Jerry Buttimer (Fine Gael)
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I thank the Cathaoirleach for allowing me raise this matter and thank the Minister of State for being here. I thank the staff for being here at this hour and for their courtesy, and we will not keep them long. May I share time with Senator Ross?

Paddy Burke (Fine Gael)
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Is that agreed? Agreed.

Jerry Buttimer (Fine Gael)
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This matter is of critical importance to thousands of people, be they pensioners, people who are sick or patients young and old, so that they have access to their medication and there is an equitable restructuring of the pharmacy issue. We all support the important concept and the need to achieve value for money, but I call on the Minister to be equitable in what she does in this regard and to engage in negotiations with the pharmacists' unions.

This is an important issue that has not gone away. It has been simmering and now it has come to the surface with the threat of thousands of pharmacists resigning from the scheme. The value for money could be phased in, as the Dorgan report recommended. What are the contingency plans if the pharmacists withdraw their services?

I have great sympathy for the smaller pharmacies the staff of which are providing a service and working hard. Giving the taxpayer and consumer value for money is fine, but the Minister for Health and Children is driving a coach and four through everybody involved.

There are concerns that the Minister's decision will have a negative impact on both patients and, importantly, jobs in the industry. The 33% decrease in payments that pharmacists receive from the HSE could have a negative impact on jobs, with the closure of many community pharmacists reducing choice and service for patients.

The Leas-Chathaoirleach and I have met with pharmacists and raised these issues with them. As I am sharing time with Senator Ross, I will conclude by saying we need to look at all of the options, including generic substitution for branded drugs. There is greater clarity and flexibility needed from the Minister. We must remember that this is about patients, people who need medication, and jobs.

Shane Ross (Independent)
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I thank Senator Buttimer for sharing time.

There is an extraordinary spinning game going on here between pharmacists and the Government, and this is far too serious for a game or for macho stances to be taken. It is all very well at this stage, in July, to sit back and suggest that somehow the pharmacists will capitulate on their demand by the beginning of August. I do not believe this will happen. We are heading for a serious crisis in the pharmacy industry, not just for the pharmacists who are being badly treated by the Government but also for patients. It is not right, as Senator Buttimer said, for the Minister to stand back and say there will no talks whatsoever.

The instrument the Minister has used, a cut of 34%, is crude. One cannot treat pharmacists with the one-size-fits-all approach as not all will be able to take such a cut. I know of pharmacists who have borrowed enormous sums of money to establish their business. These cuts will put some of them out of business. Is that what the Minister wants?

The results will be that small businesses will go under, creating more unemployment, and medicines will not be accessible to patients, particularly older people. The intransigent attitude of a Minister saying she will not talk with concerned parties is irresponsible because people's health will be at risk. This is not like cutting public service pay where people make a small sacrifice and will still be in jobs. This is going to affect some people very badly. Pharmacists have been conciliatory, coming forward with reasonable offers of cuts. They are perfectly happy to take the pain with the rest of us. However, the pain they are being asked to take with these cuts is crude and disproportionate in one go.

Will the Minister, or at least her civil servants, sit down for talks with the Irish Pharmacy Union? One problem in the dispute is the difference in the calculations of the effects of the cuts on the pharmacy industry. The differences are wide and inexplicable. For example, the pharmacists claim the bottom line will be €106,000 for an average pharmacy while the Minister claims it will be only €82,000. The pharmacists are correct in wanting these to be compared. People who paint pharmacists as being particularly well off should examine the PricewaterhouseCoopers review in 2007 which showed their margins are only 6.6%. Talks need to begin before this becomes the inevitable crisis it will be at the beginning of August unless it is resolved.

Martin Mansergh (Tipperary South, Fianna Fail)
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I am taking this matter on behalf of the Minister for Health and Children, Deputy Harney. If there ever were a hospital pass at 2.25 a.m., this is it.

Jerry Buttimer (Fine Gael)
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We can give the Minister pills for that too.

Martin Mansergh (Tipperary South, Fianna Fail)
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I welcome this opportunity, or not as the case may be, to outline to the House the background to the decisions taken by the Minister for Health and Children under the Financial Emergency Measures in the Public Interest Act 2009 to tackle the rapid growth in the cost of distributing and dispensing drugs under the medical card and community drug schemes.

