Gerard Murphy (Cork North West, Fine Gael)
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Question 139: To ask the Minister for Health and Children if she will make a statement on the reference changes being proposed by the Health Service Executive in respect of negotiating rights for pharmacists. [3207/07]

Mary Harney (Dublin Mid West, Progressive Democrats)
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In 2005, a process was begun to examine all aspects of the drugs supply chain, with a view to achieving greater value for money in the pricing and supply of drugs and medicines to the health services and the GMS and community drugs schemes, consistent with patient safety and continuity of supply. This process was agreed by the Cabinet Committee on Health. A joint HSE/Department of Health and Children negotiating team was put in place to advance this process. In mid-2006, the negotiating team reached agreement with the Irish Pharmaceutical Healthcare Association (IPHA) and the Association of Pharmaceutical Manufacturers in Ireland (APMI). Discussions then began with the wholesaler representative body, the Pharmaceutical Distributors' Federation (PDF), as part of the agreed process. Early in discussions, PDF advised the State that a legal issue precluded it from negotiating a new margin for distribution to community pharmacies. The negotiating team then obtained legal advice, which subsequent legal advice to the Department confirmed. This issue also had implications for negotiations with community pharmacists.

Section 4(1) of the Competition Act, 2002 prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the restriction or distortion of competition, including agreements to fix prices, unless the agreement, decision or concerted practice meets certain conditions. Those conditions are not met in this case. Wholesalers and pharmacy contractors are undertakings. PDF and the IPU are associations of undertakings under Section 4(1) of the Act. The coming together of wholesalers under PDF or pharmacy contractors under the IPU to negotiate prices would be a breach of Section 4(1). Entering into an agreement, making a decision or being involved in a concerted practice in contravention of Section 4(1) is a criminal offence and would expose those parties, their directors, managers and officers to the risk of criminal prosecution.

In light of this advice, it is not possible for the HSE to engage in negotiations with PDF or the IPU in relation to fees or margins. In the interim, in order to determine new arrangements for wholesale services and remain in compliance with competition legislation, the negotiating team has begun a public consultation process, which includes an invitation to make submissions, coupled with an independent economic analysis of the Irish and EU markets. This process is based on an assumption of continuation of current service levels. The negotiating team will consider, following completion of the wholesale sector review, how best to address this issue for pharmacy contractor services. It is noted that the competition issues do not preclude negotiation on contractual arrangements by the IPU other than in relation to fees. The HSE has written to all community pharmacy contractors setting out the position in relation to these issues in detail. There is, and will continue to be, ongoing dialogue with the IPU, within the constraints of the legal advice provided. I wish to see that dialogue continuing in a constructive manner.