The country's powerful pharmacy lobby is threatening a damning public campaign against the Turnbull government if it doesn't settle a bitter funding dispute in its favour.
The Pharmacy Guild of Australia has embarked on a lobbying blitz of Coalition backbench MPs to pressure Prime Minister Malcolm Turnbull and Health Minister Sussan Ley into changing course.
The guild and the government are locked in an arm-wrestle over some elements of an $18.9-billion funding deal with the guild and the 5500 community pharmacies it represents.
Called a "risk share", the contested element forecasts prescription volumes in each of the pharmacy agreement's five years. In the first year – last financial year – there was a 2.1 per cent shortfall in prescriptions, delivering the government a saving of up to $500 million.
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That includes the cost of medicines that were not dispensed and therefore not paid for under the PBS. But it also included an estimated $81 million of foregone dispensing revenue for pharmacies which the guild wants repaid.
The government wants to bank the full saving for the mid-year budget update due later this month amid falling revenues and a deepening deficit.
But doing so threatens to provoke the guild into launching an unprecedented public campaign against the government, spearheaded by thousands of pharmacists across the country.
With the government already fighting doctors over the Medicare rebate freeze and GP surgery owners over pathology collection centre rent control, it can ill afford yet another bruising health stoush, particularly given the Coalition's vulnerability on health policy following Labor's successful "Mediscare" campaign.
For now, the guild is refusing to comment publicly on the battle but it's understood tensions ran high at its annual Parliament House dinner last month, attended by Mr Turnbull and Opposition Leader Bill Shorten.
In his speech, National President George Tambassis made his views clear.
"Like all risk shares, it cuts both ways. The risk share protects the government fiscally against a blowout in dispensing expenditure," he said.
"It also provides the certainty that pharmacies need to employ staff and continue investing in their small businesses.
"The actual prescription volumes from the first year of the agreement reveal a material shortfall. Community pharmacies have incurred these fixed dispensing costs and need to be reimbursed for this shortfall.
"This is a seminal issue that goes to the heart of why the government and pharmacies have a trust-based agreement that provides financial certainty for both parties."
Mr Turnbull sought to soothe tensions by promising in his speech the government would deal "constructively" with the guild to reach an agreement.
Ms Ley says the government is working towards a "mutually satisfactory outcome" but a spokesman for the minister pointed out the remuneration of pharmacists increased by 6 per cent between 2014-15 and 2015-16.
Her office also says the 2 per cent script variation in this case is well below the 5 per cent threshold for compensation included in previous agreements.