The cost of these schemes has doubled since 2002 to over €1.6 billion in 2008. Fees and other income earned by pharmacists have doubled accordingly. It cost the taxpayer €640 million to get €1 billion of drugs from factory gate to patients in the community in 2008. The Minister considers this growing level of cost unjustifiable and unsustainable and it has to be reduced.

Approximately 1,600 pharmacies hold contracts with the Health Service Executive from which they receive substantial fees and income and will continue to do so under the new measures the Minister announced. In view of the complex nature of the sector, and the different rates and retail mark-ups which apply under the schemes, the Minister decided to overhaul the payment structure.

Up to now, the general medical services scheme has attracted a dispensing fee of €3.60 per item, while the drugs payment scheme and long-term illness scheme attracted dispensing fees of €3.16 plus a 50% mark-up on the ingredient cost of the drugs. The changes involve a new higher dispensing fee structure for the schemes based on a sliding scale. It will be €5 for the first 20,000 items, €4.50 for next 10,000 items and €3.50 for the remaining items. The changes will reduce from 50% to 20% the retail mark-up payable under the community drugs schemes. No mark-up is payable under the general medical services scheme.

The amount paid to pharmacists includes a wholesale mark-up of 17.66% over the ex-factory price of these products. It means, for example, that in the case of a drug which leaves the factory gate at a price of €85, the Health Service Executive pays the pharmacist €100. In theory, this mark-up is intended to cover the price paid by pharmacists to their wholesale suppliers for the delivery of products. It is estimated the wholesale mark-up amounts to approximately €200 million per annum, of which half is retained by community pharmacists.

The Minister considers there is no justification for half the wholesale mark-up being retained by pharmacists in addition to the fees and mark-ups they are paid. This mark-up will be reduced to 10% which will save €77 million in full year terms.

Pharmacists are also paid a premium of approximately €33 million per annum on foot of an agreement in 2001 arising from the granting of medical cards on an automatic basis to persons aged 70 years and over. Upwards of €200 million has been paid to pharmacists up to the end of 2008 under this arrangement. This special payment is being ended now to save €33 million in a full year.

The savings to the Exchequer from these measures are estimated at €55 million for the remainder of this year and €133 million on a full-year basis. This is almost exactly what would have been saved if the Minister had imposed an across-the-board 8% reduction in fees and retail mark-ups and re-imposed the reduction in wholesale mark-up to 8%, as attempted by the Health Service Executive last year. However, the Minister decided to achieve broadly the same level of reduction through a revised common fee structure for dispensing, a reduced retail mark-up, removal of the special payment for over-70s dispensing, along with the lesser wholesale reduction.

In accordance with the Financial Emergency Measures in the Public Interest Act 2009, a public consultation process has already taken place. All interested stakeholders were invited to make submissions. Over 100 other written submissions were received, most of them from community pharmacists. The Irish Pharmacy Union made a written submission and made an oral submission to Department officials. These were analysed and considered before the Minister made her decision on the restructuring of payments.

The retail pharmacy sector has been on notice for some time of the need to reduce substantially the amount paid by the State. Senator Ross pointed to the number of investments in their businesses made by pharmacists, sometimes involving high degrees of borrowing. In the last analysis, a pharmacy is a business and, as we know with investments in other sectors of the economy, investment can pay off or be over ambitious. I would be second to none in my regard for my local pharmacies. The truth, however, is that the State is not in a position to pay the escalating sums of money in order to maintain the status quo.

The Minister is aware that a number of pharmacists have threatened to withdraw from participation in the community drugs schemes. Under the Act, health professionals are required to give 30 days notice of their intention to withdraw service. The Minister believes the threats of withdrawal of service by community pharmacists are unjustified and not in patients' interests, and there can be no grounds for causing upset or anxiety about the supply of prescriptions to patients. The HSE has written to all 1,600 community pharmacy contractors to clarify whether they intend to continue the provision of services under the GMS and community drugs schemes. A contingency plan is being put in place by the HSE and will be implemented if required to ensure supplies of medicines to patients under the GMS and community drugs schemes will continue in the event of discontinuation of services by community pharmacists.

