Seanad debates
Tuesday, 4 March 2008
Pharmaceutical Pricing: Statements
5:00 pm
Mary Harney (Dublin Mid West, Progressive Democrats)
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I am very happy to be here to deal with pharmacy pricing issues. Many Members of this House have been interested in this for some time. I want to set out the context in which the HSE and the Government is examining the cost of pharmaceutical products. We cannot separate this from the wider issue of health reform. In the health reform or transformation programme we seek to achieve a number of objectives, in particular to make our health service more responsive to the needs of patients and ensure patients have access to appropriate treatments when they need them, whether in hospital treatments or pharmaceutical or other products.
The cost of pharmaceutical products in Ireland has risen very dramatically. In 1991, for example, we spent the equivalent of €200 million on the community drugs scheme. In 2007 we spent €1.5 billion on the same scheme. By any standards that is an incredible increase. When the Government and the HSE investigated the rising cost of drugs in Ireland we had to examine the whole supply chain. There are three elements in that chain: the manufacturers or producers, the wholesalers and the community or retail pharmacy sector.
First, the HSE and Government began negotiations with the producers of medicine and the result of those negotiations has been positive from the perspective of taxpayers and patients. Prices of all drugs going off patent will be reduced by at least 35%. That is significant and the National Centre for Pharmacoeconomics said it is a greater saving than if we immediately moved to generic prescribing. In addition, Ireland is part of a wider basket of countries. In the past we belonged to a basket of five countries, and they were the five most expensive countries in the EU. Today Ireland belongs to a basket of nine countries including Spain, and we will procure new pharmaceutical products at the average price in that basket. That is 10% lower than the price at which we produce new products today. That is very satisfactory from the perspective of the taxpayer and the patients.
Next, the HSE and the Department of Health and Children sought and began, in good faith, to negotiate with the wholesalers. In the middle of those negotiations the wholesalers produced legal advice that suggested it was a breach of competition law to negotiate, that fixing or agreeing prices with the wholesalers, which is what would happen through those negotiations, was contrary to Irish and European competition law. Negotiations were suspended for the HSE to get legal advice. I also sought the advice of the Attorney General and independent legal advice was sought. It confirmed that Irish and European competition law does not allow the Government to enter negotiations on price setting with any group. That was a disappointment and it was news to us, but it is the law. Thereafter, the HSE commissioned independent research by Indecon to look at the wholesale margin in Ireland. Essentially the wholesale margin in Ireland is double the margin across the EU. For example, we pay 18% by way of a wholesale margin.
The next piece in the equation is the retail or community pharmacist, and the State's contract with such pharmacists is based on supplying drugs through the General Medical Services, also known as the medical card scheme, or through the drug payment scheme. There are also some small agreements on high-tech drugs. For the GMS, we pay a dispensing fee of €3.26 per item, and we pay a 50% mark-up on the drug for the drug payment scheme, as well as a dispensing fee of about €2.60. Those fees deliver an average of €240,000 per year to pharmacists, or €100,000 more than pharmacists in Northern Ireland for the service they provide.
It is my view that pharmacists should be paid for the professional service they supply, which is the dispensing of medication. They should not be paid fees based on the commodity price or based on a mark-up of the commodity price. As drugs get more expensive, a 50% mark-up clearly would become unsustainable and I know of no country where fees are paid on that basis. We are seeking to get better value for taxpayers and better value for patients. The wholesale margin will be reduced to roughly the European average of 8% from 1 March and 7% from 1 January 2009. When the wholesalers made their submission to the HSE as part of those negotiations, they acknowledged that the 7% to 8% margin allowed for overheads and running costs of 4% to 5% plus a profit margin of 2% to 3%. The HSE recently went to tender for the supply of vaccines, which must be distributed in complicated conditions in freezers and so on. The company that won the contract did so on a 4% margin. In Northern Ireland the wholesale price is 12.5% for the first €180,000 and thereafter it drops to 4%. Therefore, I do not accept that a wholesale margin of 7% from the start of next year is not adequate for a thriving wholesale business.
We have a virtual market here. The three big wholesale companies have major interests in the pharmacy sector. United Drug has invested €300 million in pharmacies. Cahill May Roberts owns about 70 pharmacies while Uniphar owns between 400 and 500 pharmacies.
A number of changes have been made to pharmacy legislation in recent years. A regulation was introduced in 1996 to restrict the location of pharmacies, based on the number of miles from the nearest pharmacy. This was repealed by the then Minister for Health and Children, Deputy Martin, in 2002. At that time the Irish Pharmaceutical Union predicted that there would be catastrophic consequences, but since then we have had a 26% increase in the number of pharmacies in this country.
I enacted a Bill in 2005 to liberalise the market to allow more pharmacists to open premises in Ireland, including many graduates who could not get into pharmacy school in this country because we only had one school with a restricted number of places. Many of our own young people had to go abroad to study pharmacy, but when they came home they could not open their own pharmacy. When we acted in 2005 to change that, it was again predicted that there would be dire consequences for the pharmacy sector. Since then, there has been a 5% increase per annum in the number of pharmacies in the country.
The Government wants to see a thriving community pharmacy sector. It has been suggested that up to 200 pharmacies may close as a result of the new wholesale price. Even if we were to accept that, it means that we are being asked to pay €5 million per annum to each of those pharmacies to keep them open. I do not think anyone could suggest that that would be possible or desirable.
The new dispensing fee of €5 per item from 1 March for those who wish to enter into a temporary contract, as announced by the HSE, represents a 70% increase on the €3.26 fee. That may well be attractive for some pharmacists. However, representatives of the pharmacy union made the point to me that because that fee was not set by an independent process, pharmacists would be very reluctant to accept it. That is why I asked Mr. Sean Dorgan, a former head of the IDA and a former Secretary General of two Departments, to oversee a group which was composed of himself, Mr. Mark Moran, the former chief executive officer of the Mater Private Hospital and who worked in the pharmaceutical sector, and Ms Mary O'Dea, the director of consumer affairs at the Irish Financial Services Regulatory Authority and who has enormous credibility as a consumer champion. The group was asked to look at the flat fee for dispensing on a temporary basis.
We are not in a position to break a contract nor would we wish to do so. Breaking a contract requires at least six months' notice. The intention of the Government and the HSE is to enter into negotiations with the IPU on a new contract for pharmacists. I want to see the developmental role of pharmacists taken more seriously. I want to see pharmacists, as well-educated and skilled health care professionals, more involved in chronic illness management, in preventative health care measures and in primary care. Through negotiating a new contract with the IPU, I hope we will be able to do that. We would not be able to negotiate the price for that new contract owing to the competition laws I mentioned earlier, so it will have to be set by an independent body.
It is not acceptable nor sustainable that it should cost €600 million in Ireland to get €1 billion worth of products from the manufacturer to the patients. I know of no sectors that have margins of 60% to 70%. Therefore, I believe that the separation of the professional dispensing fee from mark-ups and discounts is desirable in the interests of the taxpayers and in the interests of the patients. It is also desirable in the interest of the pharmacy sector, especially those pharmacists that are very heavily dependent on medical card patients or in rural areas with very small turnover. Such pharmacists will do a lot better as a result of a higher dispensing fee than is currently the case.
I am very pleased that patients have not been adversely affected since 1 March. The freefone line operated by the HSE has taken about 300 calls. In all those cases the operatives have been able to reassure the patients, and I pay tribute to the pharmacy profession. I think pharmacists——
Pat MoylanMary Harney (Dublin Mid West, Progressive Democrats)
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Pharmacists take their ethical responsibility seriously and all evidence suggests that is the case. If anyone can show me anywhere in the world where it costs €600 million to bring €1 billion worth of drugs to patients, I will be very surprised. We have put in place a regime for the reimbursement of the retail pharmacy sector which is just not sustainable. As new drugs come on the market for cancer and other ailments, it is important we have access to those drugs. We have a finite resource available for health care and we must ensure that we deliver those drugs to patients in the most cost-effective way, remunerating the professional skills, educational competence and training which pharmacists have, but also delivering appropriate value for money for patients, the pharmacy sector and the taxpayer.
Frances Fitzgerald (Fine Gael)
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I welcome the Minister to the House. There have been many calls in recent weeks for her to come to the Seanad and to explain the action she has been taking. The reason Members on all sides wanted her to come was because of the concerns of the pharmacy sector. These concerns focus mainly on the risks to the community pharmacy sector. Pharmacists say that many pharmacies could close because of the changed economic situation which they face. They also say that many people who are new to the profession will find it difficult to survive.
There is a wide range of concerns on all sides of the House and Members would have welcomed an opportunity to discuss them with the Minister before the deadline of 1 March. I regret the Minister chose to come to the House after the deadline had passed. It does a disservice to the Seanad, following the disservice done to the Dáil when she chose to appear before it as late as last Thursday. If democracy is to mean anything, Parliament must engage in vigorous debate and discussion of issues. Instead, representatives of the Health Service Executive appeared before a committee of the House to defend the organisation's decision and stated the HSE was carrying out political orders. We did not hear the details from the Minister. The HSE defended her policy and she chose not to explain, defend or debate the changes she was introducing in either House.
