Legal challenge to attempt to cut payments to pharmacists

Another group has taken the legal route to try to prevent a government decision to reduce expenditure, this time the Minister of Health’s decision to reduce payments to pharmacists for dispensing drugs to patients. Eilish O’Regan, the Irish Independent’s health correspondent, has two good articles outlining both the background to the dispute and giving some details on the money at stake to individual pharmacies in today’s issue of that paper.

The case (see Irish Times report here), which is being taken by the Haire group of pharmacies, claims that the cuts will push it into a loss-making situation meaning it cannot repay its bank loans and will thus become insolvent. The pharmacies want an injunction restraining the Minister applying the regulations. Among various claims, they allege failure to provide 30 days notice of the change in the payment regime was unlawful and breached their constitutional rights. The case is being prosecuted by Gerard Hogan, SC who is also representing the teachers taking a case against the government for closing their early retirement scheme. The application for the injunction will be heard on Monday next.

If the main argument made by the pharmacies is that the Minister did not give the required 30-day notice, this would appear to simply delay rather than prevent the implementation of the cuts, which seems a lot of money simply for a few months’ reprieve. If the Minister lost on that basis, I presume she would simply start the process again giving proper notice. One assumes that the pharmacies want to prevent the cuts indefinitely, but the basis for this argument is not clear from the reports.

16 thoughts on “Legal challenge to attempt to cut payments to pharmacists”

  1. Maybe the Pharmacists should employ MKC Communications instead of Geard Hogan SC to advise them when dealing with Mrs.Geoghegan…nee Harney.

  2. From what I gather, the Minister seeks to reimburse pharmacists below the invoice prices they get in the drugs for.

    Harney, believes that pharmacists receive substantial discounts from the wholesellers and that she should get some of it. She wants to pay them 93.5% of the invoice price. Assuming that the average pharmacy gets a trade discount of 10%(if they pay within the month), thats leaves a very small profit margin for pharmacists who do benefit from these discounts. The problem I think is that not all pharmacists get the discount, and not all drugs are subject to a discount.

    My sympathy lies with pharmacists on this. There is large wastage in drug bill, and the proposals Harney and the McCarthy have voiced do not address this wastage.

    For example, the fundamental issue behind our large drug bill is that factory prices of our drugs are among the highest in the OECD. The DoH negotiated these prices with the drug manufactures within the context of government policy to attract and keep pharma jobs in Ireland. It is generally accepted that Ireland is a high wage and high cost economy, and one of the ways to compensate pharma firms for this, is to charge the domestic market high drug prices. It is not as the media report it to subsidise the cheaper prices abroad or because the domestic market is too small to realise economies of scale in price.

    The second source of wastage is the use of brand label when generics are available. This numbers floating around which could be saved if we used generics range from 15m to 300million euro, depending what side you are arguing. Needless to say, the Minister finds it helpful to underestimate the benefits of moving to generics in order to continue appleasing the brand manufacturers loacted here.

    And the third and often overlooked source of wastage is at the dispensing stage. The over prescription of drugs is a well known issue, but there is an issue as well about those who are dispensed drugs when they know they dont need or wont use the drugs. A pricing, a small price, system should be introduced to help rationalise the consumption of drugs. The McCarthy report mentions a standard 5 euro charge per presception and while this may raise money for the govt, and it is questionable if it will raise money, it actually embedds wastage by promoting a attitude of ‘take everything’ which is on the scirpt, get one’s money worth so to say. It would be far better, if people had to pay a small fee per item. limited perhaps to a maximum fee per month. 2 euro per item, limited to 20euro per month.

    The cost of drugs is huge and those on GMS get their drugs for free, someone has to pay, and when our tax system excludes so many from paying tax, alot of people are receiving alot from the state and giving it nothing. The state can only give what it first takes away. With the crisis in the government finances and the generous exclusion of so many from making social security contributions/taxes, it is reasonable to ask people to pay a small amount towards their drugs EVEN medical card holders.

    There are too many free loaders on the system, in order to keep the system, more have to contribute towards its upkeep.

  3. I was talking to a friend yesterday ang going through her books – she’s a typical ‘shop in a high street in a small Irish town’ pharmacist. It’s clear that this measure will close her down/put her into loss.

  4. Isn’t there such a thing as a single European market? Apparently it does not apply to drugs. Is this because various national health authorities try to use monopsony power to negotiate specific national deals from drug manufacturers? If so, then the Irish authorities seem to have been unusually incompetent in their negotiations (surprise, surprise!).

