Review of methadone treatment in Australia

10 Costs of services

Page last updated: October 1995

10.1 Costs of public programs
10.2 Costs in the private sector
10.3 Client costs
10.4 Costs to pharmacists
10.5 Contributions by State and Commonwealth governments
10.6 Summary
10.7 Recommendations

10.1 Costs of public programs

In the course of this study, State health authorities were asked to complete a questionnaire detailing the costs of services provided to clients of public methadone clinics for the past five years. Data have been provided by all States, although considerable delays were experienced in several instances. Data were requested for five years to 1993/94, however in the majority of cases, information was provided only for the 1993/94 financial year. In part, this has been due to the fact that the required data were subsumed in wider expenditure figures, and it was not considered feasible to estimate costs for past years with an adequate degree of confidence. In NSW in particular, considerable effort was expended in estimating the costs specific to methadone programs across a variety of settings in both metropolitan and country areas. The efforts of State health authorities in extracting these data and providing them to the consultants is gratefully acknowledged.

The data provided have been estimated as best as possible from existing financial records in each State. However, in most cases, methadone programs are often subsumed within more general programs relating to drug and alcohol services, or are provided within public hospitals as part of their outpatient services. Consequently, the basis for the estimates provided differs between States, and care should be taken in making direct comparisons between them. Costs do not include the cost of methadone syrup, the costs of any urinalysis tests billed through Medicare, nor any costs to clients for the dispensing of methadone which may vary between States.

The number of clients in each State used as the basis for calculating the average cost per client has been determined from data provided by the States via a questionnaire, and is the aggregation of individual clinic data. Because of the different administrative practices in place in different States, the basis on which these have been reported may differ. For example, the NSW data comprises clients who are dispensed methadone at public clinics, while other States' data may include clients whose prescriber is based at a public clinic, but whose methadone is dispensed at a community pharmacy. This may lead to anomalies between States' data. At the same time, many clients do not participate in methadone programs (in both the public and private sectors) for a full year, as evidenced by the high number of admissions and exits from these programs each year. In Table 17 below, the number of clients used to express the annual rate is based on the mean of the number of clients at the beginning and end of 1993/94. Many more clients would have participated in these programs at some stage and for different durations during the course of the year. The average annual cost per client derived above therefore represents an estimate of the costs for a full year's placement in a public program. This approach is considered reasonable, in that the majority of clinics run at full or near full capacity most of the time, and each available place is therefore occupied.

Notwithstanding these caveats, the total costs of services in the public sector in each State for 1993/94 are presented in Table 17 below.

The data indicates reasonable consistency between public clinics in each State, with the exceptions of Victoria and Tasmania. All other States have average direct costs per client of between $1,800 and $2,400 per annum. In the case of Victoria, caution should be taken in interpreting the average estimated cost of approximately $6,000 for several reasons. Firstly, the basis of estimation comprised an average estimated cost of $2,000 per client for hospital-based providers, to which was added known costs of five major agencies and counselling and support services. No explanation was given as to how the hospital costs of $2,000 were derived. Secondly, the comparatively low number of public clients in Victoria provides a narrow base for the allocation of costs. Thirdly, the Victorian policy has been one of promoting the participation of the private sector in the provision of methadone treatment, and considerable investment has been made in developing an appropriate regulatory structure to support this policy. These costs have been included in the above.

In the case of Tasmania, their methadone program is comparatively new (having commenced in late 1992), with only 75 public clients as at June 1994. In combination, it is reasonable to expect their costs to be higher than more mature programs with higher client numbers.

If the Victorian and Tasmania costs (and client numbers) are excluded from the above data, the average direct cost per client per annum in the public sector falls from $2,425 to $2,096, while total costs per client per annum fall from $2,662 to $2,250.
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Table 17: Estimated costs of public methadone programs, 1993/94

Program managementService delivery costsTotal costsAverage no of clients 1Average direct cost/clientAverage total cost/client
126,484 4
All States

1 Based on data provided by States at clinic level which may vary from aggregate State level data elsewhere reported.
2 Excludes cost of Pentridge Prison service.
3 Excludes cost of Cairns Hospital Clinic
4 Includes $55,728 for development of private program.
5 Includes costs associated with supporting Prison and Private Programs.