As usual, the Minister strongly defended her stance. She indicated that she has taken into account broader health issues and the cost of drugs. No one disagrees with her argument that drugs should be cheaper and profit margins need to be examined. The Indecon report, which examined margins, noted the difficulties in making the type of international comparisons to which the Minister referred.
The Minister is presiding over a failure in industrial relations. Those working in the pharmacy sector, which provides a good community service, are very concerned and alienated. They believe a confrontational approach has been taken, they were not involved in meaningful discussions about the changes and efforts were not made to bring them on board. Time and again they have indicated that they accept the need to reduce costs. They have also made a range of suggestions for making cost savings and recognise wastefulness in the dispensing of medicines. Clearly, therefore, there is scope for agreement and discussion.
Having established an independent body, why did the Minister not remove the deadline? Why did she not engage in discussions to reach agreement on a range of measures to be taken to secure the cost savings she seeks to deliver a better health service? We are aware of the many deficits in the health service, realise that money is needed for many frontline services and accept that savings should be made in the area of drug prescribing. However, the manner in which the changes have been implemented is disturbing.
Many people are concerned about the impact of the changes on the fabric of community life. There has been considerable discussion in the media and elsewhere about threats to the fabric of community, especially since the violent killings last week of two young Polish men. While that incident may appear to be far removed from the issue under discussion, the role of the pharmacy in delivering local services to vulnerable people in communities has emerged in this debate. Post offices, for example, are closing and the fabric of rural life is under threat.
A letter from a pharmacist published in today's edition of The Irish Times states:
The HSE action will result in the community-based service being available only in large urban centres operated by Boots, Tesco or Unicare. The Minister won't say it publicly but this is what she wants because her HSE advisers tell her the large multinationals can absorb the costs. Meanwhile, a fine body of caring, frontline, professionals who have been providing a service, quietly and efficiently, to generations are put out in the cold.
Regardless of whether the Minister likes it, this is how pharmacists view the impact of the changes. They believe the Minister is supporting large multinationals without taking into account the concerns of smaller pharmacists, community pharmacists, the independent sector and those pharmacies with a large cohort of medical card customers. I ask the Minister to respond.
All sides, not only the Opposition, are concerned about this issue. Many Members on the Government side have expressed concern about the manner in which the HSE has acted. I refer to another letter published in The Irish Times on Saturday, 1 March, which noted that the HSE acted "without any consultation." It added: "If the changes go ahead as scheduled, the implications for our national delivery of pharmaceutical services will, in my view, be catastrophic." These words were not written by an Opposition politician but by a former Minister of State at the Department of Health and Children in the previous Government, the Minister's party colleague, Mr. Tim O'Malley. The Minister stated in the Dáil that Mr. O'Malley is a pharmacist. He raised the concerns I have raised about the future of small, local pharmacies, especially in rural areas. Will their future be threatened? If so, where are their patients, particularly elderly people, expected to go to obtain prescribed medication? Will the Minister outline what contingency plans have been made? She indicated that only 300 calls had been made to the helpline. That is a significant number of people raising concerns about whether their medication will be available. I expect many of the calls were made by elderly people.
Fidelma Healy Eames (Fine Gael)
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The figure was for the first two days after the deadline had passed.
Mary Harney (Dublin Mid West, Progressive Democrats)
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It related to the period before the deadline. Hardly a call has been made since 1 March.
Frances Fitzgerald (Fine Gael)
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In her address to the Joint Committee on Health and Children, Aisling Reast, a young pharmacist from Lucan, stated:
Young pharmacists like me face financial ruin for wanting to play a key role in looking after our community's health. We want this issue to be resolved in a way that will ensure our patients will receive the service they need and that our members will be paid a fair rate for providing that service. All we want is fair play.
Pharmacists want negotiation and engagement. I ask the Minister to respond to some of the specific key areas of concern which have been articulated by Members from all sides regarding the impact of the unilateral change which took effect on 1 March.
Jerry Buttimer (Fine Gael)
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The Minister reminds me of St. Paul riding his horse into Damascus, except she has not yet fallen off her horse or been politically converted. Why is she being confrontational on an issue on which there was scope for agreement and compromise? She and her Government colleagues have instilled fear in ordinary people. I use the Northgate pharmacy in Cork city, a simple operation run by a woman and her daughter who act as the friends, counsellors and confidantes of many of their customers. Why is the Minister placing them under severe pressure?
The viability of community pharmacists in rural and urban areas is being put at risk. What contingency plans are in place in the event that the Irish Pharmaceutical Union decides this week that enough is enough? The Minister indicated that 300 people telephoned the helpline before the deadline expired. What will happen when chaos looms? What contingency plans are in place? We have spin and bluster from the Department when we need answers and reassurance.
6:00 pm
Maria Corrigan (Fianna Fail)
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I welcome the Minister to the House to discuss this important issue and thank her for regularly making time available to come to the House. I commend her on the determination and commitment she brings to the vital issue of health reform.
It is important to remind the House of the long-standing problem faced by patients regarding the cost of medication. They pay a multiple of the cost in other countries.This has long been a bone of contention for all parties and a constant source of frustration for people when they travel abroad and purchase medication at a fraction of the price paid in Ireland. This is not in the best interests of the consumer and as the taxpayer foots €100 million of this unnecessary cost, it is not in the best interests of the taxpayer or the Irish finances. There is much we could do with €100 million and we can all think of projects on which we would willingly spend it.
The increasing cost of medication in Ireland represents a significant portion of our health budget. The ageing population has increased the demand for a practical and efficient community pharmacy drugs supply program. The HSE and the Department of Health and Children have sought to provide a system giving greater value to patients purchasing medication and to taxpayers who contribute to that budget.
The Brennan Commission highlighted faults with the present system of reimbursements under the drugs payment scheme. As a result, the existing wholesale mark-up paid for drugs is to be reduced to a level fair to both wholesalers and taxpayers. The Government should be commended for this bold step to ensure a sustainable and principled system of drugs payment exists.
It is important to note the context in which the change takes place. The HSE expenditure on medical card and community drugs schemes in 2007 shows that €1.1 billion was spent on purchasing drugs and medicines from manufacturers; €200 million was paid to wholesalers to deliver these products to community pharmacies; €237 million was paid to pharmacists in fees for the medical card, drugs payment scheme and long term illness schemes; and a further €130 million in markups on specific schemes giving a total of €367 million. Adding VAT of €38 million, the total cost of drugs and medicines under the schemes will amount to approximately €1.74 billion in 2007. Therefore, it costs upwards of €600 million to deliver drugs and medicines costing €1.1 billion from the factory to the patient. This is very expensive and the HSE saving of €100 million from the wholesale delivery side should be seen in this context.
The reduction of the wholesale margin from almost 18% to a level eventually reaching 7% will represent a saving of €9 million per month. This will bring the Irish level in line with the European average. It has cost us in excess of €600 million just to deliver €1 billion of drugs to the patient. This situation is untenable and avoidable. The HSE's pharmaceutical reform will provide a stable foundation for the process of pharmaceutical pricing for the years to come.
The new system of pharmaceutical pricing ensures dispensing fees will stand independently and eradicates the practice of external wholesaler discounting. This simplification affords every party of the supply chain — the producers of medicine, the distributors to the retail sector and the pharmacists — with a durable and effective method of interaction and work.
Wholesale companies have given assurances that they will not charge pharmacists more than the amount wholesalers are reimbursed by the HSE for the cost of drugs and medicines supplied. Therefore, contrary to beliefs, pharmacists will not have to sell below cost. The HSE's decision on the wholesale price does not affect the €370 million paid in fees to pharmacists. The flat fee proposal that will be assessed by the independent body will be voluntary.
I welcome the announcement by the Minister for Health and Children of the establishment of an independent body to assess an interim, fair community pharmacy dispensing fee, with at least €5 to be paid for the medical card scheme, the drugs payment scheme and other community drug schemes. This amount is an increase of over €1.70 per item dispensed. This offer to individual community pharmacists is voluntary and the option to remain with their existing contracts allows for a level of flexibility during the transition period. This option facilitates the evolution of the system in a practical and sensitive way. The HSE will not be taking contracts away from any chemist.
Reservations have been expressed by the Irish Pharmaceutical Union about the new pricing system. Questions have been aired about the survival of many pharmacies across the country. These concerns have resulted in an extensive lobbying campaign on behalf of the pharmacists.
While I commend pharmacists for the role they play in our community — I have seen first hand their professionalism and compassion — I have grave reservations regarding some of the actions they have undertaken in this campaign, particularly their early move regarding people who use methadone. I regret the fear that is now being instilled in elderly and vulnerable patients.