    What is the role of various national drug regulatory bodies, such as the Irish Medicines Board, in preventing the emergence of a Europe-wide drugs market? Is it the case that separate national approval (and possible testing) is required for drugs and that this inhibits trade?

    Within the Irish health system prescription drugs are supplied free to (a) medical card holders and (b) everyone else when they have to spend more than €100 per month. Yet the methods of re-imbursement are radically different: the medical card prescriptions are supposed to be provided at cost (plus a dispensing fee?) and the non-medical card prescriptions are reimbursed on a much more generous basis. Why ?

    Also a recent Competition Authority report has drawn attention to the lack of competition in the Pharmacy sector, and the role of the generous State agreements on drugs prices and markups in supporting this. Interestingly there has been little or no reference to this during the past week.

    Finally I don’t quite understand the alleged link between pharma production in Ireland and drugs prices. I assume that production in Ireland is for a global market and has little to do with sales in Ireland. Conversly, I would imagine that many drugs sold here are produced abroad.

    Massive incompetence all round from the Department of Health, in my opinion . Again, surprise, surprise!

  5. @ John Sheehan

    ‘Finally I don’t quite understand the alleged link between pharma production in Ireland and drugs prices. I assume that production in Ireland is for a global market and has little to do with sales in Ireland. Conversly, I would imagine that many drugs sold here are produced abroad.’

    It is true that the drugs manufactured here are released both on the domestic and international markets at different prices for each market for the same drugs. We pay higher factory prices to compensate the manufacturers for producing here at higher costs(than other countries). This has been the guiding rationale held by the DoH(directed presumably by overall government policy to attract and hold pharma jobs here).

    The trade-off we face is do we want to pay the high prices in return for keeping the pharma companies here, or do we want cheaper prices but open the possibility of pharma firms leaving. Remember, we already accord significant benefits to pharma firms over and above higher drug prices.

    The media need to highlight this, because it there seems to be the impression among the public that pharmacists are creaming it. They see that Spain charges AT retail point, alot less than prices here. The point is that Spain buys drugs much cheaper than we.

    I would agree that the current reimbursment system stinks. Pharmacists that have a large number of medical card customers only recieve a dispensing fee, while pharmacists in areas where residents are wealthy and so do alot of their business on DPS, see a 50% markup on nearly everything PLUS a dispensing fee.

    Pharmacists are not a homogeneous interest group, some will lose significantly from cuts in the DPS markup(from 50% to 20%) while others will not see any real difference(those mostly dealing with GMS).

    A more equitabel scheme would be to abolish the DPS markup and pay pharmacists their INVOICE prices(let them keep the trade discounts) and pay a substantial dispensing fee. (8 euro per item), with patients contributing towards the cost. (GMS could pay say 2 euro per item, maxed at 20euro per month, while DPS(reflecting greater ability to pay) would pay 100 per month)

  6. @ damien

    So from what you say, the Irish health service, and ultimately taxpayers and consumers, are being used as a means of subsidising domestic production of prescription drugs. Are there EU rules on State aid to firms? Do they apply to the pharma sector? What needs to be explained is either (a) non-enforcement or (b) the rationale for exempting this sector.

    We have a long list of activities which have been subsidised by tax-breaks and other means, most notably in construction, and we see the disasters that this sort of distortionary behaviour brings. So can we add one more to the list?

    Ireland is such a small part of the market for most drugs that for big integrated firms the connection between Irish drug prices and global revenues should be small.

  7. @ Damien
    For example, the fundamental issue behind our large drug bill is that factory prices of our drugs are among the highest in the OECD. The DoH negotiated these prices with the drug manufactures within the context of government policy to attract and keep pharma jobs in Ireland. It is generally accepted that Ireland is a high wage and high cost economy, and one of the ways to compensate pharma firms for this, is to charge the domestic market high drug prices. It is not as the media report it to subsidise the cheaper prices abroad or because the domestic market is too small to realise economies of scale in price.”

    Is this really accurate? It just strikes me as very odd that a drug manufacturer who exports huge amounts of drugs from this Country, would spend a lot of time worrying about the price they get for their drugs from our tiny population.

    Pfizer and Wyeth etc are here for our educated workforce and our low corporation tax and incentives etc.

    Regarding the pharmacy dispute. Why are the points for studying pharmacy at TCD etc so high I wonder ?? There must be a pot of gold at the end of the rainbow. Good for them.