10.2 Costs in the private sector

Costs incurred in the provision of methadone services in the private sector are largely borne by the Commonwealth through Medicare. These costs relate to the costs of consultations by medical practitioners, together with the costs of pathology tests (particularly urinalysis for illicit drugs). As in the case of the public sector, the cost of methadone syrup is borne by the Commonwealth.

The Commonwealth Medicare Benefits Schedule (CMBS) does not separately identify methadone services from other primary health care services. In the absence of data specific to methadone clients and the medical practitioner approved for their methadone treatment, it is not possible to accurately determine the treatment profile for methadone clients and their associated costs from the CMBS.

Data from a sample of 10% of Medicare clients from NSW, Victoria, Queensland and Australia as a whole, has been provided by the Department of Human Services and Health. The basis for selection was all clients who received at least one service for CMBS Item 66343 during 1993/94.

The description of this item is:

"Detection or quantitation or both (not including the detection of nicotine and metabolites in smoking withdrawal programs) of a drug, or drugs, of abuse or a therapeutic drug, on a sample collected from a patient:
  1. participating in a drug abuse program; or
  2. being treated for drug effects;
including all tests on blood, urine or other body fluid - each episode, to a maximum of 21 episodes in a 12 month period."

While not restricted to clients participating in methadone programs, a significant proportion of clients undergoing this test are believed to be methadone clients. In NSW and Queensland, the number of persons receiving this service is broadly consistent with the number of clients participating in methadone programs in these States. However, in Victoria, the number of persons receiving this item is two to three times the number or methadone clients. The reason for this difference in uncertain. One possibility is that persons receiving this item of service are participating in other drug treatment programs, such as therapeutic communities.
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Notwithstanding these potential limitations, the treatment pattern for this group of clients has been used as a first estimate of the costs of treatment of methadone clients in private programs.

The results of the analysis of these data are contained in Table 18. It should be noted that the number of services, fees charged and benefits paid in each category of service have been expressed as a rate of the total number of clients receiving Item 66343 in each State, rather than as a rate per client receiving each particular category of service. This approach has been adopted in order to facilitate a comparison of treatment patterns by groups of services in each State.

By way of example, in NSW each client who received Item 66343 in 1993/94 on average had 27 visits to GPs, 8 visits to psychiatrists, and 26 pathology tests performed. In comparison, clients in Victoria averaged 24 visits to GPs, 1 visit to a psychiatrist and had 14 pathology tests. In part, these differences reflect different clinical settings that exist as well as the mix of services that clients may have (a client may appear in any combination of the defined categories during the period). It should be noted that the data relate to all clients who received Item 66343 at any time during 1993/94, many of whom would not have remained in a methadone program for the full year. The costs do not therefore represent the average costs per client for a full year's participation in a methadone program in the private sector. It should also be recognised that the data relate to all services provided to these clients, not just those pertaining to methadone treatment.

Notwithstanding the limitations of the data, some significant differences are apparent between States in the number and costs of services to clients. Clients in NSW, have on average, 41% more medical consultations than clients in Victoria, and 95% more than clients in Queensland. This pattern is common to both GP services and psychiatric services, and also extends to the number of pathology tests performed. When considering all services provided in the categories selected, clients in NSW had 29% more services than the national average, at a cost approximately $300 per client per annum higher than the national average. Costs for clients in Victoria and Queensland on the other hand, were considerably lower than the national average.

The ratio of benefits paid to fees charged (98% at the national level) reinforces the understanding that the overwhelming majority of medical practitioners bulk-bill for their methadone services.

While the above analysis provides an indication of the differences in service patterns between States, it does not provide a reliable estimate of the annual costs of treatment of clients in the private sector who participate in a methadone program for a full year, which may be used as a comparison for the equivalent costs in the public sector. In order to obtain a more reliable indicator of these costs, a questionnaire was sent to a sample of 30 medical practitioners in both New South Wales and Victoria, seeking information about treatment patterns in their methadone services. Unfortunately, industrial action in Victoria prevented the collection of the data. At the time of this report, replies had been received from 17 medical practitioners in New South Wales.