I commend the pharmacists' intention to minimise the impact of their actions. I applaud their commitment to developing their role and enhancing the services they provide to the community. I understand their fear of change. I hope that they will find reassurance in the Government's clear dedication to maintaining the role of the pharmacy and to ensuring fair fees for this development.
The role of the pharmacist in Irish society is not to be understated. Pharmacies are an integral part of our health system. It is not envisaged that any pharmacies will suffer as a result of this latest reform. Previous pessimism about the fate of pharmacies after reform was introduced in recent years has proved unfounded. This instance will be no different.
I welcome the HSE's intention to enter discussions with the IPU and other parties on the development of a new substantive contract and I especially welcome the commitment to a proper professional fee for contracted pharmacy services. This is a deserved recognition and acknowledgement of the valuable role played by pharmacists within our community. Pharmacists have made the strong point that theirs is a role that could be developed further for the benefit of the public, for example in the areas of diabetes and health screening.
The professional fee provides a basis for a proper acknowledgement of this role and its further development. However, in the interests of value for money, we should look not only at wholesalers and pharmacists but also at the structure in place to support the various drugs payment schemes. Pharmacists recount a multitude of frustrating experiences in following up on their payments and the associated paperwork. They report being passed from one person to another and the considerable time required in following up claims. If this is the case, it is not a good use of anybody's time. It is not efficient and carries a cost that cannot be considered value for money. I ask the Minister to examine such comments and to investigate what improvements may be required to ensure an efficient, effective system that contributes to value for money.
It is essential to keep in mind that the welfare of the patient is at the crux of the transfer to a new pricing system. We must guarantee that no patient will suffer as a result of this reform programme and that provisions are in place should such an occurrence arise. Ultimately, the change in price will benefit the patient through reductions in drug prices. The target of reducing the wholesale mark-up paid on the price of drugs to 7% by January 2009 represents the target set by the HSE and the Department of Health and Children to achieve fair and sustainable levels for all. This is also on par with European counterparts.
I look forward to the recommendations of the independent body in late May. Rounded and wide-ranging opinions gathered from independent analysis, and from all stakeholders, can only strengthen this reforming process. I strongly urge the pharmacists and the HSE to work with the independent body to ensure that the best possible service for the patient is delivered at a reasonable cost, with appropriate acknowledgement and recognition of the role of the pharmacist.
Feargal Quinn (Independent)
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I wish to share my time with Senator Ross. I welcome the Minister to the House and the explanations she has given on this issue.
When I came into this House 15 years ago I decided that I would examine all proposed legislation from the customer's point of view. I want to look at the present problem from a slightly wider angle than we have become used to over the last few weeks.
I am a fan of the tasks that pharmacists do. I see them as fulfilling an important and necessary role in the overall health service. In a situation where the primary health care provided by doctors is hopelessly inadequate, pharmacists serve as a kind of auxiliary troop in the fight against ill health. At community level they are an important part of the health care team and could play an even more important role.
However, while I am a fan of the task of pharmacists and their general role, I am much less of a fan of the pharmacists themselves. To be more precise, I am not in favour of the way they have defended their vested interests in recent years against the more general interests of the community the Minister described so well earlier. Their policy all along has been blatantly protectionist, and in a rapidly changing world they have tried their hardest to defend the indefensible.
In the current dispute the mark-ups pharmacists enjoy in dispensing medicines are undoubtedly excessive, and I fully support the Health Service Executive in its efforts to reduce them. However, I have not always been much of a fan of the HSE, either generally or in the way it appears to have handled this dispute. The HSE deserves at least some of the blame for the situation we find ourselves in today. The fact that it has the right on its side does not give it licence to behave unreasonably in its negotiations.
Having called down a plague on both houses in this dispute, I will now try to widen the issue. The mark-up by pharmacists is not the only issue that affects the excessive cost of drugs in this country. There are at least three other factors that the HSE should be paying attention to and which, until I heard the Minister speak earlier, I thought it was ignoring.
The first factor is the use of its buying power against the prices demanded by the drug multinationals. As a retailer I am very aware of the clout created by being a big customer. I had intended suggesting to the Minister that she should get together with other countries — she has indicated she has got together with nine of them — to be able to negotiate in a better way than we have done previously. I was pleased to hear that.
The second factor is the greater use of generic drugs. These are drugs on which royalties do not have to be paid because their original patents have expired. The drug multinationals are past masters at making tiny and inconsequential changes to their drugs just as the patents are about to expire. They ally that with pressure on doctors to prescribe the new drugs rather than switch to the much cheaper but just as effective generic drugs. Since the medical profession has shown itself incapable of addressing this problem, the time has now come to deal with it at national level, probably by way of legislation.
The third urgent issue also involves curbing the doctor's traditionally unfettered freedom to prescribe whatever he or she likes. It has become clear in recent years that we have a serious problem in over-prescribing by doctors, largely created by the expectations of patients. It is notable, for instance, that the average number of drugs prescribed to medical card patients, who can visit the doctor as often as they like, is considerably higher than the average number of drugs prescribed to private patients. That has very serious cost implications for the health service but it is not the most important reason over-prescription must be stopped as a matter of urgency. The more drugs that are prescribed, especially of antibiotics, the more resistant the patient's body becomes to them. I understand the staggering increase in the prevalence of the MRSA bug in our hospitals in recent years has been attributed to the general over-prescribing of antibiotics by general practitioners.
I welcome the Minister's contribution to the debate. The row between the HSE and the pharmacists will no doubt sort itself out in the coming weeks. The Minister has shone a beam of light on an area I had not quite understood until today. It will help bring this dispute to a conclusion.
Shane Ross (Independent)
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I thank Senator Quinn for sharing his time with me, particularly as I do not agree with a word he said, something of which he was perhaps unaware when he generously agreed to my request.
I see this as a kind of David and Goliath struggle, with the HSE on one side and the pharmacists on the other. An unequal battle is taking place because the weapons the pharmacists must use are very difficult, if not impossible, to exercise.
I agree with what Senator Corrigan said about the withdrawal of methadone services. That was a public relations mistake. The only weapon the pharmacists now have is either to withdraw or not withdraw their services. The HSE is using what is always a problem in the health service, namely, a type of commercial bludgeon with which to hit community workers.
We must recognise that pharmacists have two roles. They must make money but they must also be community workers. Somewhere in the middle stands the State, which says they must behave in a totally commercial way where they are community workers. We cannot expect people to do that when they are expected to do a duty for the State. It is the same weapon the nurses have when they threaten to go on strike. They cannot go on strike because the consequences of using that ultimate weapon are unthinkable. What happened in the methadone case was catastrophic and the pharmacists rightly pulled back from it immediately. If they now decide not to dispense certain medicines to medical card holders it will be a disaster, not just for the individuals concerned but for the pharmacists also because the support of public opinion will be lost.
In that situation the HSE holds all the cards. It is aware the pharmacists are, to some extent, fairly helpless and weak in the battle they are fighting. It is wrong for a State monolith like that to take on what is ultimately a weak group, bully them and use fairly tyrannical tactics to get its way.
I understand the solution being suggested by the pharmacists is a reasonable one. They are not as intransigent as the HSE. They say they are happy to go to independent arbitration. That is a reasonable position to put forward. They say they are prepared to examine the waste in the pharmaceutical area in the dispensing and the use of medicines. That is another area which should be examined. They even say they will make concessions on costs and perhaps even on margin if it is necessary but they say they do not want to be kicked around when they have nothing with which to fight. That is what is happening currently.
I do not accept the umbrella organisation the Minister has set up because to include in a group a former of IDA Ireland, the head of the Mater Private Hospital and a high profile member of the Financial Regulator's staff is putting official Ireland up front to make a decision which to some extent is predestined. Mr. Moran also happens to be chairman of the EBS. That may or may not qualify him for this particular post but it puts him in a certain category which might not necessarily be sympathetic to the pharmacists.
The Minister made two statements which were interesting. She said this was to be considered in the context of overall savings in the health service. That is a reasonable statement to make but Members of the Oireachtas would be aware that the Health Service Executive bombards us daily with propaganda. I do not know if I get it because I am a member of the press, a Member of the Oireachtas or both but the propaganda from the HSE never stops. There is a spinning war going on which is lethal but it reflects what is happening here. I understand the HSE has now appointed a parliamentary director. This morning I heard someone who is a director of something else in the HSE. It issues dozens of press releases on a regular basis. It has people in its public relations office spinning continuously——
Shane Ross (Independent)
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——whereas the pharmacists have virtually no bodies to do this work for them.
The survey undertaken by the pharmacists indicates the consequences of the action proposed will be far more severe than the spin which emanates from the Department and the HSE. The number of closures, possible unemployment and the cost to rural communities will be immense and ultimately unacceptable.