    Nobody seems to mention the amount of otc medicines, cosmetics and all the other sundries which pharmacies sell and the extra services some offer. All these are highly profitable.

    I think the phramacists are going to have to take some pain here. The 30% drop in the DPS scheme seems a bit drastic but then we are in drastic times. As Colm McCarthy wrote in yesterdays Irish Times..the general public don’t seem to understand how serious the situation is.

  8. Why can the pharmacists not buy drugs at retail in Spain and sell them here at half the price of “irish” drugs at a 1000% markup on Spanish retail prices or even buy off Spanish wholesalers….

    There’s obviously some mechanism to stop this, can anyone clearly explain what it is?

    There was a letter from a woman on Pat Kenny on Radio1 last week.
    Bottle of antibiotic here ~47 euros
    bottle of same stuff/different brand in Spain ~1.70

  9. I was under the impression that membership of the EU entailed free movement of goods within member states. Is there an exclusion for pharmaceuticals? If not, why do pharmacists not source their drugs in countries where the prices are cheaper (including, allegedly, Spain) and use this to bolster their margins while claiming official invoice price from the HSE? John above makes a very valid point regarding the similarity of this arrangement to state aid.

    If there is such a derogation, are there other industries similarly affected?

    I presume the differences in pre-tax car prices (where identical models are available 20% cheaper in the UK than here after allowing for currency, VAT and VRT differences) are not caused by similar “agreements”?

  10. @ Brendan

    I do believe it is possible to import drugs from other EU member states under what is termed parallel imports. While medicines would be probably be exempt ordinarily from the free movement of goods principle (and mutual recognisation), most drugs licenced abroad are permitted to be sold here. I’m open to correction on the technicalities of that, but some pharmacists do import from abroad. A lipitor or zoton in an Irish box is the same in a Spanish box(except the language on the box from Spain is in Spanish).

    As for reimbrusment from the HSE, I think the pharmacist charges the wholesale Irish prices since these are the set prices that apply to all pharmacists. So yes, pharmacists who parallel import do cream it.

  11. The court case and the possibility of correct procedure by the querist riases the possibility of the usual “Irish solution”. This involves abdication of responsibility and a helpless waving of ministerial arms at the courts and the public service for mucking up their excellent idea. One that all parties know was designed to be deferred for as long as certain favours continue, and are designed to drag out in court while the minister fails to implement the policy as publication of a policy is enough to appear to be addressing the situation. If it is implemented, the court case will speed up. The minister will lose and then the new government can deal with it…….

    I failed to read about generic substitution in the above replies. This would mean genuine savings. But not an Irish solution…….

  12. Carrawaystick
    First, not all drugs are available retail elsewhere in teh EU, at least not legally.
    Second, except in very restricted circumstances pharmacists must dispense what the doctor prescribes.
    Third, the Irish Medicines Board have to licence each and every drug. Somehow, and im sure its for our own good, this involves lengthy analysis so that RopoDopGermoDie 5mg which is salable in Portugal for 8c per caplet has to be “modified” from the factory (which is probably in clonmel) to suit the unique irish situation and costs 7.43€ per. Sorta….

  13. So it’s the irish merdicines board that’s the root of this then. what did an Bord Snip Nua say about them????

  14. @ Ted..”In January 2006, Brian Geoghegan resigned from IBEC and took up a position as Chairman of MRPA Kinman. According to the company, which re-branded as MKC Communications in mid 2008 and from which Geoghegan resigned as chairman in October last, it is a consultancy firm that prides itself on its access to government for lobbying purposes. It is led by former PD spokesman, Ray Gordon, and former party press officer and policy director Stephen O’ Byrnes. It counts among its government and commercial clients the Health Information and Quality Authority, a body which was set up by Minister Harney to implement the sort of reforms which Brian Geoghegan was anxious to see – and which his wife is now responsible for implementing”

  15. As to the actual price of drugs, the US has a kind of mercantileist system to support its health care industry, at the expense of others like autos. My guess is that is part of the answer in Ireland. As a practical experiment why don’t you try to purchase a pharmaceutical in Spain and have it shipped to Ireland? See what happens.

    I question if a highly trained professional is needed to dispense drugs as most of the intellectual work can be better handled by computers and company tech support. Pharmacists should either not exist, or should be able to prescribe and treat patients independent of a medical doctor.

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