Chris Andrews (Dublin South East, Fianna Fail)
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I am delighted with the opportunity to speak on this issue, which is important not only to society but also to the health system. A delicate situation has arisen involving the Health Service Executive and the Irish Pharmaceutical Union, IPU. On 14 October, up to 140 pharmacists withdrew methadone services from approximately 3,000 patients as a protest against the changes due to come into force on 1 December 2007. A pharmacy is currently paid the cost price of the drugs under the general medical card scheme in addition to a fee of €3.26. There is no mark-up on the cost of these medicines and all the costs of operating the pharmacies' GMS medications are paid for from the €3.26. It has been said the pharmacists receive fees of up to €18 on occasion, as indicated recently by the Minister, but three out of every four chemists to whom I have spoken claim they never received this payment. One chemist indicated today that he has been in business for 15 years but has never received it.

In practice, the GMS scheme is loss making for the pharmacy but is cross-subsidised by other products. From 1 December, the HSE intends to pay pharmacies 8% less than the cost price of the medicines. Pharmacists have described this as a breach of their contract with the HSE. Drugs payment scheme customers will also be affected because the HSE said it no longer intends to pay pharmacies based on the cost price of medicine.

The pharmacists have been more than willing to negotiate, they have come to the table with a very open mind and are willing to discuss virtually any issue with the HSE. In February 2007, the Minister for Health and Children and the chief executive of the HSE both indicated the need for an independent process for the setting of pharmacy fees. Discussions were held under the independent chairmanship of Mr. Bill Shipsey but he has since suspended his efforts to find a resolution. We are thus in limbo and will end up with two unhappy parties and a crisis on 1 December.

I understand Mr. Shipsey met the IPU and HSE representatives last Wednesday but nothing has happened since. It appears to me, having spoken to pharmacists around the country, that the process is really only a smokescreen and that the HSE will continue to force through its proposals without any really meaningful talks. The HSE has argued that the IPU, as a collection of business undertakings, is precluded under the Competition Act 2002 from negotiating fee-related matters with the HSE. It is not in a position to negotiate directly with the IPU. I accept that the HSE has difficulties but do not accept the complete lack of flexibility regarding its unwillingness to discuss the issue with local pharmacists. It will not engage with the pharmacists as a group or as individuals and this is very unfair.

Pharmacists provide a vital service to the community and work long hours. In many ways, they represent the last bastion of local retail outlets and are genuinely local. More often than not, they are involved in the local community and provide what the old corner shops used to provide some years ago, namely, a means of interaction with members of the community. Pharmacies are now part of the social infrastructure and provide medicine to GMS scheme patients and those who are eligible under the drugs payment scheme. They provide this service on behalf of the HSE and this should be recognised rather than punished.

It is simply not realistic to demand that pharmacists dispense medicine at a loss. In many cases, they are small businesses with high overheads and must compete with new entrants to the market. A pharmacy with a high GMS turnover will be particularly affected if the proposed change comes about. Pharmacies should be supported and, in order to increase competition, pressure should be put on the wholesalers rather than the retailers. The HSE has not been able to negotiate sufficiently good terms with the wholesalers but the retailers and customers should not suffer as a consequence.

The HSE has not carried out an economic assessment of its proposals on the retail sector or heeded the recommendations of the Indecon report, which recommended consultation and dialogue. Why has the report not been published? I ask that this be done as soon as possible. It is not enough to hide behind the Competition Act 2002 and it is imperative that the HSE and IPU, on behalf of small pharmacists and those with a high GMS turnover, find a way to reach a mutually beneficial conclusion that avoids further action and does not put patients in further danger.

Máire Hoctor (Tipperary North, Fianna Fail)
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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.