Ivor Callely (Fianna Fail)
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I thank the Minister for Health and Children, Deputy Harney, for coming to the House. The issue before the House on matters relating to community pharmacists should not take up the time of this Chamber, the Minister or the Dáil Chamber, as it did last Thursday. This is because the principal parties involved, namely the HSE and the community pharmacists, should be able to resolve this issue. I understand from speaking to a number of pharmacists, whom I know well, that the vast majority of community pharmacists wish to assist in finding a resolution. They support the view that savings can be made. The intransigent position taken by the HSE, regardless of the fallout, is regrettable.
Reform and reduction in the cost of medication is welcome. I will mention something stated earlier by a Senator; he may wish that I did not state it in his absence.
Ivor Callely (Fianna Fail)
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I was interested to hear the words of various contributors. A view was put forward that in the market place we do not have normal market forces. We know in the grocery industry, and a good friend of mine is involved in the wholesale end of grocery, that issues arose with regard to below-cost selling, hello money and various other matters. Whether one changes the name and it is called "13 for 12", a space on a shelf, bin-end or service, it is a market force.
If the Minister states that we have a group of people who are good marketeers and who have developed their pharmaceutical chain to include a number of pharmacies and are consequently able to use their clout to demand more, then so be it. It is wrong to state that because United Drug, Cahill May Roberts and Uniphar have a number of interests to defend we are now changing market forces.
The current situation is not in the best public interest. I will put on record my understanding of the party of which I am a member, Fianna Fáil. It has always adopted a caring philosophy and put people first while at the same time ensuring value for money and managing the nation's affairs in the people's best interest and benefit. The personnel involved in the pharmaceutical negotiations, particularly the HSE, seemed not to have adopted this caring philosophy. The proposal, and manner in which it has been pursued by the HSE, has done enormous damage.
I am aware the HSE proposal has been on the table for a considerable period of time. I have heard the cases for and against both sides. The positions presented indicate huge variances and it is regrettable that we find ourselves in this position. The HSE has advanced its process of review of the pharmaceutical supply chain and I understand agreements have been made between the HSE and the wholesalers.
I understand that €877.98 million was paid to manufacturers in 2006 and an agreement has been reached with the wholesalers for savings of €65 million. The fees and mark-up paid to pharmacists in 2006 was €321.7 million, of which we now seek to save approximately €100 million. Perhaps the Minister would confirm the accuracy of those figures.
I concur with previous speakers on the service provided by community pharmacists. No community pharmacist would have cut required methadone provision to an addict when it was used as a lever. It may have been threatened but I know many pharmacists went to great lengths to ensure that if an addict would not get methadone in their pharmacies an alternative arrangement was made.
The emphasis on reimbursement and the new contract is causing serious difficulties for community pharmacists and the Minister knows this. It is also causing heightened anxiety among patients. I have heard people talk about the savings to the public. I am not sure what great savings will be made with the various schemes which operate, including the GMS, the LTI and the DPS.
The Minister made a comparison with the North with regard to vaccines. How much of the figure of €1.6 billion, referred to in this debate, is spent on vaccines? I would think it is a minute percentage. The comparison made by the Minister is unfair. I also understand there are only two or three suppliers in the vaccine area. It is a specialised area and some people are prepared to carry loss-leaders or a product for the sake of turnover or other reasons.
The Minister stated she sought the advice of the Attorney General. Did she seek his advice with regard to the HSE changing the contract in place on 1 March and what was the Attorney General's advice with regard to reimbursement?
We all welcome the group established by the Minister. However, is it fair to state it is only examining one matter? We know other issues exist and that this dispute is not only about fees. I would welcome the Minister stating the group will examine not only fees but also reimbursement prices along the lines mentioned by her.
The Minister mentioned facts and figures earlier and I wish to outline others. It has been brought to my attention that pre-tax and pre-interest profits currently run at 13.5% in pharmacies and the impact of an 8.2% reduction in reimbursement prices will hit pharmacy profits by approximately 4.3%. The effect of the interim contract removing the mark-up taken by pharmacists on the DPS and the LTI schemes would be to remove a further 6.5%. The interim contract increase on the script, from 3.26% to 5%, would add back 1.5%. The combination of the 8.2% reduction in reimbursement together with the impact the interim contract would have if implemented would reduce pre-interest and pre-tax profits from 13.5% to 4%. This would mean that 77% of existing pharmacies would be unable to meet their debt commitments to banks. I cite these to also illustrate that we can all marshall facts and figures to sustain our arguments.
The Minister has said she wishes to avoid anxiety among patients or frustration among pharmacists. The pharmacists do not know if they hold €50,000 or €150,000 worth of stock. They do not know what the reimbursement rate will be, how it will be calculated or what mechanisms will be put in place. The community pharmacists have assisted on many other fronts and are willing to reach agreement on this matter.
I have been involved in the health services on both sides, as a Minister of State at the Department and in pharmaceutical sales. This is a very complex matter in which I support the Minister. If we want to attract multinational pharmaceutical company investment, research and development, we cannot prescribe generic pharmaceutical products.
It is regrettable we were not able to ensure harmony and agreement between all players in the dispute. I believe, however, it is still possible. I look forward to the Minister's response and hope she outlines how best we can get a resolution. A three-man independent body only examining one issue will not be the solution.
Paul Coghlan (Fine Gael)
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I wish to share my time with Senator Fidelma Healy Eames.
Paul Coghlan (Fine Gael)
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This dispute strikes me as another fine mess we have gotten into. I was going to blame the HSE entirely but the Minister stated it was a Government and HSE decision. I agree with the Minister that the pharmacists are very ethical and responsible. I have no doubt those who require medicines will continue to have access to them. I agree with the setting up of an independent body, chaired by Seán Dorgan, to come to conclusions on changes to the community pharmacists' contract with the HSE. This is the approach that should have been taken rather than the unilateral action that has already taken place, which puts the cart before the horse.
Unilateral variation is a basic but major change to the contract. In essence, it is a breach of contract. I take issue with the manner and method of this whole operation. I agree with Senator Shane Ross that all Members, as does the Minister, accept that dialogue is essential to conflict resolution. Consultation with those involved is a sine qua non.
I am greatly concerned for the future of community pharmacy shops. We all like the idea of a pharmacy shop on the streets of our towns rather than the proliferation of bookie shops or fast-food outlets. I am also concerned with the emergence of out-of-town medical centres and super pharmacies. A number of rural pharmacies will be under severe threat with the proposed changes to the contracts. The only pharmacy in Castlegregory will be forced to shut down, leaving none on the northern side of the Dingle Peninsula.
The handling of this dispute is unusual and highly irregular. The motion proposed by Deputy Moloney, Chairman of the Joint Committee on Health and Children, stated no change should be made to contracts between the HSE and community pharmacists in advance of the setting up and reporting of an independent body whose remit will be to make recommendations on the reimbursement to pharmacists for drugs supplied under the State's community drugs schemes. It recognised the vital role community pharmacists play in the delivery of health services. It further recognised proposed changes to the contracts between the HSE and the pharmacists should be designed to allow for financial sustainability. Every Member on both sides of the House agreed to this wording. I do not know why it was subsequently withdrawn.
Fidelma Healy Eames (Fine Gael)
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I agree with the Minister's aim to save €100 million on the costs of drugs to the HSE. However, I vehemently disagree with her uncompromising method of achieving that end. The Minister may be proud of being Machiavellian but it is an approach I deplore. A recent letter to The Irish Times pointed out the Minister is showing an iron fist to community pharmacists, a fist she lacked when setting up the HSE and failed to implement a rationalisation of health board employees.
Community pharmacists are an easy target for the Minister. Her approach also threatens patients and will cause unemployment and undue hardship. To comprehend the issue, I called a public meeting for pharmacists in Galway and attended one. The IPU, the body the Minister has fought and refused to meet——
Mary Harney (Dublin Mid West, Progressive Democrats)
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I met the IPU just two weeks ago. I never refused to meet the IPU.
Fidelma Healy Eames (Fine Gael)
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Gabh mo leithscéal. The Minister has refused to negotiate with the IPU. It has urged pharmacists to continue dispensing medical card prescriptions, despite the massive cut in their fees, as a token of goodwill and to allow time to find a formula to resolve the issue. What compromise is the Minister willing to make to prevent this dispute escalating?
I do not know where pharmacists' breaking point is but it must be very close. In Carraroe I met a young pharmacist with a young family whose pharmacy is 90% dependent on the GMS. He was shaken by the dispute and must be about to close up shop.
The Minister's action is a massive hit to rural and young start-up pharmacies. Up to 300 outlets are under pressure to close. In Galway, one to 1.5 lay-offs per shop is expected. Why threaten so many livelihoods? I do not thank the Minister for this. It is all because she will not negotiate.
Shame on the Minister. Why has she not gone after the drug manufacturers who make the big bucks? She knows this because she agreed the price with them. What is her hidden agenda? What deal has she entered into with them?
