cancelled under s 98(3) of the Act, which permits cancellation when the Secretary is satisfied that the approved pharmacist “is not carrying on business as a pharmacist at premises in respect of which the pharmacist is approved”. The applicant had purchased a pharmacy and obtained approval in connection with it, but had set up business at other nearby premises and intended to close the first pharmacy. She worked at the new premises and dispensed medications from there, but rarely if ever interacted with patients there. The first pharmacy remained open, with medication delivered from the new premises and a qualified pharmacist on duty to assist patients. The Tribunal affirmed a decision to cancel the applicant’s registration under s 98(3). The Full Court held that the Tribunal had erred in its understanding of the provision. The Court concluded at [20] that, on the facts as found, the applicant was carrying on business at two locations. Their Honours continued:

There was no suggestion that this practice was inconsistent with the terms of her approval. Indeed, s 90 contemplates the supply of pharmaceutical benefits away from the premises which are the subject of the approval. Each of subss (1), (2) and (3) refers to supply “at or from” the premises in question, indicating that the supply of pharmaceutical benefits need not necessarily occur “at” the approved premises. It is sufficient if such supply is made “from” those premises. The Tribunal’s decision necessarily assumed that a pharmacist could only carry on business at the site at which prescriptions are received and medications physically delivered. Given the aspect of s 90 to which we have referred, it seems unlikely that this was Parliament’s intention.

24    This was part of the background to the 2007 Amendment Act, which amended s 90(1)-(3) so as to put them in their current form. Now, approval is to be sought and granted for the purpose of supplying pharmaceutical benefits “at” specified premises. In his Second Reading Speech on the Bill for the 2007 Amendment Act, the Minister (Mr Pyne) said (Australia, Parliamentary Debates, House of Representatives, 20 September 2007, 139 (Christopher Pyne, Minister for Ageing):

The act [sic] currently uses the term ‘at or from’ premises in relation to the supply of pharmaceutical benefits by approved pharmacists. This means, if an approved pharmacist is conducting a mail order business, there is no need for the pharmacist to have a shopfront pharmacy supplying to their local community.

The proposed amendments provide that an approved pharmacist must supply pharmaceutical benefits ‘at’ their pharmacy—that is, to have a shopfront for people to physically attend the pharmacy. In addition, an approved pharmacist may also choose to supply pharmaceutical benefits ‘from’ their pharmacy to people who do not physically attend the pharmacy—for example, to nursing home residents or to a person by mail order.

25    Although neither the Second Reading Speech nor the Explanatory Memorandum to the Bill expressly refers to Holzberger, the case was referred to by the Shadow Minister (Ms Roxon) in the course of the Second Reading debate (Australia, Parliamentary Debates, House of Representatives, 20 September 2007, 141 (Nicola Roxon)); and the first paragraph of the extract from the Second Reading Speech set out above appears to draw on the observation in Holzberger that “the supply of pharmaceutical benefits need not necessarily occur ‘at’ the approved premises”. Whether or not Holzberger constituted the source of this understanding, the apprehended consequence—that an approved pharmacist might conduct business as such without maintaining a shopfront where people could attend and be served personally—is evidently the mischief at which these amendments were directed. The second paragraph of the extract indicates the solution that the legislature had in view (statements to similar effect appear in the Explanatory Memorandum to the Bill, at pp 4–5 and 18). This view is supported by the fact that another amendment made by the 2007 Amendment Act was the insertion of s 90(3D), precluding the approval of a pharmacist in respect of premises if pharmaceutical benefits cannot be provided “at” those premises or if they are not accessible by members of the public.

26    Contrary to a submission made by the applicants, it is not appropriate in these circumstances to regard the 2007 Amendment Act as having re-enacted the earlier wording of s 90 and thereby endorsed the construction given to that wording in Holzberger: cf, eg, Re Alcan Australia Ltd; Ex parte Federation of Industrial, Manufacturing and Engineering Employees (1994) 181 CLR 96, 106 (the Court). The provisions as amended do not repeat the phrase “at or from”. Instead, they make clear that approval is to be sought and granted for supply “at” specified premises, then provide in a separate subsection for supply “from” such premises. As I have noted above, features of the debate indicate that a possible consequence of the Holzberger construction was in fact the perceived problem that led to these amendments being made.

