Freedom fight: A challenge to the exercise of Ministerial Discretion

The Federal Court of Australia has dismissed an application challenging the Minister for Health’s discretionary power to approve a premises to supply pharmaceutical benefits where the nearest approved pharmacy is only 60 metres away.

On 26 November 2019, the Minister for Health exercised his discretionary power to approve a Blacktown pharmacy to supply pharmaceutical benefits from within a medical centre.  The decision was appealed by Freedom Pharmaceutical Pty Ltd (“Freedom”), being the owner of a TerryWhite Chemmart pharmacy located only 60 metres from the approved premises.

The Minister’s Decision

Following the Australian Community Pharmacy Authority not recommending that Maggis Rouchdi’s application for approval to supply pharmaceutical benefits from a pharmacy premises located within a medical centre be approved under Rule 133 of the Pharmacy Location Rules, Ms Rouchdi applied for exercise of Ministerial Discretion in relation to the pharmacy premises.

After considering Ms Rouchdi’s application, the Minister was satisfied:

  • there was a community that would be left without access to PBS medicines unless the proposed premises was approved; and
  • it was in the public interest to approve the application.   

The Minister exercised his discretion in favour of Ms Rouchdi despite Freedom’s pharmacy being only 60 metres from the approved premises and a further 14 approved pharmacies being located within a 2 kilometre radius from the approved premises.

The Minister considered that unless he exercised his discretion, the community which would be left without reasonable access to PBS medicines was “the group of people who attend the medical centre”.

Further, whilst acknowledging that the approval would result in two approved pharmacies operating within 60 metres of eachother, the Minister “weighed those points against the fact that, were the proposed pharmacy approved, members of the community would not need to leave the medical centre to obtain PBS medicines”.  That is, the Minister was of the view that having to leave the medical centre and travel 60 metres by foot to obtain PBS medicines did not constitute reasonable access.

On the consideration of public interest, the Minister found that there was “public interest in the community having access to PBS medicines in the proposed location which is co-located with the medical centre from which members of the community receive medical attention”. That is, the need to have access to PBS medicines co-located with the medical centre outweighed the existing circumstances of the patients of the medical centre travelling 60 metres to the nearest approved pharmacy.

Freedom’s appeal

Freedom appealed the Minister’s decision on grounds including legal unreasonableness, error of law, adequacy of reasons and taking into account irrelevant considerations. 

Legal unreasonableness

Freedom submitted that the Minister’s decision led “to a capricious and arbitrary result or one lacking intelligible justification” and that the Rules, being the Pharmacy Location Rules, “seek to balance the interests of the community, the Commonwealth and pharmacists and in particular, the need to balance the Commonwealth’s financial burden against the need for acceptable community service”.  Freedom argued that the Rules must be taken to embody and provide a geographic baseline for ascertaining what amounts to reasonable access.

Whilst accepting the purpose of the Rules, the Court held that “whilst the Minister may choose to exercise the discretion in certain situations to ensure that the Rules do not operate capriciously, the scope of the discretion is not so confined”.  In considering the Minister’s decision, the Court held that there was a “rational connection” between the defined community identified by the Minister and the need for a pharmacy to supply medicines to that community, and that that Minister’s decision was not unreasonable.

In response to Freedom’s submission that the scope of the Minister’s discretion is constrained by a baseline or geographical constraints, the Court held that “it is open for the Minister to consider broader factors than simply whether or not the application of the Rules leads to an anomalous result”.  The Court considered that the Minister had taken into account a number of factors in making his decision and, in weighing up the merits of the application, found that those factors (including the location of the nearest approved premises) did not outweigh the fact that a decision not to grant the approval would result in a community being left without reasonable access to PBS medicines.  It was further held that “the matters to which the Minister refers about the existence of the community and the nature of access to alterative premises provide a rational basis for him to have formed his opinions”.