Of the responses received to date, 9 were from GPs and 8 were from psychiatrists; 9 were in metropolitan locations and 8 were in country locations; 12 provided methadone services as part of their wider practices and 5 worked in specialist methadone clinics. The results are presented in the table overleaf.

The results demonstrate the considerable variation in treatment patterns both within different groups of practitioners and between groups. This variability may be attributed to different levels of complexity among clients in individual medical practices, as well as to differences in medical practitioners' views on the frequency of consultation required.

A consistent pattern is evident of a higher number of consultations throughout the treatment period by psychiatrists compared to GPs by a ratio of between 1.5:1 and 2:1, whether considering either the mean or the median. A similar ratio also applies to the number of urinalysis tests ordered by the respective groups. Both groups show a comparable pattern in authorising takeaways, although GPs approved slightly more than psychiatrists.

A comparison of treatment patterns between country and metropolitan areas shows similar treatment patterns over the first twelve months, although country doctors tend to see their clients more frequently in the first three months, with the rates reversed for the subsequent nine months. In subsequent years, metropolitan doctors see their clients over twice as often as their country counterparts. This is not directly allied to the distribution of psychiatrists and GPs, as both groups were represented in country and metropolitan areas, with a slight weighting towards the metropolitan area for psychiatrists. The number of takeaways approved were similar in the first year, but 32% higher in the metropolitan area in subsequent years.
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In regard to specialist clinics compared to wider practices, the number of consultations were similar across the two settings in the first three months of treatment, and considerably higher in specialist clinics thereafter. Doctors in specialist methadone clinics consistently ordered more urinalysis tests than those in wider practices. Doctors in wider practices approved more takeaways in the first year of treatment than those in specialist methadone clinics, but this pattern was reversed in subsequent years. (See Table 19)

In identifying the variability of treatment patterns between health professionals and between clinical settings, we do not consider it appropriate to comment on whether the differences are clinically justified. For example, the higher consultation rate among psychiatrists compared to GPs may be reflective of a more complex and difficult client profile requiring a more intensive and frequent form of treatment. However, the data illustrates the considerable differences that exist in practice, which must be recognised and catered for in the payment system. At the same time, the payment system should encourage models of best practice

In seeking to identify the costs of treatment in the private sector, we have used the above treatment profile to estimate the number of services provided, and applied the average fee rates charged by psychiatrists, GPs and pathology services derived from the data presented in Table 18 above. Because of the considerable variation in treatment patterns within each group, we have used the median figure for the number of services provided rather than the mean, which is subject to greater bias from outliers. The results are presented in the following table. In so doing, we are aware of the considerable differences that have been shown to exist between States, as indicated by the CMBS data. In so far as New South Wales consistently demonstrates a higher frequency of consultation by both GPs and psychiatrists compared to their interstate counterparts, the estimates derived may be considered to be higher than those in other States. (See Table 20)

The estimates indicate that, compared to the average annual cost per client in public methadone programs, services provided by GPs are considerably less costly, while those provided by psychiatrists are of a similar order of cost to those of the public clinics. It should be noted, however, that these costs do not include payments by clients for methadone dispensing, which are generally higher in the private sector than in the public sector where in some instances no charge is made. When taken into account, this factor is expected to reduce the difference in overall costs between the public and private sectors.

No data are available to indicate whether or not the client complexity and service needs of clients treated by psychiatrists justify the higher costs compared to those incurred by GPs. However, the view expressed by many of those consulted during the course of this review was that the methadone treatment services provided by GPs and psychiatrists for the large majority of their clients were of a like nature, and the fee differential was not justified. Under these circumstances, there appears to be considerable scope to reduce the costs of services in the private sector, which would enhance the overall cost advantage demonstrated over public clinics.

Table 18: Services and fees charged per client receiving Item 66343, selected states, 1993/94

GP Consults - No. of Services
GP Consults - Fees Charged
GP Consults - Benefits Paid
GP Consults - Benefits/Charges (%)
Psychiatric Consults - No. of Services
Psychiatric Consults - Fees Charged
Psychiatric Consults - Benefits Paid
Psychiatric Consults - Benefits/Charges (%)
All Medical Consults - No. of Services
All Medical Consults - Fees Charged
All Medical Consults - Benefits Paid
All Medical Consults - Benefits/Charges (%)
Major Pathology Services - No. of Services
Major Pathology Services - Fees Charged
Major Pathology Services - Benefits Paid
Major Pathology Services - Benefits/Charges (%)
All Selected Services - No. of Services
All Selected Services - Fees Charged
All Selected Services - Benefits Paid
All Selected Services - Benefits/Charges (%)
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Table 19: Treatment patterns among a sample of medical practitioners in NSW

Table 19 is separated into 5 smaller sections in this HTML version for accessibility reasons. It is presented as one table in the PDF version.