27    The 2007 Amendment Act also inserted s 4(3) into the Act. It provides as follows.

A reference in this Act to the supply of pharmaceutical benefits at premises is a reference to the supply of pharmaceutical benefits to people who are at the premises when the supply is made.

28    It is in this context that s 90(5AA) is to be understood. That subsection is somewhat infelicitously drafted, in that it appears in a section devoted to the purposes of and criteria for approval but appears to be intended to authorise conduct by a pharmacist after they are approved. Further, the conduct that a pharmacist “may” engage in pursuant to s 90(5AA) is not conduct that is otherwise prohibited by the Act. The work that is done in a literal sense by s 90(5AA) is therefore somewhat obscure. The respondent accepted, however, that a condition purporting to prohibit the supply of pharmaceutical benefits “from” approved premises could not validly be imposed as a consequence of s 90(5AA). I agree that, whatever else s 90(5AA) might do, it limits in this way the power to impose conditions (notwithstanding that s 92A(1)(f) expressly envisages conditions in respect of “premises”).

29    The placement of s 90(5AA) in s 90, and its genesis alongside the amendments made in 2007 to other provisions in that section (as well as s 4(3)), sheds light on the relationship between the concepts of supply of pharmaceutical benefits “at” and “from” premises.

(a)    Supply of a pharmaceutical benefit “at” approved premises—which is what the pharmacist must propose to do in order to obtain approval under s 90(1), (2) or (3)—connotes the physical handing over of the pharmaceutical benefit (ie, the drugs in the form and quantity prescribed) to a customer at those premises. The definitional provision in s 4(3) confirms this. The language is agnostic as to whether anterior steps, such as those involved in “dispensing” medication in accordance with applicable laws and procedures, are also undertaken at those premises (leaving those issues, at least potentially, to be regulated by conditions under s 92A).

(b)    The “supply” referred to in s 90(5AA) is supply “from” the premises in respect of which the pharmacist is approved. This was obviously conceived as something different from supply “at” those premises; however, the connection with approved premises is important. The expression connotes that the relevant pharmaceutical benefit is dispatched “from” those premises (not from a remote warehouse or depot) to the patient or to a location where the patient can collect it. Because the premises in respect of which approval is given will necessarily be a place “at” which the pharmacist supplies (or at least proposes to supply) pharmaceutical benefits, the permission granted by s 90(5AA) does not confer an entitlement to conduct business as an approved pharmacist without maintaining a shopfront where members of the public can attend in person to obtain pharmaceutical benefits.

30    The applicants submit that the amendments in the Instrument have the effect of:

(a)    prohibiting supplies of pharmaceutical benefits that are not made “at” the approved premises;

(b)    regulating the dispensing practices of both approved and registered pharmacists, such that they must be conducted at the approved premises, and with the result that the entire dispensing process for each medication must be conducted by a single (ie: the same) registered pharmacist;

(c)    imposing these conditions generally upon approved pharmacists, irrespective of whether the approved pharmacist intends to claim payments or advances under the PBS.

31    As to the first of these points, it will be noted that the Note underneath the new s 9(1) refers to s 4(3) of the Act. Section 4(3) has been set out above.

32    The applicants contend that, applying the instruction in s 4(3) to the interpretation of new s 9 of the Determination, that section has the effect that any supply of a pharmaceutical benefit is prohibited if the customer receives it at premises which are not “approved premises”. That has the effect of preventing any supply of pharmaceutical benefits “from” approved premises unless the recipient is located at another approved premises or at some place that does not constitute “premises” (eg, in a park). This is said to be in conflict with s 90(5AA).

33    The usual approach to applying a definition is to read the words of the definition into the substantive enactment (in place of the defined word or phrase) and construe the substantive enactment in its context: Kelly v The Queen [2004] HCA 12; 218 CLR 216 at [103] (McHugh J). However, that cannot be done in any mechanical way in the case of a provision such as s 4(3) that does not simply supply text that can stand in the place of a defined term.