Error of law

On the ground of an error of law, Freedom argued that “community” has primarily a geographic or locality based component to it and that it should be understood within its ordinary meaning.  In Freedom’s view, the Minister’s “circuitous definition” of the relevant community (being the community who attend the medical centre) was an error of law which undermined the objectives of the relevant statutory scheme, and led to a conclusion that any pharmacy co-located in a medical centre could be approved regardless of whether the requirements of the Rules are met.

The Court disagreed, stating that the decision on whether a community is deprived reasonable access to medicines depends on what amounts to reasonable access and a consideration of public interest, both of which involve separate evaluations by the Minister.

On public interest, Freedom submitted that the Minister failed to take into account all factors of public interest including the purpose of the Rules and relevant economic considerations.  That argument failed with the Court finding that the Minister’s decision involves “a value judgement of wide import and a discretionary judgement by reference to undefined factual matters confined only to the extent that the subject matter, scope and purpose of the enactment may require”.

Adequacy of reasons

When the Minister made his decision, Freedom applied for a statement of reasons.  Freedom submitted that the reasons provided by the Minister did not set out why the community was a relevant community without reasonable access to medicines.  In Freedom’s view, the reasons “lacked reasoning beyond conclusionary statements” and were therefore inadequate.

In considering the Minister’s obligation to provide reasons for his decision, the Court held that “no standard of perfection” is required in the preparation of reasons.  The only requirement is for the reasons to be in clear language so that they are capable of being understood.  In regards to the adequacy of the reasons, the Court held that the reasons must be considered fairly and not “combed through with an eye to error”.  The Court went on to state that it was not necessary or required that a “baseline of reasonable access” be defined in the reasons and that the Minister had discharged his obligations with respect to the statement of reasons.  As such, the ground of appeal failed.

Irrelevant considerations

For its final ground of appeal, Freedom contended that the making of the Minister’s decision was an improper exercise of power because the Minister took into account an irrelevant consideration, being the future number of doctors at the medical centre.  In that regarded, the Minister considered that although there were only 4 doctors at the medical centre when the application was considered, the medical centre was expected to reach 8 full time medical practitioners within 12 to 18 months of the date of approval.

In exercising his discretion, the Minister must be satisfied that unless approval is granted, the decision will result in a community being left without reasonable access to pharmaceutical benefits.  The Court held that the language of the Minister’s discretionary power “leaves it open for the Minister to consider the likelihood of circumstances that may yet arise” and therefore, the Minister was entitled to take into account that the community identified by the Minister would be serviced by an increased number of medical practitioners in the near future.  The ground of appeal failed.

So, what does this mean?

The Minister’s decision to exercise his discretion to approve a pharmacy to supply pharmaceutical benefits where the nearest approved pharmacy is only 60 metres away is a decision which could open the floodgates for future applications to the Minister to approve pharmacies where the distance requirements of the Rules are not met and where the nearest approved pharmacy is only a short distance from the proposed premises.

Although the decision may lead to an increased number of applications, the Minister has broad discretion in relation to requests for Ministerial Discretion and as such, there are no guarantees that future applications will be decided by the Minister in the same manner.  The identification of the relevant community being the community which attends the medical centre may well be a distinguishing factor between this case and future applications for Ministerial Discretion.  The very specifically defined community may not exist in other circumstances or, if it exists, the circumstances regarding reasonable access may differ.

This case also demonstrates the very broad discretionary powers bestowed on the Minister.  It is apparent that the criteria which is relevant to the ACPA, and the principals which underpin the legislation regarding pharmacy ownership and approvals, are not necessarily considerations to which the Minister must have regard and following that, not necessarily considerations which will result in the Federal Court of Australia overturning a decision of the Minister exercised under his discretionary power.

Should you have any queries regarding this case, the Minister’s discretionary power or applications for pharmacy approvals, please contact Sarah Stoddart on sarah@vitalitylawaustralia.com.

This article is intended to be for general information only. It does not constitute legal advice nor does it establish a relationship of client and lawyer. Specific circumstances or changes in law may vary the accuracy or applicability of the information published. We recommend seeking specific legal advice particular to your circumstances before taking any action, or refraining from taking any action, on any issue dealt with in this article.

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