Average no. of patients

  • GPs - 83.0
  • Psych's - 72.0
  • Metro - 80.0
  • Country - 74.0
  • Wider - 83.0
  • Meth clinic - 99.0
  • Mean - 90.0

First 3 months

GPsPsych'sMetroCountryWiderMeth ClinicMean
Consults - Mean
Consults - Median
Consults - Range
Urinalysis Tests Ordered

Next 9 months

GPsPsych'sMetroCountryWiderMeth ClinicMean
Consults - Mean
Consults - Median
Consults - Range
Urinalysis Tests Ordered

Total first year

GPsPsych'sMetroCountryWiderMeth ClinicMean
Consults - Mean
Consults - Median
Consults - Range
Urinalysis Tests Ordered
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Subsequent years

GPsPsych'sMetroCountryWiderMeth ClinicMean
Consults - Mean
Consults - Median
Consults - Range
Urinalysis Tests Ordered

Table 20: Estimated annual costs of private methadone services in NSW

First YearSecond YearAverage
GP Consults
GP Urinalysis Tests
Total GP Services
Psychiatrist Consults
Urinalysis Tests
Total Psych. Services

10.3 Client costs

The large majority of medical practitioners providing methadone services bulk-bill for their services to Medicare. This is confirmed by the data in Table 18. Costs to clients of methadone services are largely restricted to the charges for daily dispensing of methadone either at community pharmacies or clinics, and transport costs incurred in attending their treatment locations. As shown in previous sections, dispensing costs vary widely between States, and between dispensing settings. While the Pharmacy Guild recommends a dispensing fee in each State, pharmacists often charge different, and often higher rates. In the large majority of cases, however, the fees charged by community pharmacists are considered reasonable, and affordable from the licit incomes of clients.

The greatest concern in regard to dispensing charges lies with the large private clinics in NSW, where daily charges of $7 to $12 have been reported. This level of charge is often beyond the capacity of the licit income of clients, forcing them to either revert to crime to support their continued involvement, or to leave the program. It has also been postulated as a factor in the diversion and sale of methadone. The compensating factor for this cost is the ready availability of takeaways in the large clinics.

The majority of clinicians consulted in the course of this study considered that some level of client payment for methadone services was appropriate. This payment was considered to be part of the self-discipline embodied in methadone treatment, and reinforced the value of the services provided to the client. The issue is more the amount of the payment rather than whether there should be any payment. Such payment should take account of both what is affordable by the client, and the costs incurred by the pharmacist in providing the service.

Information provided by the Pharmaceutical Society of Australia referred to a survey in Victoria in 1990 where methadone clients were asked how they would cope if they were charged $50 per week for methadone. Only 10% replied that they could find the money without difficulty; 38% said it would be difficult but they could cope; and 36% said it would be impossible. Many indicated that they would leave the program or revert to crime.

Given the variability in charges across jurisdictions and clinical settings, there is a need to establish a more uniform and equitable fee for dispensing. It is recommended that a ceiling be placed on the fees charged to clients for the dispensing of methadone, whether by community pharmacies or by methadone clinics. A maximum fee for the order of $3 to $5 per dose is suggested. This fee could be a condition of approval by the relevant State health authority for a pharmacy or clinic to dispense methadone. This may require changes to State legislation or regulations to be put into effect.
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10.4 Costs to pharmacists

The Pharmaceutical Society and the Guild have emphasised that the role of the community pharmacist extends beyond the simple preparation and provision of doses, and that a client counselling role is also often provided. The pharmacist is also a member of the treatment team for these clients, and should participate in the communication process inherent in service delivery. The PSA and Guild consider that the fees currently charged to clients are inadequate to cover these costs, and that pharmacists participating in methadone programs do so more from a sense of community spirit and professional calling than for financial reasons.

