Shane Ross (Independent)
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This is a delicate issue that has caused a great deal of anxiety among pharmacists. It relates particularly to medical card holders.

When artificial prices are being imposed or negotiated between various State bodies, it is important that there be a minimum of interference. In a situation where the State, rightly, has decided that medical card holders must be subsidised, a difficult negotiation between various bodies results, in this case the HSE, the wholesalers and the pharmacists. The issue to be decided upon is the mark-up that is taken by various bodies and the eventual profit that pharmacists actually receive. As the Minister knows, the mark-up wholesalers receive from the HSE on drugs supplied to pharmacies for medical card patients is to be reduced next year from 17.65% to 8%. In January 2009, the figure will be reduced further to 7%. I do not know where these figures came from and I have heard no rational reason why it was ever set at 17.65%, or why it is now being reduced to 8% and then to 7%. Admittedly, there is a difficulty when one introduces figures of this sort, which tend to be arbitrary.

However, the decision to do so arbitrarily, without consultation with the pharmacists, is wrong. It shows a misconception of where pharmacists make money. They make money on the medicines they dispense to medical card patients through deals they negotiate with wholesalers. It is a complicated series of circular transactions, but initially they got a proportion of the 17.65% that wholesalers received. As I understand it, it was up to individual pharmacists to negotiate their own deal with the wholesalers, after which they would be reimbursed by the HSE. This new measure will reduce pharmacists' profits by half or more. It is difficult to say, but it appears that from the lobbying of many pharmacists, some of them will be asked to sell at a loss. If so, we cannot ask them to continue to operate in this fashion. They maintain the new measure will force them to cut corners and reduce overheads.

An additional difficulty is that many pharmacists are claiming the effect of this measure — and we are only talking about medical card holders — will be to threaten closure of pharmacies in the most vulnerable areas where customers include elderly and poor medical card holders. If pharmacists are not making money from selling medicines to medical card holders, the majority, or a large percentage, of their business will be lost. As a result, if what they are saying is correct, it will mean the most vulnerable medical card holders will not have pharmacies in their areas. Therefore, those who are least capable of doing so will have to travel much further to access pharmaceutical services.

I applaud the fact that the HSE is seeking to cut costs in all sorts of areas, but there is no justification for the executive to cut costs if it means the most vulnerable will suffer. The HSE has many problems and there are many areas in which costs could be cut. However, if cuts are made to payments to pharmacists, who are not popular and it is a slightly populist measure, thus forcing them to reduce overheads while operating in a competitive market, the result will be that the weakest consumers may suffer. The Minister is cutting costs in the wrong place. I ask her to examine whether there is room for renegotiating this arbitrary cut. She should consider asking the HSE not to implement cuts in this area.

Mary Harney (Dublin Mid West, Progressive Democrats)
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I am pleased to take this Adjournment matter. When I saw this item on my private secretary's desk earlier today, I said that it could not possibly be from Senator Ross. I thought he must have made a mistake because I did not believe the consumer's champion could possible table such a motion. Senator Ross and I are good friends. We attended Trinity College together and I have strongly defended him in many places because I support many of the matters he has pursued. If he were to ask his friends, the auctioneers, about this, however, they would tell him that retail pharmacies sell for three times their annual turnover. In the retail sector, pharmacies and pubs are the businesses that make most money, although I understand that publicans are under some pressure.

There were no negotiations with the wholesale sector and there is no agreement because there can be no agreement or negotiation. The HSE and the Department of Health and Children engaged in discussions with the wholesale sector. During the course of those discussions the sector brought forward legal advice to say that we could not engage with them because it would amount to price fixing and a breach of competition law. When the HSE got its own advice and the Department received advice from the Attorney General, they found that was the case and therefore we were not in a position to negotiate with the wholesale or retail sectors.

Over the past ten years, the price of drugs has risen by 370%, which is more than two and a half times the rate of inflation in the same period. In 2006, drugs cost us €1.57 billion, the fastest growing cost in the health services. There are a number of components in that cost. In the first instance, there is the ex-factory price. We negotiated a new arrangement with the EPHA which will save approximately €260 million over the next four years. A price was set for the wholesale sector which, as Senator Ross said, is 8% from 1 January 2008 and 7% from 1 January 2009.

The wholesale margin in Ireland is twice what it is in any other European country. Drugs are more expensive in Ireland than anywhere else and even though the ex-factory price is around the middle of the range of such prices elsewhere, we are at the top when it comes to cost. That is because of the wholesale margin, which is double the cost elsewhere, and because of the way we remunerate pharmacists.