The so-called independent body under Seán Dorgan, unilaterally established by the Minister, is restricted to coming up with a flat fee to apply to the contract. No pharmacist has yet signed up to it, as it was drafted entirely by the HSE and not negotiated or agreed with them.
If the Minister agreed the terms of reference for the independent body with the IPU, there might be some chance pharmacists could accept the outcome. The Minister, however, is persisting with the one-sided bullying approach, instead of calmly negotiating with the IPU, which wants to negotiate and achieve the same savings.
The Minister, as Senator Fitzgerald pointed out, is presiding over a failed industrial relations negotiation. Will the Minister explain why she is embarking on a unilateral breach of pharmacists' contracts? A contract must have two parties at least. The Minister is exposing the State again to large litigation costs. Between 500 to 600 litigation cases are being prepared. This attitude is similar to that of the Department of Education and Science against children with special educational needs. It wasted €11.5 million in litigation costs fighting them instead of providing them with services. To give pharmacists their due, proposals have been on the Minister's desk for some time outlining ways to save €90 million through generic substitution, as well as alleviating waste through the over-prescription of drugs.
We cannot forget the patient, the most vulnerable party in the loop. What are the Minister's plans to get drugs to patients in the absence of a local pharmacy or when a drug is not on the shelf because it is too expensive to carry? Some drugs for shingles, for example, cost more than €100. What are her plans in that case? I want to hear some answers. I am disappointed with the Minister's adoption of an entrenched approach when negotiation would have made all the difference.
Brian Ó Domhnaill (Fianna Fail)
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I welcome the Minister to the House. It is an indication of her personal commitment to this issue that she is here this evening for a few hours in order to engage in this debate and listen to the views of Senators.
Brian Ó Domhnaill (Fianna Fail)
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I acknowledge the contribution made by pharmacists around the country. I come from a rural area in Donegal and I recognise the wonderful contribution of rural pharmacies in helping vulnerable members of our society, including the young and the elderly.
The HSE announced new arrangements for wholesale margins on 17 September last year, which affect the price for the supply of drugs to the State. This followed the completion of new arrangements with drug manufacturers in 2006 and the IPHA-APMI agreements. This, as the Minister mentioned, is distinct from the dispensing fees paid to community pharmacists under the general medical scheme and the drug payment scheme, which remain unaffected by these arrangements. It was planned that the new wholesale price arrangements for the delivery of drugs to pharmacies would take effect from 1 January 2008 but, as we know, the date was deferred to 1 March by the HSE in light of the ongoing engagement with the IPU under the auspices of Mr. Bill Shipsey SC.
The Government is firm in its view that the wholesale mark-up paid on the price of drugs should be reduced to a level that is fair to both taxpayers and wholesalers. The existing mark-up is between 15% and 17.6%, while the revised mark-up, as we know, is 8% from 1 March this year and will be reduced to 7% from January 2009. In light of the concerns expressed about the alleged impact of the new wholesale arrangements on GMS-dependent pharmacies in particular, a draft interim contract with a flat-rate dispensing fee of not less than €5 has been offered to individual community pharmacists. This offer is voluntary and pharmacists can opt to stay with their existing contracts if they so wish. Pharmacists with a high proportion of medical card patients currently receive a dispensing fee of €3.26 for most transactions. Many of these pharmacies are in rural or inner-city areas and provide an important social and health service. The higher flat rate is aimed at these pharmacies in particular.
The Minister, contrary to a suggestion made by a Senator from the Opposition, did meet with the IPU recently — I understand from the Minister it was about two weeks ago — and heard its point that there should be an independent assessment of the fees offered. I welcome the fact that the Minister has established an independent body which will immediately begin work to assess a fair interim community pharmacy dispensing fee of at least €5 to be paid for the GMS, the DPS and other community drug schemes. However, €5 is a little on the low side. I ask the Minister to use her good offices to impress upon this body to consider increasing the €5 fee. I note that it is a minimum dispensing fee but I urge that it be increased.
The independent body is chaired by Seán Dorgan, the former head of IDA Ireland. I have full confidence that Mr. Dorgan, who is a man of great reputation, will bring forward proposals that can be agreed upon by both the HSE and the IPU. Submissions from all stakeholders will be accepted and analysis of those submissions will be carried out by the three-member body. Recommendations are to be made to Government by the end of May and the recommended fee, subject to Government approval, will be backdated to 1 March 2008 or to whatever date individual community pharmacists choose to accept the HSE's voluntary interim contract. The independent body and independent negotiations represent the best available option for addressing the concerns of pharmacies. I have confidence that there will be meaningful discussions and a meaningful outcome. We all anxiously await this.
The body met first on 25 February and again yesterday. Public submissions have been invited and the development of a new substantive pharmacy contract will get under way as soon as possible. This will be done under the auspices of an agreed facilitator and it too will be priced by the independent body. Thus, we have the independent negotiations which we all sought, certainly on this side of the House, and we all welcome them.
I commend the IPU on the manner in which it dealt with this over the weekend. On Thursday evening the president of the IPU, Michael Guckian, called on all pharmacies to continue dispensing medicines to patients on 1 March.
Fidelma Healy Eames (Fine Gael)
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That is because they are a decent group of people. They have not been treated decently, though.
Jerry Buttimer (Fine Gael)
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They did not get much help from Senators on that side of the House.
Brian Ó Domhnaill (Fianna Fail)
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Tomorrow, approximately 500 pharmacists from all around the country will meet in Dublin. That is the proper manner in which they should do their business. They should come forward with their views, which will be passed on to the independent body and then to the Department. It is to be hoped the negotiations will prove fruitful. In any democracy, that is the best way to do business, to express opinions and to keep both sides of the argument constructively——
Fidelma Healy Eames (Fine Gael)
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After the hatchet has come down.
Paul BradfordBrian Ó Domhnaill (Fianna Fail)
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I come in here, like every other Senator, with an opinion. I hope I may have the opportunity to express that opinion without other Senators shouting across.
Brian Ó Domhnaill (Fianna Fail)
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I do not think anyone on this side of the House shouted across the floor when an Opposition Senator was speaking.
Jerry Buttimer (Fine Gael)
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The Senator has a misguided opinion. He needs help.
Brian Ó Domhnaill (Fianna Fail)
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Common courtesy is a virtue which is easily expressed.
David Norris (Independent)
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I welcome the Minister to the House. She has a difficult row to hoe. I have some disagreements with her but I was impressed by what Senator Feargal Quinn had to say. He talked a great deal of practical sense and I was glad to have heard him.
I wish to raise an issue that is perhaps an unintended by-product of this dispute but one that I would like the Minister to take seriously. I mentioned this on the Order of Business and asked the Acting Leader to bring it to the Minister's attention. I received a letter from Dr. Martin Henman, professor of pharmacy and pharmaceutical science at Trinity College, in which he indicated that this dispute was directly affecting senior sophisters in the pharmacy degree course. On completion of the degree, graduates must undertake a year's supervised practice, of which at least six months must be in either a community or a hospital pharmacy. This practice is undertaken under the supervision of a tutor pharmacist and it must take place in a specified practice. Both the pharmacist and the practice site must be approved by the Pharmaceutical Society of Ireland.
These courses or training posts are funded by the community pharmacists and graduates pay the society's fees and the examination fee. They must do these courses or they cannot graduate. The majority, 90%, of the students undertake either six or 12 months' training in a community pharmacy and the remainder enter a hospital practice. While the hospital places have mainly been continued this year, Professor Henman says those in Tullamore were cut by the HSE after being advertised. There are therefore no places in Tullamore.
The situation has created considerable uncertainty for students. Many of them, probably the majority, who would have been offered a pre-registration training place are not prepared to take them. The effect of the dispute means that because of the legal challenge it is unlikely that this will be resolved immediately. If it goes to the courts, the earliest it can be heard is June. The senior sophister students in Trinity and elsewhere are faced with the prospect of being graduates who are unable to complete their professional training, and the health service will find itself without a cohort of pharmacists. That will mean further upward pressure on salaries and will make staff retention in the hospital sector, where salaries are lower, difficult. Staff will be inclined to move out of hospitals. The independent pharmacies will be disproportionately affected because they do not have excess fat in terms of finance to cope.
Professor Henman says in his letter that the situation is unique in his experience of just over 25 years in Trinity College. He knows of one student who has submitted over 45 curricula vitae and, in all but a handful of cases, has been told that no position will be offered in the coming year. He says his students are unsettled and unable to give all the attention they should to their academic work because they are intensively searching for pre-registration places. I ask the Minister to take particular notice of this matter, which could be damaging for students at a vulnerable time and also damaging for the industry and the delivery of community health.
With regard to the general situation, the competition elements are anathema to me. I believe we have made competition a false god and I strongly object to the fact that under the competition legislation, the HSE is prohibited from negotiating directly with the pharmacists. The same situation applies to Equity. In other words, the weakest people are disbarred. That law should be re-examined. It is not fair or appropriate. Competition is not the wonderful thing it is claimed to be. Look at the impact it has had in spreading the plague of drink in this country, with every huckster shop piled to the ceiling with gin, wine, beer and so forth, and open all night. This happens in the name of competition. Let us not pretend competition is the be all and end all.