34    Further, s 4(3) must itself be construed in its context. As noted earlier, it was inserted by the 2007 Amendment Act. It was evidently intended to assist in clarifying the relationship between supply “at” approved premises (the subject matter of s 90(1) to (3)) and supply “from” such premises (the subject matter of s 90(5AA)). It was not intended to create tension between the concept of approval for the purpose of suppling pharmaceutical benefits “at” approved premises on the one hand, and the permission to supply pharmaceutical benefits “from” those premises on the other. This makes it unlikely that a consequence of s 4(3) was intended to be that any supply of pharmaceutical benefits would be taken to occur “at” the premises where the patient was located, wherever that might be.

35    Section 4(3), like the provisions in s 90, treats the “supply” of pharmaceutical benefits as an activity engaged in by the pharmacist. So much is clear, at least, from the reference in s 4(3) to the supply “to people who are at the premises”: the focus is not on individual transactions but on the nature of the pharmacist’s activity. If a supply of pharmaceutical benefits “from” approved premises is effected by entrusting those pharmaceutical benefits to the postal service or a courier to be delivered to the patient, the pharmacist’s role is complete at that point. There is therefore no relevant supply “at” the place where the patient receives the delivery. New s 9 of the Determination, in its reference to the supply of pharmaceutical benefits “at” premises that are not approved (which, in the light of the Note underneath the section, is clearly intended to be construed consistently with s 4(3)), therefore does not have the vice contended for by the applicants. What new s 9 is directed at, and seeks to preclude, is a pharmacist (or their employee or agent) physically handing over pharmaceutical benefits to patients who attend premises in person, where those premises are not approved.

36    The second point is directed at the introduction, by new s 10 (read with the definition of “dispensing steps” in new s 5), of requirements for the pharmaceutical benefit to be at the approved premises when all dispensing steps are performed and for a registered pharmacist, physically present at the approved premises, to conduct or supervise those steps. It is submitted that these requirements seek to prohibit “remote dispensing”, ie, supply “from” approved premises. I reject that submission. What these requirements do is require the administrative steps involved in lawfully dispensing medication to be performed at approved premises, by a registered pharmacist physically present, and for the relevant pharmaceutical benefit to be at the approved premises while those steps are performed. This is not inconsistent with the pharmaceutical benefit then being sent to a patient who is at another location.

37    Further, the new section does not purport to regulate the conduct of registered pharmacists. Having been made in overt reliance only on s 92A(1A), the provision does no more than erect a condition on continuation of a pharmacist’s status as an “approved pharmacist” under the Act. It potentially affects that pharmacist’s right to claim and receive payments under the Act by giving rise to a prospect of suspension or revocation if breached. It does not purport to affect the lawfulness of any particular dispensing or supply of any drug.

38    I understand the gravamen of the third point to be that new ss 9, 10 and 11 apply to a supply by an approved pharmacist whether or not the pharmacist claims an advance or payments from the Commonwealth in respect of that supply. This appears to be correct. However, it does not lead to any inconsistency with the Act. Section 92A expressly imposes conditions on a pharmacist’s approval, not on claims for payment for individual supplies. Compliance with those conditions (including conditions imposed by a determination under s 92A(1)(f) and (1A)), is thus the price of avoiding potential suspension or revocation of approval under s 95. The conditions imposed directly by s 92A(1)(a)-(c) and (d) relate to advertisements, refund arrangements and general practices rather than individual supplies of pharmaceutical benefits. The potential subject matter of additional conditions in s 92A(1)(f) is broadly framed and expressly includes conditions in relation to premises. There is therefore room in the statutory language for the Minister to pursue policies that encourage or discourage particular behaviours or business models by imposing conditions that control a pharmacist’s continued access to payments under the pharmaceutical benefits scheme. The premise of this aspect of the statutory regime has some similarity to that described in Regis Aged Care Pty Ltd v Secretary, Department of Health [2018] FCA 177; 261 FCR 120 at [65] (Mortimer J): compliance with such standards as are imposed from time to time is the price of access to a subsidy funded by the Commonwealth.

