John Browne (Wexford, Fianna Fail)

I thank Senator Norris for raising the issue and apologise for the absence of the Minister for Health and Children, Deputy Harney.

In 2005, against a background of rapidly rising drugs costs in the general medical services scheme and community drugs schemes, a process was put in place by the Cabinet committee on health. This process aimed to examine all aspects of the drugs supply chain and achieve greater value for money in the pricing and supply of drugs and medicines to the health services, consistent with patient safety and continuity of supply. A HSE-led negotiating team, with representation from the Department of Health and Children, was set up to advance this process.

In mid-2006, the negotiating team reached agreement with the Irish Pharmaceutical Healthcare Association, IPHA, and the Association of Pharmaceutical Manufacturers of Ireland, APMI. As part of the process, the team then began discussions with the wholesaler representative body, the Pharmaceutical Distributors' Federation of Ireland, PDF. However, PDF advised the State that a legal issue prevented it from negotiating a new margin for supply to community pharmacies.

The HSE sought legal advice, which showed that the legal issue was wider than the PDF position and had implications under competition law and for negotiations with community pharmacists. Legal advice obtained by the Department of Health and Children confirmed the HSE advice on this issue.

The position is as follows. Section 4(1) of the Competition Act 2002 prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the restriction or distortion of competition. Those conditions are not met in this case. Wholesalers and pharmacy contractors are undertakings. PDF and the Irish Pharmaceutical Union, IPU, are associations of undertakings and come under section 4(1) of the Act. The coming together of wholesalers under the PDF or pharmacy contractors under the IPU to negotiate prices would be a breach of section 4(1). Acting in contravention of section 4(1) is a criminal offence and would expose those parties, their directors, managers and officers to the risk of criminal prosecution. In light of this advice, it is not possible for the HSE to negotiate with the PDF or the IPU on fees or margins.

In the interim, in order to determine new arrangements for wholesale services that comply with competition law, the negotiating team has begun a public consultation process, including an invitation to make submissions, coupled with an independent economic analysis of the Irish and EU markets. This process assumes continuation of current service levels. In view of the implications of the legal advice, the HSE wrote to all community pharmacy contractors, setting out the position in detail and indicating that the HSE is constrained from negotiating fees with the IPU, for the reasons outlined. The union has been fully briefed on the legal position.

The negotiating team will consider, following the wholesale sector review, how best to address this issue for pharmacy contractor services. Meanwhile, the negotiating team has been engaging with the IPU in an open and constructive dialogue. Both the Department of Health and Children and the HSE recognise the IPU as the collective representative body for its members. However, negotiations with the union must comply with the law. All contractual matters other than fees may be negotiated. The negotiating team is considering proposals from the IPU for resolution of this issue, with a view to agreeing a process for contract review that would comply fully with competition law.

Accordingly, the Minister is satisfied there is, and will continue to be, ongoing dialogue with the IPU as the representative body for pharmacists, within the constraints of the legal advice received. I assure the House the Minister wishes to see that dialogue proceeding in a constructive manner.