Reference should also be made to the letter to The Irish Times from former Deputy, Mr. Tim O'Malley. It is an interesting letter that gets the situation right; he puts the patient centre stage. He wrote it as a pharmacist. He is a former colleague of the Minister and a decent man. He referred to the clawback by the HSE. I urge the pharmacists to be very careful. The pharmacists are marvellous people but there is a notice on the window of my local pharmacy telling customers that the pharmacy will be closed tomorrow for a meeting. These meetings usually take place on Sunday, so the pharmacists are definitely using the patients and customers. They should be careful about doing so because they are in great danger of alienating the public, as they did when they threatened to withdraw methadone services. That was cruel and callous and, from the point of view of public relations, stupid.
There should be genuinely independent arbitration of this matter. I am concerned about small pharmacies going out of business. Like other Members, I have received a sheaf of letters from pharmacists throughout the country, and they cannot all be wrong. They suffer under the economies of scale and the fact that the larger pharmacy chains are in a far stronger position to negotiate with the pharmaceutical companies.
Another point should be made. There are plenty of people around here who will suck up to the pharmacists for their votes. I am not one of them. I have supported the pharmacists over the years, when others would not, on ideological grounds. However, where there is a wholesale services mark-up of 17% on medicines in this country and it is only 7% in Europe, there is something wrong. We must examine it and we are being dishonest if we say otherwise. It may be the case that the smaller pharmacies should be cushioned in some way against this, and I would support that. However, I am not in favour of profiteering. There are large pharmacy chains in this country but the number of pharmacies has increased by 26% in the last couple of years. That does not suggest that all pharmacies are on the margins. I am prepared to believe that the rural and community pharmacies are but why should patients pay twice the price their European counterparts pay? Why not go to Europe and return with suitcases full of drugs?
David Norris (Independent)
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It is not just due to that. The Competition Act should be scrapped. It has not served the country well, just as the abolition of the groceries order did not. I also warned against the abolition of the groceries order and look at the result of that. There must be independent arbitration but we must ensure that small, family run pharmacies in local areas stay in business. We have seen the post offices wiped out in rural areas and the Garda stations replaced by a telephone device. If the local pharmacists are destroyed, will anybody be surprised at a flight from the land? However, there is an argument for cutting some margins in line with the margins in other European countries.
Jim Walsh (Fianna Fail)
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It is interesting to listen to the debate. I will start with two peripheral points. Members of the EU scrutiny committee on a visit to Brussels recently met with nine EU Commissioners. One of them was the EU Commissioner for agriculture, who outlined the measures that had been taken regarding Brazilian beef. It was obvious that the effective lobbying of the IFA was instrumental in that decision. I would have considered the IFA to be the pre-eminent organisation for lobbying in this country, until the pharmacy issue arose. The Pharmaceutical Society of Ireland has put the IFA in the ha'penny place.
Never previously have I seen so many politicians rush to a cause. Some time ago a senior Opposition politician in the Lower House said to me, "Jim, there are two types of politician: politicians of image and politicians of substance." I believe we must constantly question ourselves as to the category to which we belong. The Health Service Executive must tackle a multiplicity of areas where money is being spent unnecessarily and one of those areas is undoubtedly medicinal products. I will return to that point later. This campaign by pharmacists is one of the most intensive I have experienced. It was reasonable to extend the date to 1 March. The Minister is in a better position to evaluate what use was made of that time by the Pharmaceutical Society but it appeared to me that there was no engagement on its side. The society continued to lobby rather than constructively engage.
As has been said by a number of speakers, the comparative cost of medicines abroad clearly illustrates that something is wrong. I am not often impressed with the content of the "Joe Duffy Show" on RTE. However, years ago I heard a number of radio programmes on the topic of people who could travel abroad and buy generic drugs at a fraction of the cost of the medication in this country. That cannot be overlooked or lightly set aside. I accept that a small number of small pharmacies throughout the country might come under pressure and that the pharmacists' livelihoods might be threatened. In the majority of cases, it is a very lucrative business to be in and one would not need to be an accountant, or a pharmacist's accountant, to come to that conclusion.
Senator Norris suggested scrapping the Competition Authority because of this issue but anybody who knows anything about the business fabric of this country would argue to the contrary. We need competition and effective competitive systems in place in the interest of consumers and everyone else. My criticism would be that the Competition Authority has been very ineffective in many areas. I was highly critical of its failure, for example, to tackle other professions who cream off society. Very little has been done in that regard. The legal profession is probably the most notorious in that resect and we in these Houses have involved ourselves in paying huge fees on a daily basis to people who are producing very little, relative to what they are being paid. That area must be tackled. In fairness to the Competition Authority, it has drawn up recommendations in that regard and responsibility at this stage rests with the Government — I am surprised it is taking so long — to come up with real measures that will make a difference to consumers in our society.
The risk takers in our society are the ones who primed this economy. They are the people who invested and through their courage, innovation and entrepreneurial flair, created the jobs that have brought this country to the standard we now enjoy, where we are the envy of many countries in Europe and the wider world.
Professions which add nothing to the economic output of the country are in a privileged position because the State has colluded in it, inadvertently or otherwise and has allowed it to continue. The pharmacists would not be top of the list in this regard. They would be well down the list, to be fair, but others in the medical profession, including consultants, would be well up on the list. I spoke to a medical consultant recently who agreed with my views on this matter but argued that nothing will change because the vested interests of the consultants and others in the medical services are endemic. Unless we are prepared to assist the HSE in achieving the savings it should be achieving, we are defeating the purpose for which we are elected.
We are paying approximately €16 billion this year to the HSE. I estimate, conservatively, that €3 billion of that money is wasted. If we could identify the waste of that €3 billion, it would do so much to address the real issue of lack of access to services that people require. It is not an easy task in a body that employs 120,000 people but it is what we must do. Where the Government sets up a body like the HSE, which is like a board of directors, to do a job it should not put obstacles in the way of what is already a difficult job. We should assist and help it to achieve the reasonable targets that have been set. My main criticism of the HSE is that it is not doing enough to identify and achieve the necessary savings. However, I have confidence in the Minister for Health and Children. If anybody can achieve the efficiencies and the cost effectiveness that we need in our health services, it is the Minister, Deputy Mary Harney, who in the past has shown the courage and the skill to manage and achieve the type of public service to which we all aspire.
Paddy Burke (Fine Gael)
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I welcome the Minister for Health and Children, Deputy Harney, to the House. This is a very important debate about an issue which goes to the core of our health service. The patient is at the centre of this issue. The pharmacists are providing a wonderful service throughout the country.
I ask the Minister to clarify who sets the prices of drugs with the drug companies in this country. Is it the Minister who sets the price? She is getting the credit for setting the price and I presume it is she who does so. I wish to know who is fully responsible for setting the price for drugs and that should be our starting point.
How did the Minister arrive at the price proposal whereby pharmacists will be paid the invoice price for drugs, less 8%? Why is the figure not 7%, for example, or 10%? How was the figure of 8% decided upon?
Senator Jim Walsh referred to the independent arbitrator but, unlike him, I believe the pharmacists and their union, the IPU, have acted very responsibly in this dispute, which has been going on for more than a year. The pharmacists' union should have been allowed to negotiate on behalf of its members. The pharmacists sought the appointment of an independent arbitrator. Why did the HSE not allow an independent arbitrator to negotiate and come to some agreement with the pharmacists? I believe it was because the Minister for Finance decided he would take €100 million out of the budget for health, end of story. The Minister for Health and Children found herself short €100 million and decided she could not afford to have an independent arbitrator in place because every month the dispute continued would cost the Department €8 million to €10 million. No-one could say when the independent arbitrator would report and every month the issue went unresolved, the Department would lose millions. That is why the Minister for Health and Children did not put in place an independent arbitrator.
It is incredible that pharmacists will invoice the HSE and will be paid 8% less than the cost of the drugs. I cannot get my head around this, to be honest. I heard the Minister state there is a mark-up of 17% on drugs. If that is true, why does the Minister not pursue the wholesalers? Why is she taking the pharmacists to task? The pharmacists do not know where they stand now. They must stock their shelves, heat and light their premises, put in place security measures and ensure a pharmacist is available at all times to dispense the drugs for which the HSE will now pay €5. I do not understand how the Minister arrived at the figure of 8%. She referred to a 17% margin but it is the Minister who sets the price of the drugs. The wholesalers do not seem to come into the equation at all. There is a 17% margin somewhere but the Minister is going to take it off the pharmacists.