A joint working party of these groups is preparing a submission for Commonwealth subsidisation of their activities in providing methadone services. They consider that pharmacists involved in the provision of methadone services should be appropriately remunerated for their time, and preferably on a fee-for-service basis. Alternatively, a client management model would be considered. They propose that such payment would be independent of the PBS, and should be funded either through Medicare or through a separate Schedule of Payments. If payment were made under the PBS, the Commonwealth may face increased expenditure since methadone clients would reach the threshold levels under the PBS safety net provisions sooner, thereby receiving additional PBS drugs at no charge.

The comparatively low fees charged by community pharmacists for methadone dispensing has been a barrier to more pharmacists participating in methadone programs. The provision of a government subsidy would assist in alleviating this problem. At the same time, however, any subsidy provided should be at a set level which reimburses costs incurred, rather than providing an opportunity for pharmacists to profit from their involvement.

While recognising the logic of the argument for a government subsidy, no evidence has been provided during the course of this review which quantifies the costs incurred by pharmacists in providing methadone services. Consequently, it is not possible to recommend a course of action at this time. However, it is recommended that any submission to this effect be considered in regard to its economic benefits as well as its potential to attract additional pharmacists to methadone programs. At the same time, the costs to the Commonwealth need to be considered. A further complicating factor to be addressed is whether or not dispensing from private methadone clinics would also qualify for the subsidy.

10.5 Contributions by State and Commonwealth governments

All States have provided data on the costs incurred in the provision of methadone services, details of which were presented in Table 17. It should be noted that the costs incurred by the States may include funds contributed by the Commonwealth under the NDS, as well as funds from States' own health budgets.

An analysis of costs incurred by the Commonwealth through Medicare payments, the costs of providing methadone syrup and the contribution to States under National Drug Strategy (NDS) funding has also been undertaken.

Costs incurred by the Commonwealth through Medicare payments for private clients were estimated by an examination of the treatment patterns of clients receiving CMBS Item Number 66343 (as described in Section 10.2), and applying these patterns to an estimate of the total number of clients treated by private practitioners during 1993/94.

The approach adopted for this analysis was:
  • The average number of GP, psychiatric and pathology services provided to clients receiving CMBS Item number 66343 was determined. This analysis was restricted to those services provided to at least 1,000 clients (out of a total of 16,820).

  • The equivalent treatment profile for all Australian clients receiving these services was then derived.

  • The profile derived in Step 2 above was then deducted from that derived in Step 1. The residual is considered to be representative of the additional number of services provided to private methadone clients compared to all Australian clients, which are regarded as the services attributable to methadone programs.

  • The above service profile was then multiplied by the average Medicare benefit paid by the Commonwealth for each service item. Top of page

  • The above costs were then weighted by the number of clients receiving each service item relative to the total population on the file. This provides an estimate of the weighted cost per client in the course of a year, net of costs for non-methadone related services. This was estimated at $592 per client per annum, including costs of urinalysis.

  • This figure is lower than the estimates derived in Section 10.2, (shown in Table 20), since it reflects both the high-dropout rate of methadone clients, together with the relative distribution of services provided by GPs and psychiatrists across all jurisdictions in Australia. The figures presented in Table 19 represent the average costs per client if they remained in treatment for a full year.

  • The average weighted cost per client was then multiplied by an estimate of the total number of private methadone clients for 1993/1994. In this regard, a range of estimates has been identified. At the lower end, we have used data from the States on the number of people participating in the program at the start of 1993/94 plus an estimate of the number of new admissions during the year. This yields an estimate of 11,500 persons. At the upper end, we have used the number of clients who received CMBS Item Number 66343 during the year, namely 16,820.
The results of this process indicate that the Commonwealth funding of methadone services through Medicare in 1993/94, including the costs of urinalysis, was between $6,810,000 and $9,960,000, with a mid-point of $8,380,000. In addition, the Commonwealth pays for methadone itself (which is provided free to public and private dispensers), and makes a contribution to cost-shared funds under the National Drug Strategy.

