Dáil Éireann - Volume 638 - 03 October, 2007

Written Answers. - Health Services.

Deputy Jan O’Sullivan asked the Minister for Health and Children if her attention has been drawn to a letter sent to pharmacists on 17 September 2007 by the Health Service Executive proposing to reduce the wholesale mark-up on medicines without consultation with the Irish Pharmaceutical Union; if she will intervene to ensure that the concerns of pharmacists are addressed; and if she will make a statement on the matter. [22210/07]

Deputy Finian McGrath asked the Minister for Health and Children if she will support requests (details supplied). [22168/07]

Deputy Bernard J. Durkan asked the Minister for Health and Children the extent of the discussions she, her Department or the CEO of the Health Service Executive have had with front line staff such as general practitioners, pharmacists, consultants or health service or hospital administrators prior to the recent announcement in respect of the new proposals in regard to the purchase and dispensing of drugs; the extent to which wholesalers or retailers have had an input in such discussions; the degree to which the [1596] service in terms of scale or quality to the customer is expected to be affected; the net benefit in terms of costs to such parties; if the hours or quality of services are expected to be affected; the extent of same; and if she will make a statement on the matter. [22135/07]

  Deputy Mary Harney: I propose to take Questions Nos. 157, 158 and 183 together.

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. An HSE-led negotiating team, including officials from my Department, engaged with the Irish Pharmaceutical Healthcare Association (IPHA) and the Association of Pharmaceutical Manufacturers of Ireland (APMI), representing the proprietary and generic supplier representative bodies, and completed new agreements with these bodies in mid-2006. These agreements are in place.

As wholesale margins are not addressed in the new IPHA and APMI Agreements, it was intended to negotiate direct formal arrangements with the wholesale sector. Following completion of the manufacturer agreements and in line with the process agreed by the Cabinet Committee on Health, the negotiating team entered talks with the wholesaler representative body, the Pharmaceutical Distributor’s Federation (PDF).

Early in discussions, PDF refused to negotiate a new margin for community supply, based on its own legal advice that this was a contractual matter between individual wholesalers and retailers. Subsequent legal advice to the HSE, confirmed by legal advice to my Department, indicated that, under section 4 of the 2002 Competition Act, PDF as an association of undertakings may not collectively negotiate fees, prices or margins on behalf of its members. Given the fact that the Irish Pharmaceutical Union is also an association of undertakings, it is not possible for the State to negotiate with PDF or the IPU on fees or margins as such negotiations would place these bodies at risk of prosecution.

In light of the legal position arising from the wholesaler legal advice, the negotiating team re-considered how best to address the review of pharmaceutical supply. Based on the legal advice, a consultation process accompanied by independent economic analysis was considered the most appropriate means to allow for the determination of new reimbursement arrangements. The consultation process involved direct discussion with wholesaler companies and a call for public submissions, published on 20th December 2006, in response to which a total of 161 submissions (including 143 from community pharmacy contractors) were received.

[1597] Following the completion of public consultation, and informed by independent economic analysis, new reimbursement arrangements were announced by the HSE on 17th September 2007. In its examination of the issues involved, the negotiating team considered a reimbursement level that reflects the market value of pharmaceutical wholesale services, and security and continuity of supply at current levels to patients. The evidence on which the decision is based, following examination of the issues, direct consultation and independent economic analysis, all indicates that the State is currently paying a premium for the services in question. It is possible and necessary for revised arrangements to be put in place without a substantial impact on the delivery of such services.

Information available to the negotiating team indicates that small and rural pharmacies typically receive discounts of 2-3% on the existing wholesale margin, while larger urban pharmacies and chains typically receive discounts of up to 12%. Therefore, smaller and rural pharmacies would be proportionately less affected by the revised arrangements.

In the light of the legal advice received, and following consultation with the IPU, a separate procedure was also agreed to examine available options for advancing contractual negotiations in compliance with Irish and EU competition law. This process is being chaired by Mr Bill Shipsey, SC. This process is continuing.