Let us examine the 8% the pharmacists are supposed to be getting in rebates. The Minister referred earlier to the cost of money being in the region of 4% to 5% but I urge her to come into the real world. Where can one get borrowed money at 4% to 5% interest? Perhaps the HSE or local authorities can borrow money at 4% or 5% but I do not know any small business that can borrow money, on overdraft, at those rates. If it is possible to borrow money at those rates, perhaps that is the road the Minister should go down. She should give soft loans to pharmacists to stock their shelves with drugs and provide the services. Certainly all of the overdraft facilities of which I am aware are in the region of 10% to 12%.
The 8% rebate the pharmacists receive is not for only one element of the service they provide. It comes as a result of investments made in the past ten to 15 years. The system has been computerised and they pay in 30 or 60 days or pay cash on demand of invoice. This is from where their 8% comes. Hard-pressed pharmacists are providing wonderful services throughout the country and receive twice-daily deliveries from wholesalers. Will the Minister for Health and Children, Deputy Harney, tell us whether the HSE, will pay in 30 or 60 days or pay cash on demand of invoice? This is something pharmacists need to know.
Pearse Doherty (Sinn Fein)
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I welcome the Minister, who has at long last come before the House to discuss this issue. A Senator from the Government benches wondered whether we are rushing under pressure or have been lobbied intensively to speak on this issue. I was the first person to speak on this issue in the Seanad and since the resumption of the Seanad and Dáil last year Sinn Féin has called on the Minister to deal with this critical issue, which has escalated in its threat to community pharmacies. It is only now, after the cuts that have been imposed, that there are statements and questions on these matters. A similar situation has arisen in the Joint Committee on Health and Children, which dealt with this matter in detail and met over three days to hear submissions, followed by questions and answers, from the HSE and the Irish Pharmaceutical Union. The committee requested that the Minister attend these hearings before 1 March but she did not do so. I believe the Minister shirked her responsibilities and sent a negative signal to Senators and Deputies who represent their constituencies. She is hiding from this issue and is avoiding her accountability to the Houses of the Oireachtas.
The escalating pharmacy dispute has been a cause of concern for tens of thousands of patients. Not only have pharmacists contacted Members of these Houses but we have also received calls from patients worried that they will not receive service if their pharmacies withdraw from the general medical service, GMS, or the drugs payment scheme. Last week 475,000 letters were handed in to these Houses but they were allowed in at a rate of only five at a time. The figure shows how many people believe the Minister is doing the wrong thing on this issue.
This matter has caused concern for all users of our health services, whether medical card patients or those dependent on the drugs payment scheme. I have seldom seen an issue that led to such prolonged lobbying of TDs and Senators, yet hardly featured in the media. This is unfortunate because if this matter received the media attention it deserves it might have been resolved before now.
There is no doubt the most aggravating factor in this dispute has been the adherence of the Government and the HSE to the line that they cannot negotiate financial issues with the IPU, allegedly because of the Competition Act. Many Senators spoke of the Competition Act and the Minister and the Government have hidden behind it without attempting to address this piece of their own legislation. They opposed the Competition (Amendment) Bill put to the Dáil by Deputy Michael D. Higgins in recent weeks and I do not believe they are sincere in their efforts to resolve this issue and negotiate with the IPU on financial matters.
If the IPU withdraws from the medical card and drugs payment schemes tens of thousands of patients will be affected. The HSE tells us that only a few pharmacies will withdraw from these schemes but this remains to be seen. I hope no pharmacy withdraws from them and I appeal to all of them to continue their services because patients will be affected by such a withdrawal. The IPU is to meet tomorrow and as a result pharmacies across the State will close. The IPU is to be commended on organising an emergency service, but in Donegal four pharmacies will remain open for three hours each. That amounts to four pharmacies in a county where it takes two hours to travel from one to the other. In their need to avail of pharmacy services tomorrow, patients will see the long-term effects of the decision of this Minister, which will close rural pharmacies that are not viable and that depend on the medical card scheme. In my county 80% of patients who visit pharmacies hold medical cards.
The Department has received e-mails on this matter. Some pharmacists are asking the Minister and the Department to run the numbers they are offering pharmacies, audit their accounts, and tell them whether they will stay in business under such terms. I welcome the extension of the deadline to 1 March on the cuts imposed by the Minister but there is no point extending a deadline if nothing is to happen in the period before it is reached. There should have been meaningful negotiations during this period, involving the independent body, to review the pricing of medicines for pharmacies. There is no point having negotiations now if the cuts are to be imposed anyway. I fear the decision some pharmacies will take on 21 April, the day pharmacies across the State will receive payments for drugs issued at the reduced prices.
This issue is all about patients. Across the State, in rural Ireland and particularly on the west coast, the effect of the closure of post offices can be seen. One day in January five post offices closed in rural Ireland and I have no doubt that if the Minister continues with this scheme we will see the same type of effects. They were not evident on 1 March and will not be evident on 21 April but will happen drip by drip. This is not good for patient care, services or rural Ireland.
The IPU uses its figures to claim that more than 300 rural pharmacies will be the worst affected. Age Action Ireland is very concerned about this matter because older people in areas with no public transport will be forced to travel long distances for medication.
I ask the Minister, even at this late stage, to enter meaningful negotiations with the IPU on all of the issues involved in this matter, including pricing. The president of the IPU called on all pharmacies to maintain services and this shows real leadership while some pharmacies are threatened with going out of business. I ask the Minister to meet pharmacists' representatives, enter meaningful negotiations, defer the cuts introduced in March and allow the independent body to review the pricing mechanisms in order that she can deal with this in a more considered way.
The Minister has tackled this issue in a ham-fisted way. There was an iron lady in Britain in the 1980s and there is no desire to replicate her in this country. I ask the Minister to take a more compassionate, considered approach to this matter. The media have not picked up on this story, unfortunately, because it is complex and while the HSE says one thing the Department says another and the pharmacies another. Everything is revolving around notions such as the 17% and the 8% and the overall cost of medication.
My young son is on medication that costs €40 at the local pharmacy. A couple of miles across the Border, in Derry, the same medication costs €5? Who is responsible for this? This is not a 17% increase but is a result of prices set by the Department of Health and Children and manufacturers. I welcome that we are examining savings that can be made in the health service and are seeking to reduce the cost of medication to the general public. However, I ask the Minister to accept audited accounts from pharmacies and to run the figures on what they are being offered. Will she come back to the House and confirm, on the basis of those audited accounts, that those pharmacies will remain in existence? If not, will she confirm that her decision and that of the Government will result in the closure of rural pharmacies and that she stands over that?
Paddy Burke (Fine Gael)
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The Order of Business provided for some questions, whichever way the Minister wishes to proceed.
Mary Harney (Dublin Mid West, Progressive Democrats)
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May I respond to the debate?
Mary Harney (Dublin Mid West, Progressive Democrats)
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I am very happy to be here to respond to the debate. I wish to correct the record, I have spoken on this issue in this House on two occasions since last summer. This is not the first time I have come to address the issue relating to pharmaceutical pricing and my view has not changed in the intervening period.
There is no change in the contract between pharmacists and the Health Service Executive. Pharmacists have a contract with the Health Service Executive which provides for the payment of a dispensing fee of €3.26 for items on the GMS and for a mark-up of 50% and a dispensing fee of €2.60 for the DPS. That is the contract and it has not been broken. In 2005 pharmacists, by way of fees, got €293 million; in 2006 they got €321 million; in 2007 they got €367 million. That figure is not being altered. I remind Senator Doherty that these payments amount to, on average, €100,000 more than is paid to pharmacists in Northern Ireland. I accept there are caveats when comparing different jurisdictions.
The Government does not have an agreement with the pharmaceutical sector in Ireland. Ireland is now part of a basket of nine countries where we pay the average price. Unfortunately, with pharmaceutical products, the normal market does not apply because in most instances there are monopoly suppliers of various drugs. One does not have the option of putting an advertisement in the newspaper for different companies to supply drugs across the whole range of medicines that are required in the health service. Therefore, Ireland, like all other Governments, negotiates with the producers of those goods. We have negotiated, from a position where we were part of a basket of five countries — the most expensive five in Europe — to a position where we are now part of a basket of nine countries and we will pay the average price in that basket. That basket includes countries such as Spain where drugs are substantially cheaper than in Ireland.
As a result of this decision to reduce the distribution cost I was asked why we do not take it from the wholesalers. We do not have a contract with the wholesalers. There has never been a contract between the State and the wholesalers. When the HSE and the Department negotiated in good faith with the wholesalers they produced the legal advice. They were the first to do so. I reiterate what I said here, we have a virtual market. Some 400 pharmacies own UniPhar, one of the big wholesalers, a further 150 pharmacies have been financed by a financial wing known as IPOS. Cahill May Roberts is the owner of Unicare, which has 72 pharmacies and United Drug has put €300 million into pharmacies. Given that, perhaps, between 700 and 900 pharmacies are owned by the wholesalers. We do not have a separation in the way many of the Senators tried to portray.