Table 21 summarises the cost incurred by the State and Commonwealth Governments in providing methadone services during 1993/94. It should be noted that the expenditure by the States may include funding provided by the Commonwealth under the NDS. As more clients are treated in the private sector, and particularly as the community-based model is extended, it is expected that the contribution by the Commonwealth under the existing funding arrangements will increase.

Table 21: Costs incurred by State and Commonwealth governments in the provision of methadone services in 1993/94

Table 21 is presented as text in this HTML version for accessibility reasons. It is presented as a table in the PDF version.

Costs incurred by State:
  • New South Wales - $5,774,000
  • Victoria - $3,070,000
  • Queensland - $2,253,000
  • South Australia - $1,745,000
  • Western Australia - $1,221,000
  • Tasmania - $375,000
  • ACT - $796,000
  • Total States - $15,233,000
Costs incurred by Commonwealth:
  • Medicare Payments - $8,380,000
  • Methadone - $2,100,000
  • NDS Contribution - $4,873,000
  • Total Commonwealth - $15,353,000
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10.6 Summary

A review of the comparative costs of methadone services between the public and private sectors and between different jurisdictions has been made difficult by the absence of readily available financial data. As a result, costs have been estimated based on the results of specific questionnaires to State health authorities and private medical practitioners, and by an examination of a sample of Medicare data. The uncertain reliability of these data sources suggests that the results should be interpreted with caution.

In the public sector, reasonable consistency was found in the direct costs per client treated. The exceptions to this were in Tasmania and Victoria, where relatively few public clients are treated, and concerns are held about the reliability of the costs reported. If these two States are excluded from the analysis, the average direct cost per client per annum of methadone treatment in the public sector is approximately $2,100, while the total cost (including program administration etc.) is $2,250 per client per annum. Given the basis on which public clinics are funded, these costs are expected to reduce with the number of clients treated, though not necessarily proportionally.

In the private sector, considerable variation has been found in the costs of treatment, depending on the intensity of treatment (which tends to be related to duration of treatment) and the nature of the service provider (i.e. whether it is a GP or a specialist). The nature of the funding system results in costs being directly proportional to the frequency of service delivery and the fee charged. This has resulted in services provided by psychiatrists costing approximately three times those of GP services in all stages of treatment. These differences are reflective of considerable differences in treatment patterns between the two groups, and the higher fees charged by psychiatrists. There are no data available to indicate whether or not the clinical complexity of clients being treated by the two groups differs significantly, nor whether outcomes of treatment vary as a result of the differences in treatment approach. However, many of those consulted during the course of the study doubted that the differences in fees charged between these groups could be justified in terms of the nature of the service provided. The costs of services provided by psychiatrists are comparable to the costs incurred in the public sector.

However, the costs quoted for the private sector exclude the cost of dispensing methadone, as this is usually met by the client. Costs in the public sector generally include the dispensing costs of public clinics. When taken into account, this difference in reporting largely negates the difference in the quoted costs for the two sectors, and would make the services provided by psychiatrists in the private sector more costly than those in the public sector.

Charges to clients for the dispensing of methadone were also found to vary considerably between jurisdictions, and there is a need for greater standardisation of these charges at an affordable level. At the same time, the issue of whether or not there should be government subsidisation of costs incurred by pharmacists in dispensing methadone needs to be considered in the context of its cost-effectiveness and its effect on attracting more community pharmacists to methadone dispensing.

Finally, an analysis of the respective contributions by the State and Commonwealth governments for the provision of methadone services has indicated that, in total, they are currently of a like order of magnitude of approximately $15.2 to $15.3 million. It should be noted, however, that the expenditure by States may include funds provided by the Commonwealth under NDS funding ($4.9 million) for the provision of methadone services. Given the trend for greater private sector involvement in methadone services, it is likely that a continuation of the current funding arrangements will result in the Commonwealth bearing a greater proportion of the total costs.

10.7 Recommendations

  1. That a maximum fee to clients for the dispensing of methadone be established across all States, to be applied to community pharmacies and clinic-based pharmacies as a condition of their approval to dispense methadone.

  2. That a decision to provide a government subsidy of the costs of dispensing methadone be based on the relative merits of a submission to this effect, having regard to its economic validity, and its capacity to attract more pharmacists to methadone programs.

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