Australian companies behind the most successful and widely used digital health infrastructure programme, the nation's electronic prescription network, could face a drastic reduction in profits or may lose their projects due to a new Commonwealth Department of Health request for tender.

The implications of the government's move has sent shockwaves through the industry, with about 100 representatives of digital health organisations attending a closed door meeting held by the Medical Software Industry Association (MSIA) on Tuesday.

The department's RFT – issued without consultation with industry – is seeking companies to apply to provide prescription delivery services and an active script list registry.

These services are currently provided by eRx (owned by Fred IT) and MediSecure, which developed the systems over 10 years.

The companies also created the National Data Exchange that is the foundation of the real-time prescription monitoring systems being rolled out nationally.

But according to the RFT, funding is expected to drop from 18 Australian cents per valid escript to as low as three Australian cents, representing a loss of up to 80 per cent.

The intellectual property of the systems could also be handed over to the Department of Health.

According to procurement rules, no companies planning to submit a tender – including incumbent companies – are able to speak publicly about the issue. Others are unwilling to risk getting the department offside by commenting on the record.

Behind the scenes, however, many industry insiders claim the RFT could damage the Australian companies that have built the systems that save lives and lower health expenditure. It also risks the industry losing confidence in dealing with the Department of Health, and has implications into broader technology procurement by the federal government.

In response to questions, the Department of Health told Healthcare IT News that "no decisions have been made in regards to funding" and that it will take into account the anticipated increase in the use of escripts, presumably due to growing uptake and an ageing population, and will also consider any improvements to existing systems.

"The Request for Tender proposes both fixed and variable funding options for tenderers, and allows for tenderers to propose alternative models. The variable option reflects the anticipated exponential growth in the number of electronic scripts generated," the department said.

"The RFT also outlines that tenderers must outline specific initiatives and innovations that would or could drive continuous improvement including those initiatives that would require additional funding to supplement implementation.

"The Department will negotiate the terms, including the rates associated with fixed and variable components of any future contract, with short-listed tenderer(s)."

The four-year term draft contract included in the RFT proposed that companies relinquish their intellectual property but the department said it would be subject to negotiations.

"No decisions have been made regarding IP. The IP regime will be a matter for contractual negotiation with short-listed tenderer(s)."

Boston Consulting Group was commissioned by the department to advise it on "future funding and models to support electronic prescribing" in 2021 but the report has not been made public.

The alarm within the industry at the RFT is compounded by the relatively low cost to the government of eprescribing despite its widespread use.

The first paperless script was dispensed in May 2020 to assist in the delivery of telehealth during the pandemic. Since then, the system has enabled 37 million escripts by more than 31,000 prescribers and 95 per cent of pharmacists.

Eprescribing currently costs less than AU$25 million ($18.6 million) to deliver, with the department paying the Rx exchanges by price per escript. They then disperse almost 60 per cent to other companies in the ecosystem, such as pharmacy dispensing software providers.

In comparison, My Health Record has cost taxpayers more than AU$2 billion ($1.5 billion) and the recent federal budget contributed AU$213.2 million ($159 million) for the Australian Digital Health Agency's operations for the year.

Meanwhile, medication mismanagement was estimated in 2017 to cause more than 230,000 avoidable hospital admissions annually, costing Australia AU$1.2 billion ($894.8 million), with lost paper scripts, poor transcription of medication and illegible paper scripts among the reasons.

The MSIA's recent report, Beyond the Pandemic, contained the results of an industry survey that found digital health companies "overwhelmingly believe the federal government stifles innovation (59 per cent), almost 61 per cent said it favours international companies in federal government contracts, more than half (53 per cent) said the government's ICT procurement processes are unfair, and 74 per cent said they feel unsupported by government".

The RFT closes on 2 June.