The Government recognises that those measures will pose a challenge for the pharmacy sector. However, not making those savings will be even more challenging for health services and would mean significant, immediate cuts in hospital and home-based services for patients. The budget of the HSE this year assumes savings of at least €50 million to be achieved in the area of pharmacy costs. Other actions are being taken and will be taken by the Department and the HSE with a view to containing costs. Among the matters being addressed are the price of drugs, the volume of drugs prescribed and the extent of use of patent and generic drugs.

The reality is that we are in a very difficult situation and the Government has to take difficult and painful decisions. We previously discussed measures that will affect the Houses and will cause difficulty and distress for people. Regardless of their level of income people's commitments rapidly meet their income and, generally speaking, somewhat exceed it, so those sorts of adjustments are always very difficult. We have to combine understanding and compassion with difficult decisions but we must also be reasonably tough minded in the present situation. Every sector and group, including ourselves as Members, can always make a strong case as to why the status quo or something like it should be preserved, and that it is inadequate compared with what it should be, but this is just one area and there are many areas that will cause us difficulties.

We will have to work our way through it. We cannot allow ourselves to be completely swayed by messages and communications from a particular group that is defending its interests, in a bona fide way from its point of view, but where we are apt to lose sight of the larger interest, namely, that we survive and get through the current difficulties both in the health service and in every other sector of the economy. Unfortunately, that involves us – the Government in particular, but also the Oireachtas in a larger sense - taking and standing over tough decisions.

Jerry Buttimer (Fine Gael)
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I accept it is late, but the Minister of State was doing well until he went off the script. Pharmacists have indicated they are willing to accept a cut in their fees. I appreciate that the Minister of State is not attached to the Department of Health and Children but I ask him to bring to the Minister's attention that talks and negotiations must be held. There is no contingency plan if the pharmacists opt out. The reply is woolly. It does not explain what will happen. I call on the Minister to meet with the IPU to work out the issue.

The Minister made a comment about the global picture. This is about people. The Minister is discarding the Fianna Fáil slogan from 1987 about cutbacks hurting the old, the poor, the vulnerable and the elderly. Is that what the Minister of State is telling me this morning that he wants to do? I hope it is not, but unless we have action and a meeting of minds we will have chaos. It is not a case of spreading fear. The reality is that fear already exists among patients and people who need pharmacists and there is fear about job losses.

Shane Ross (Independent)
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The Minister of State addressed some of the points we raised and I appreciate that he departed from his script. I thank him for that. What about the point Senator Buttimer made, that at least the Minister's officials should talk to the pharmacists? The pharmacists are willing both to make concessions and to talk. One of the reasons they are offering to talk is to settle the difference between the calculations they have made and those worked out by the Department about how much it will cost each pharmacy per annum to implement the proposed cuts. If that happens we will understand how many of them will go bust.

The Minister and the Government appear to be condemning those who have quite reasonably borrowed on the basis of current margins to invest in their companies. The Minister is possibly imposing bankruptcy or liquidation on them. Let the parties at least talk so the Minister can see their point of view and they can see her figures. That matter could be resolved without anything being done at all. As a first premise the parties should be talking about exactly the same figures.

Martin Mansergh (Tipperary South, Fianna Fail)
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I thank the Senators for their interventions. Three main points have been made. On a personal basis I have much sympathy with the pharmacists. I have friends in the pharmaceutical profession.

I say to Senator Buttimer that economic survival is about people too. That is what is fundamentally involved, not just in terms of this measure but for the many other measures introduced by the Government in an attempt to retain the vast majority of the services that we take for granted and so that we do not get into a far more serious situation than we face currently.

As I am not the Minister for Health and Children and have no responsibility in that area I regard the question of talks, their format and who should attend them as ultra vires. Those are matters on which the Minister would have to be questioned. However, I do question Senator's Ross's position. I do not think he would apply the same logic to developers, namely, that the State has to protect people who borrowed to invest. People have to take responsibility for their own commercial judgment. It is not possible, especially in the current situation, for the State to underwrite every business move made by various groups, except where the safety of the State itself is at stake. Senator Ross applies a different logic to pharmacists than to other sectors.