The Community Service Obligation

A guarantee for Government and the community

In 2006 the Commonwealth Government introduced a Community Service Obligation (CSO) to underpin safe and equitable access for all Australians to all PBS medicines no matter where they lived.


The CSO was created in the form of a direct deed between the Commonwealth Government and participating pharmaceutical wholesalers (known as CSO distributors).


To be signatory to the CSO deed pharmaceutical wholesalers had to commit to the CSO Service Standards  which provided for Government a guarantee that all Australians, no matter where they lived, no matter their circumstances would have equal access to PBS medicines generally within 24 hours.


These service standards remain in place today and all CSO distributors are subject to strict reporting and auditing requirements which provide Government with transparency and compliance. (CSO Administration Agency)


The introduction of the CSO in 2006 transformed the PBS into a trusted and reliable primary healthcare program – it now is the most accessed health service in Australia.


Ensures medicine access generally within 24 hours

Guarantees supply of low volume medicines

Protects timely medicine access to rural and remote communities

Delivers on the principles of the National Medicines Policy

Most Australians don’t think about how their medicines move around this vast continent because when they go to a community pharmacy – their medicines are there – and if they are not – they will be there the next day.


But that was not always the case.  Prior to 2006 – the medicine distribution network was fractured – many wholesalers only chose to supply certain PBS medicines to certain locations at certain times.


This did not deliver for Government or for the community.


The Commonwealth Government recognised significant reform was needed to ensure equity of access as promised to all Australians under the National Medicine Policy.  That reform required a direct partnership with the medicine distribution network to underpin the ongoing reliability of the PBS.


In working with the pharmaceutical wholesalers Government co-designed a globally unique solution to solve the geographical challenges posed by the size and diverse spread of our population.  To fund the solution, Government and pharmaceutical wholesalers agreed to reduce funding from the mark up of medicines and reallocate that funding to the CSO.


This reform has proven to be one of the most progressive and successful in the health portfolio. It has allowed the system to respond, manage and adapt to the growing needs of the community all under a guarantee of partnership between the Commonwealth Government and the CSO distributors.

The criticality of the CSO has been tested over recent years when it has ensured through pandemic, flood and fire – safe and equitable medicine access to all communities no matter the crisis.


Extending the CSO's role in Primary Care

Over the years the CSO has been extended under agreement with the pharmaceutical wholesalers to support other programs.


The NPSA members have been partnering with Government on the National Diabetes Services Scheme (NDSS) since 2016.


All CSO distributors procure and manage the full range of NDSS products and distribute them to all access points nationally to support Australians living with diabetes.


The NPSA is consistently working with all levels of Government to educate and identify opportunities for the CSO and our national infrastructure network to be utilised to support other health programs and initiatives.


Please see NPSA’s Pre-Budget Submission 2023-24 Recommendations.

The CSO's role in the PBS

Since the CSO was enshrined in the service architecture of the PBS,  Australians have come to trust that they will be able to receive the medicines they need when they need them.


As part of the pharmaceutical wholesalers’ obligations under the CSO, each wholesaler must carry the full range of the PBS – that includes everyday medicines as well as complex cold chain products and high-care medicines. This provides Government with an inbuilt supply chain “redundancy” so that if there’s a disruption due to an unforeseen event – generally another wholesaler can step in to manage supply.


As CSO distributors, our members work closely with Government and regulators to manage on shore equity of access to PBS medicines in shortage. The Australian medicine supply chain is finally calibrated, focused on forecasting supply requirements and anticipating seasonal demands. But sometimes that calibration is subject to external factors such as the impact of global manufacturing capacity, an unseasonal outbreak or a pandemic.


In that event – our role as CSO distributors is fundamental in working with all stakeholders to manage on shore PBS inventory in our warehouses and enabling transparency to Government to assist its decision making and shortage management processes.