Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

Question 319: To ask the Minister for Health and Children if she has received correspondence in her Department regarding fees for services under public community drug schemes from various individuals or pharmacies; her plans to address this matter; and if she will make a statement on the matter. [12549/07]

Denis Naughten (Longford-Roscommon, Fine Gael)
Link to this: Individually | In context

Question 326: To ask the Minister for Health and Children the position regarding Parliamentary Question Nos. 750 and 764 of 31 January 2007; and if she will make a statement on the matter. [12598/07]

Mary Harney (Dublin Mid West, Progressive Democrats)
Link to this: Individually | In context

I propose to take Questions Nos. 319 and 326 together.

My Department has received correspondence regarding fees for services under public community drug schemes from individuals and pharmacies. As the Deputies may already be aware, my Department and the HSE have been reviewing the pharmaceutical supply chain, with a view to seeking value for money in the State's drugs bill in order to better fund existing and innovative therapies without compromising continuity of supply or patient safety. The review of the Irish Pharmaceutical Healthcare Association (IPHA) and the Association of Pharmaceutical Manufacturers of Ireland (APMI) Agreements, with the proprietary and generic supplier representative bodies, was completed in mid-2006 and the new agreements are in place.

Following completion of the manufacturer agreements and in line with the process agreed by the Cabinet Committee on Health, the State entered talks with the wholesaler representative body, the Pharmaceutical Distributor's Federation (PDF). As wholesale margins are not addressed in the new IPHA and APMI Agreements, the State intended to negotiate, for the first time, direct formal arrangements with the wholesale sector, to address the cost of wholesale supply to hospital and community through fair, transparent and accountable cost structures.

In particular, the State wished to examine the high margin, relative to the EU, for wholesale supply to community pharmacy and the wholesalers' claim that they supply hospitals at a loss. However, while PDF was willing to negotiate new arrangements for hospital supply, it refused to negotiate a new margin for community supply. This refusal was based on legal advice that such negotiation would interfere with agreed trading terms of third parties, community pharmacists, and expose PDF to prosecution.

Subsequent advice to the HSE indicated that the PDF position was too narrow. As wholesalers and pharmacists are undertakings for the purposes of competition law, PDF and the IPU are associations of undertakings and collective negotiation of fees, prices or margins on behalf of their members breaches section 4.1 of the 2002 Competition Act. The position is as follows:

Section 4.1 prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which have the object or effect of restricting or distorting competition, including agreements to fix prices, unless the agreement, decision or concerted practice meets certain conditions. I have been advised that those conditions are not met in this case.

Wholesalers and pharmacy contractors are undertakings. Therefore, PDF and the IPU are associations of undertakings and come 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.

Acting in contravention of Section 4.1 is a criminal offence and would expose those parties and their officials to the risk of criminal prosecution.

In light of the implications for GP and dental contract negotiations, the Department sought the Attorney General's views. The Attorney General and Senior Counsel engaged by the Attorney General confirmed the HSE advice. Given this position, it is not possible for the State to negotiate with PDF or the IPU on fees or margins and such negotiations places these bodies at risk of prosecution.

As for the rest of the supply chain, the State has been examining how to improve value for money and transparency and fairness in relation to the cost of service provision in community pharmacy. The State intended to address the review through negotiation with the IPU, as it had in the past. This is no longer possible for fees, although contractual matters other than fees may be negotiated. Accordingly, the negotiating team re-examined, in light of the legal position arising from the wholesaler legal advice, how best to address the review of pharmacy contractor services.

The HSE wrote to all community pharmacy contractors in January, setting out the situation in detail and stating that the HSE is constrained from negotiating fees with the IPU for the reasons outlined, and the IPU was fully briefed. A meeting was held on 21 February between the negotiating team and the IPU, to agree a procedure to examine available options for advancing contractual negotiations in compliance with Irish and EU competition law. Following that meeting, agreement was reached on talks to examine options for contract review that would comply fully with competition law. The talks will be chaired by Mr Bill Shipsey, SC. Both parties met Mr Shipsey yesterday, 2 April, to begin the process.

The State continues to recognise the IPU as the representative body for its members, but negotiations with the Union must comply with the law. The legal issues that emerged during the wholesale sector review were raised by the wholesaler representatives. Once the State became aware of these issues, it was no longer possible to continue as intended. There is, and will continue to be, ongoing dialogue with the IPU as the representative body for pharmacists, within the constraints of the competition legislation and the negotiating team will consider, in the context of competition law and in particular the relevant Competition Authority guidelines, all available options for advancing the process agreed by the Cabinet Committee on Health. I am satisfied that the Cabinet Committee process for review of the supply of drugs to the State is progressing effectively, within the constraints of relevant legislation.