I wish to deal with the latter point. I am a strong fan of ensuring people have a fair return for their efforts, whether they are professionals or in other business sectors generally. I am a strong supporter of entrepreneurship in the public and private sectors. There is no question of seeking to put anyone out of business. On the contrary, as a result of the liberalisation of our law, pharmacists from throughout Europe can practise in this country, including many of our graduates who could not train in Ireland when there was only one such school in Trinity College with 25 places annually. We now have a second pharmacy school in Cork. Many Irish people had to go abroad to qualify as pharmacists but when they returned, they could not open a pharmacy. We have changed the law in that respect.

We reimburse pharmacists in two ways: through the General Medical Service scheme and the drug payment scheme or DPS. As regards the GMS scheme, we pay between €3.27 and €18.83 per item per dispensing fee. For the DPS, we pay from €2.86 to €32.90 per item. On top of all that, pharmacists in the latter scheme get a 50% mark-up. It is clearly unacceptable that there should be such a mark-up in addition to the money coming back from the wholesale margin, which is roughly 9%.

I understand that a meeting will be held today under the process overseen by Mr. Bill Shipsey, SC. In the dialogue that is under way, we want to separate the price of the commodity, where we will save €660 million over the next four years, from the professional fee we pay to pharmacists to dispense it. We want a better balance between both schemes. One that is based on a 50% mark-up, so the more expensive the drug the bigger the fee, is clearly not acceptable. In that scenario there is a big incentive to dispense more expensive drugs.

The big beneficiaries of the new regime will be those in the most deprived areas where there is a large GMS practice and perhaps not as many DPS or private patients. These include areas such as Donegal, certain other counties and the more disadvantaged parts of Dublin and other large cities. I hope as a result of the dialogue under way that those new arrangements can be put into effect soon.

I understand people say that from 1 December, GMS patients will not get their drugs. It would be a great pity if contracts were breached in that way and the most vulnerable patients in our society were to suffer. No pharmacist has informed the Health Service Executive that it does not intend to dispense medicine to GMS patients from 1 December. Pharmacists are required under contract to give three months' notice in writing if they are not going to honour their contracts.

Methadone is not part of the contract and some pharmacists will not dispense it from tomorrow. The HSE will have to put alternative arrangements in place through its clinic network. This affects a vulnerable weak group of people. I appeal to pharmacists not to use the most vulnerable and the weakest in our society in the dialogue.

We want to reduce the cost of medicine which is rising for demographic reasons entailing new medicines and treatments. The €660 million we will take out over four years simply slows down the increase because the cost has been rising at a rate of approximately 11% per annum. The regime that was in place in this country was almost unique and resulted in consumers, at the top of the class of all 27 European countries, paying more for their drugs than those elsewhere. We ranked in the middle band for ex-factory prices. Nobody could stand over that and it is not in the interests of the health system, the patients or consumers.

Senator Ross represents Trinity graduates and, until recently, all pharmacy graduates had to come from Trinity. Even his better judgment, however, must agree with what we are trying to do. The HSE has my full support and that of the Government in the efforts it is making to garner more money to provide more services for patients.

Shane Ross (Independent)
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I thank the Minister for her reply. Will she consider this matter again if as a result of this measure those who depend on medical cardholders for a large percentage of their business suffer and close or do not offer the necessary service, in which case the most vulnerable members of society will suffer? The possibility of those circumstances arising has been spelt out to me.

Mary Harney (Dublin Mid West, Progressive Democrats)
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No. That is not to say that if vulnerable people suffer, I will not take notice. The pharmacists will receive between €3.25 and €18.40 per item they dispense. There might be three items on a prescription or only one. We want to achieve a better balance between the way they are paid on the GMS, for which they receive the professional fee, and the DPMS, for which they get a fee and a 50% mark-up. We want to re-balance that and separate the price of the commodity from the professional fee. Nobody would understand it if we paid doctors some kind of mark-up towards their salaries on the basis of what they prescribe. We want to pay the pharmacists a professional fee and separate that from the price of the commodity. There is no question of the pharmacists paying more for the drugs than they will receive, a suggestion I have read in the newspapers and have heard from people who have contacted me. There is no question of that happening. How could that be the case?

This is a challenging time for health reform and we must all play our part. This is a key area of the reform. We must also reform the way in which we remunerate general practitioners. We have almost concluded the consultants' contract. Now we must deal with dentists and so on. Every morning when I wake up I hear about the disaster in the health services and ask myself where is the €15 billion going. We must provide a more responsive way of remunerating pharmacists than that we have used until now. Everybody would agree that is preferable. It is unusual that a 17% mark-up for the wholesalers should be double the mark-up in other European countries. The reason for that is that half of it goes back to the pharmacists. We believe in paying them a professional fee so that they do not depend on the price of the commodity to earn their income or on the payback from the wholesale sector.