Policies outside the scope of the Act

39    The applicants’ second contention is that the amendments made by the Instrument exceed the power in s 92A(1)(f) and (1A) in that they:

(a)    “establish regulatory concepts foreign to the statutory scheme (principally finely-dissected ‘Dispensing Steps’) which in turn justify enforcement action by the Minister (and, ultimately, cancellation of approval)”; and

(b)    “require all of these steps to be done at a place (the approved premises) in circumstances in which the basis for approval of such is detached from any criteria or statutory purpose relevant to the approval power or the statutory policies that underpin it”.

40    The asserted “detachment” from criteria or purposes relevant to the “approval power” (which I take to mean approval under s 90) is said to come about in three ways.

(a)    The provisions are “not relevant and reasonable to any purposes of the Act”. They are concerned with dispensing and not with “any reason connected with the basis upon which a premises might be approved” referable to any criteria of the Act.

(b)    The provisions “seek to create a regulatory scheme of the kind which goes beyond a power to ‘condition’”. That power carries limits of a similar kind to powers to regulate matters by subordinate legislation: it may be used to “complement” but not “supplement” the plan of the legislation (citing Shanahan v Scott (1957) 96 CLR 245 at 254 (Shanahan)).

(c)    The provisions “are not reasonably proportionate to achieving the legitimate policies and purposes of the Act”.

41    The first point that should be made is that the power in s 90 is not to approve “premises” per se but to approve a pharmacist for the purpose of supplying pharmaceutical benefits “at” specified premises. The exercise of that power is implicitly allowed, if not required, to take into account recommendations by the Authority, which must consider applications for approval in accordance with rules prescribed under s 99L.

42    For some years an established feature of those rules and the Authority’s recommendations has been that approval in respect of premises depends, in part, on where the premises are. This reflects an understanding that the geographical distribution of pharmacies, so as to make in-person pharmaceutical services and advice widely available, is an important factor to be considered in approval decisions. Cases in this Court concerning recommendations by the Authority applying detailed rules concerning the locations of proposed pharmacy premises (including by reference to their distance from existing pharmacies) go back at least to Wood v Australian Community Pharmacy Authority [2002] FCA 1592 (Lee J). As the reasons in that case record, the rules made under s 99L have at various times reflected agreements reached between the Government and the Pharmacy Guild of Australia. An earlier iteration of the rules under s 99L, reflecting an agreement which sought to reduce the number of pharmacies in Australia because of a concern that some were inefficient or unviable, was considered in Smoker v Pharmacy Restructuring Authority (1994) 53 FCR 287. More recently, in Walkerden v Wodonga Pharmacy Pty Ltd [2015] FCA 273; 230 FCR 243 at [62], Mortimer J (as her Honour then was) described the objectives of the rules then in force under s 99L as follows.

Those objectives have twin themes: a sustainable and viable community pharmacy network (which focuses at least as much on the interests of pharmacy owners as on the community) and access to pharmaceutical benefits (with a focus only on the community's interests). In that sense, the location rules are an attempt to balance community access with commercial sustainability.

43    Meagher J cited that passage in what appears to be the most recent decision in a fairly long line of cases on the application of the rules: Jele Chemists Pty Ltd v Australian Community Pharmacy Authority [2023] FCA 1652 at [10]. Other cases in this line include: Darnell v Stonehealth Pty Ltd [2022] FCAFC 76; 291 FCR 597 (Markovic, Thomas and Stewart JJ); Stonehealth Pty Ltd v ZAA Ventures Pty Ltd [2020] FCAFC 188; 280 FCR 519 (Collier, Rangiah and Charlesworth JJ); Vincentia MC Pharmacy Pty Ltd v Australian Community Pharmacy Authority [2020] FCAFC 163; 280 FCR 397 (Perry, Stewart and Jackson JJ); Assarapin v Australian Community Pharmacy Authority [2015] FCA 268 (Nicholas J); Kong v Minister for Health [2014] FCAFC 149; 227 FCR 215 (Jacobson, Logan and Pagone JJ); Ranallo v Australian Community Pharmacy Authority [2009] FCA 113; 174 FCR 457 (McKerracher J); Sayegh v Australian Community Pharmacy Authority [2006] FCA 1289; 155 FCR 324 (Stone J).

