Máire Hoctor (Tipperary North, Fianna Fail)

I thank Deputy Chris Andrews for raising this matter. I am responding on behalf of the Minister for Health and Children, Deputy Harney.

The changes to the wholesaler arrangements for the supply of drugs and medicines to community pharmacists for dispensing under the relevant schemes, as announced by the Health Service Executive, were informed by a comprehensive consultation process. On foot of this, it became clear that the HSE could not negotiate with pharmacists or wholesalers for legal reasons. Under section 4 of the Competition Act 2002, the Pharmaceutical Distributors Federation, PDF, representing wholesalers, and the Irish Pharmaceutical Union, IPU, representing pharmacists, may not negotiate fees, prices or margins collectively on behalf of their members since both bodies constitute undertakings under the Act. Accordingly, it is not possible for the State to negotiate with the PDF or IPU on fees or margins as such negotiation would place these bodies at risk of prosecution. The Minister for Health and Children has already outlined in detail how the legal issues evolved in recent replies to several Deputies and in her remarks in the Seanad.

Following the completion of public consultation by a HSE-led negotiating team, and informed by independent economic analysis carried out by Indecon Economic Consultants, new reimbursement arrangements were announced by the HSE on 17 September 2007. The new price arrangements involve revised rates for community and hospital supply. On community supply, the reimbursement of the cost of drugs and medicines to pharmacy contractors is to be reduced from the ex-factory price plus 17.66% for wholesale supply — this is the previous mark-up — to the ex-factory price plus 8% from 1 January 2008 and 7% from 1 January 2009. On hospital supply, there is to be a new interim mark-up of 5% for wholesale supply from 1 January 2008, with further discounts for efficient ordering and supply in that sector.

In its examination of the issues involved and in determining the new arrangements, the negotiating team considered a re-imbursement level that reflects the market value of pharmaceutical wholesale services and security and continuity of supply at current levels to patients. The evidence on which the decision is based, following examination of the issues, direct consultation and independent economic analysis, all indicates that the State is currently paying a premium for the services in question. It is possible and necessary for revised arrangements to be put in place without a substantial impact on the delivery of such services.

I also point out that pharmacists' arrangements with wholesalers for the supply of drugs and medicines is a private commercial arrangement and that the HSE's role is confined to setting the most appropriate re-imbursement rates for community pharmacies. The basis for the new re-imbursement arrangements was set out in detail by the CEO of the HSE on 17 September 2007.

To address concerns expressed by the IPU on behalf of community pharmacists about the implications of the legal advice on competition law on their right to negotiate fees through the union, a process of dialogue was established chaired by Bill Shipsey, SC, to explore ways in which these concerns could be addressed, having regard to the legal position. Following a recent suspension of the process due to the withdrawal of methadone dispensing by certain pharmacists, there is renewed engagement between the IPU and the HSE under the auspices of Mr. Shipsey.

The Department of Health and Children and the HSE continue to recognise the IPU as the representative body for its members. There is, and will continue to be, ongoing dialogue with the IPU, in compliance with competition legislation, and the HSE will consider all available options for advancing the process for the review of the pharmaceutical supply chain. The next stage of this process will involve separation of the price of drugs and medicines dispensed in community pharmacies from re-imbursement for professional services through the introduction of a flat fee arrangement across all the GMS and community drugs schemes. The HSE aims to ensure that such an arrangement will be a fair and transparent reflection of the service provided and will be arrived at following further consultation with all stakeholders. I also point out that the service provided by community pharmacists is highly valued by the Government and I hope that it will be possible for pharmacists and the HSE to continue to engage in matters of mutual concern in a positive and forward looking manner.

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