In 2002 when my predecessor, the Minister for Health and Children, Deputy Martin, removed the restriction which essentially provided that a pharmacy could not be opened within a certain short mileage of another pharmacy — it prevented many places in the country from having pharmacies — I could embarrass some Members here by telling them what their party said. Some said it would bring to an end the pharmacy in the rural Ireland, they would not be viable, they would not be economic and so on. He was heavily criticised in this House by the then Opposition and in the other House. We know that since then there has been an increase of 26% in the number of pharmacies.
I am usually attacked here and elsewhere for supporting the private sector. The party opposite accuses me of Americanising the health service and supporting private companies. This is private enterprise. The pharmacists are health care professionals who have invested in private businesses. Nobody more than me wants to see people getting a decent return on risk taking, innovation and making their business work. That is the reason why in the 2005 Bill, when we published our proposals, which was only passed in 2007, we facilitated liberalisation here ahead of many other European countries. It used to break my heart to meet Irish pharmacists who qualified abroad, due to the restrictions on trying to become a pharmacist here because there was only one school, and who could not open a pharmacy. Nobody more than me wants to facilitate the development of pharmacy.
In the legislation passed we have provided for the regulation for the first time in Ireland of corporate entities, heretofore it was just pharmacists who were regulated. We have also provided in respect of conflict of interests between those who prescribe and those who dispense because a huge concern was expressed by pharmacists, which I shared, to the effect that groups of doctors were coming together, one person would be asked for a huge amount for key money and it would be very hard for other pharmacists to compete in the environs where the patients come from the doctor and they have their prescription. We have provided very strong provisions in the new pharmacy legislation to prevent that occurring and to eliminate those conflicts.
I do not need any lectures here about supporting the pharmacists and the pharmacy profession. We have to get value for money. We have to get better value for money, for the patients and for the taxpayers. Some 70% of the bills are paid for by taxpayers and we are entitled to ensure we get the best possible value.
In regard to the Dorgan group — I regret very much what Senator Ross said about the individuals — these are highly skilled professional people whose professional reputations matter to them. They are people whom I know individually, personally and professionally. I know them to be people of the highest integrity. In regard to their appointment, I discussed it only with one of my advisers and with the Secretary General of my Department when I was seeking to put a group of what I regarded as fair-minded competent citizens together to look at this issue.
The pharmacy profession, through its union or through whatever other source, can make the case as strongly as it wishes to that group of people. There are no restrictions in terms of sums of money that I have placed on that group, except that we want them to come forward with a recommendation for a flat fee for the interim contract. We have not broken the contract. This will simply be an interim flat fee that we will pay to those who opt for that. I decided to take this course of action because the IPU was of the view — it made that point strongly to me when I met it — that the mechanism for devising the €5 flat fee was not an independent mechanism and, perhaps, if it was it may be more acceptable. I understand that. That is the reason it is important to have the independent group. Furthermore, we have said that when it makes its recommendations by the end of May we will backdate, subject to Government approval, whatever it recommends to 1 March. That is very reasonable.
It is the future I am concerned about and we all need to focus on it. I hope we can enter into negotiations with the IPU for a new contract for the community pharmacist. Clearly, we cannot set the prices in that context. We must have a different independent group to set the price but there is no point establishing such a group until we know what we are asking it to price. In particular, I want to see the role of the pharmacist more involved in primary care, in chronic illness management and dealing with many of the issues involving waste which many Members have mentioned.
Senator Norris mentioned the training places for those who are currently studying pharmacy at Trinity College. This is an issue I have discussed with the pharmaceutical society and the regulatory body during the past fortnight. I hope we will be able to address the perceived difficulty that exists which, in fairness, may be a real one. We do not want to train and educate potential pharmacists without giving them the opportunity to complete their training with a view to establishing themselves as pharmacists, hopefully in the Irish health care system. I hope that issue can be resolved.
In regard to the contingency arrangements and the phone line, I understand there have been approximately 300 calls, most of which came before last week, although the line is still available. The patients have all been reassured. Contingency plans will be put in place and I accept what many Senators said. I commend the comments of the president of the IPU and others. I know these situations are difficult for all organisations but I commend the comments made and the fact that, to date, patients have not been used in this conflict between the Health Service Executive, the Department of Health and Children and the pharmacy profession. I hope that continues to be the case. I am more than happy to take specific questions from any of the Members.
I understand the HSE pays 14 working days after the bills are submitted. With regard to pricing, invoices and so on, I am not a party to how the wholesalers deal with invoices between them and pharmacists — that is a matter for them. What I am certain of is that no pharmacist will be asked to pay more for a product than he or she will be reimbursed by the HSE. Nobody would expect anyone to do business with them if they were to charge them more than they were to be reimbursed. I do not buy that.
Maria Corrigan (Fianna Fail)
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I thank the Minister for her response. Is there an estimate of the timeframe for the independent body to come back to us?
Frances Fitzgerald (Fine Gael)
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I thank the Minister for her response. Is she prepared to extend the terms of reference of the independent body and enter into negotiations with the IPU in this regard in order that we can move forward? What effort is she prepared to make to resolve this dispute and try to get to a stage where the mechanism she has set up is accepted by all? The Minister in her reply did not deal with the issue of rural pharmacies closing or the problems facing new entrants and young pharmacists who have said they will not be able to continue and have provided the costings. Does she believe pharmacies will close? Does she believe what has been said with regard to young pharmacists and rural pharmacists? What does she intend to do about this?
Pearse Doherty (Sinn Fein)
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The Minister stated that no pharmacy will be asked to dispense medication at a loss. Does she take into account that pharmacies must pay overheads such as ESB bills, wages and all the rest, and that in effect they will lose out and go into the red due to the new pricing? On a specific matter, will the Minister accept from myself or any other Senator audited accounts from pharmacists? Will she run the numbers with regard to the interim offer she, the Department and the Government are willing to offer the pharmacists? Will she inform the House whether pharmacies will close due to what the Department is offering?
Mary Harney (Dublin Mid West, Progressive Democrats)
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The independent body has been asked to report by the end of May. While I have not spoken to the individuals involved, I understand they intend to meet that timeframe and have already had a number of meetings. In fact, I saw an advertisement in the newspapers yesterday inviting submissions. Their intention is to talk to and engage with the various stakeholders and obviously to commission independent support and economic expertise to help them in their work.
I am not prepared to change the terms of reference. Senator Fitzgerald is asking me to have mark-ups and discounts. What we are talking about here is a temporary contract. We want to pay a fee for the expertise which the pharmacist brings to the health care system, namely, the dispensing of medication. It is not desirable that we continue with a situation where we have roughly double the distribution margin that applies across the European Union, including Northern Ireland.
We will never get to the desired situation if we are taking money out of the system. Notwithstanding these savings, the cost of drugs this year will be substantially higher than last year. I presented the Department's strategy for 2008-10 to the Cabinet today and I commented on the fact that in recent years the number of items dispensed through the GMS has increased from 20 million to 41 million per year, even though the growth in medical cards was approximately 5% in the same period. That is the reality of modern medicine and will continue to be the case. I will not be back here next year with the drugs bill reduced by €100 million; it will still be rising rapidly. What we are trying to do is to halt the increase and take out moneys that are surplus to what we believe is necessary to have a vibrant, functioning market.
On the issue of rural pharmacies, the same claims that this would spell the end of the pharmacy in rural Ireland were made in 2002 when the restrictions were removed by the then Minister, Deputy Martin. At that time, one had to be a certain geographic distance from a current pharmacy before one could open a new one. It did not have that effect. I genuinely believe that those pharmacies with low volumes of dispensing and those heavily dependent on medical card and GMS patients will do substantially better with the higher dispensing fee of at least €5 — it may well be substantially higher following the work of the Dorgan group.
Vibrant markets always attract new entrants — I made this point in the other House last week and I made the same point to solicitors when PIAB was being introduced. In any developed, well-off society like ours, professionals always do well — that is a fact. Whether we are talking about health care professionals, accountants, engineers or lawyers, professionals do well in well-developed countries, and this is a very well-developed and prosperous country where huge opportunities will exist.
With regard to overheads, I am not an expert on how to run any business and I will not get into the situation of auditing anybody's accounts. I understand that last year a pharmacy on Grafton Street, one of two owned by Hickeys, closed down despite being on one of the busiest streets in the country.
Mary Harney (Dublin Mid West, Progressive Democrats)
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Businesses close from time to time. I will not stand here and say it will not happen. A point of which I am certain is that what we are seeking to do is to have a vibrant pharmacy sector and to have pharmacies accessible to patients throughout the country. We can pride ourselves that even in relatively small places we have successful pharmacies and general practitioners, which is not the norm in some other countries. This will continue to be the case and is a policy position I want to see implemented. I want to have a vibrant community pharmacy sector throughout the country.
I believe I have answered all the questions posed. If not, I would be happy to return to them.