44    It was not suggested before me that these cases proceeded on a false premise because the exercise of the approval powers in s 90 cannot properly be shaped by policies that attempt to balance the viability of pharmacy businesses and the widest possible access to pharmaceutical benefits. Such an argument would be very difficult to maintain, not only because of the body of existing case law assuming the contrary but also because of the broad language of s 90. The power to approve or deny approval to a pharmacist in relation to particular premises is not shaped or constrained by any provision in the Act except, arguably, that by implication the Secretary must have regard to the recommendation of the Authority. Consideration of the subject matter, scope and purpose of Part VII of the Act is similarly unproductive from the applicants’ point of view. Part VII creates a regime for the provision of pharmaceutical benefits at public expense. Its core provisions are summarised at [2] above. Within that regime, s 90 makes plain that not every person who is entitled to practise as a pharmacist is to be allowed to supply pharmaceutical benefits and claim payments therefor under the Act. It is only those who are approved; yet no criteria are supplied by the Act for approval. The establishment of the Authority to advise the Secretary on applications for approval, with provision in s 99L for rules which the Authority is to apply, is consistent with the understanding that the power of approval in s 90 is otherwise not limited as to the kinds of policies that can legitimately shape its exercise.

45    The power conferred by s 92A(1A) to impose conditions for the purpose of s 92A(1)(f) (breach of which potentially leads to the revocation of approval) is the obverse of the power under s 90 to decide whether approval should be granted. The inclusion of that express power indicates that the Minister was intended to have a measure of control over the composition from time to time of the cohort of “approved pharmacists”. The power mirrors s 90 in that it is also not constrained by any express criteria. As with s 90, its anodyne language leaves room for a range of policies to be pursued concerning who is to be permitted to provide pharmaceutical benefits under the Act (and to receive payments from the Commonwealth) and the practices they must follow in order to retain that permission.

46    The applicants’ submissions asserting a lack of connection or proportionality between the provisions inserted by the Instrument and policies or criteria embodied in the Act thus reach for handholds that are not there. The Act does not embody a policy that any particular aspect of a pharmacist’s practice or business model is immunised from becoming the subject of a condition potentially affecting their ongoing approval. Nor does the Act embody a particular approach to approvals and conditions of approval that the new sections can be seen as travelling beyond.

47    Cases concerning the ambit of powers to make regulations prescribing “necessary or convenient” matters (such as Morton v Union Steamship Company of New Zealand Ltd (1951) 83 CLR 402 at 410) or matters “necessary or expedient for the administration of this Act” (such as Shanahan) have little if anything to say concerning a power to impose conditions on an approval. Any rule that operates as a condition on the approval necessarily has a connection with the relevant subject matter, being the approval. No express limit is placed by s 92A(1A) on the kinds of conditions that may be imposed; and, as I have sought to explain above, the scheme of Part VII does not provide a sound foundation for the implication of any limits that might be transgressed by the impugned provisions of the Instrument.

48    This does not mean that there is no limit on the conditions that may be imposed under s 92A(1A). A condition that was frivolous or imposed for purposes having no rational connection with the disposition of Commonwealth funds in the public interest (to use the canonical example, a condition that a pharmaceutical benefit may not be dispensed by a person with red hair) would not constitute a valid exercise of the power. There may be other limits as well. However, the impugned provisions of the Instrument do not approach such limits.

49    In substance the impugned provisions seek to ensure that a pharmacist, who is approved for the purpose of supplying pharmaceutical benefits at particular premises, does not move the essential steps of dispensing medication off site, or set up business serving customers in person at other premises, without going through the process (envisaged by s 90(2) and (3)) of obtaining approval for those other premises. For reasons explained above, the provisions do not purport to prevent supply “from” approved premises as authorised by s 90(5AA). Control over the locations at which pharmaceutical benefits can be supplied, and control directed at limiting the expansion of individual pharmacy businesses (which has the potential to jeopardise the viability of smaller businesses), are within the scope of policies which may legitimately be pursued under ss 90 and 92A(1A).

Disposition

50    The applicants have not established that the impugned provisions of the Instrument travel beyond the power in s 92A(1A) of the Act. The originating application will therefore be dismissed with costs.

Associate:

Dated:    25 June 2024

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