JOINT COMMITTEE ON HEALTH AND CHILDREN debate

Community Pharmacies: Discussion with IPU and HSE.

Chairman

I welcome the Irish Pharmaceutical Union and representatives from the Health Service Executive. I also welcome parliamentary colleagues and members of the Joint Committee on Health and Children. I will introduce the secretariat of the committee, namely, Ms Áine Breathnach and Ms Maria Edgeworth.

As we want to get as much as possible out of the meeting I will make a few suggestions as to how we can take value from it. The meeting is scheduled for two hours, until 5.20 p.m. I will invite the IPU to make a presentation first, because it was first to request this meeting, on 15 January. When the presentation from the IPU is completed we will hear a presentation from the HSE. I will then invite Deputy Reilly to make his presentation on behalf of Fine Gael and to ask questions. I will then ask Deputy Jan O'Sullivan to speak on behalf of the Labour Party, followed by Deputy O'Hanlon on behalf of Fianna Fáil. Following that series of questions and answers it will be open to members of the committee to participate.

I welcome all Oireachtas members who are not members of the Joint Committee on Health and Children. Their interest and involvement in this issue are as great as that of the members but it is important that members of the committee are given due priority. If members exhaust their line of questions, or if they are exhausted, I hope to be able to invite non-committee members to ask questions.

I do not want to lay down too many rules but if Oireachtas members are substituting for other members they must remain as substitutes until the end of the meeting and there must be no musical chairs. This is to ensure we stick to the two-hour schedule. We make every effort to allow non-members contribute. I hope the next two hours can be productive and I do not have to ask people to remember that we cannot talk about people outside the Houses and so on. It should be practical business.

The members from the Irish Pharmaceutical Union, IPU, are Mr. Michael Guckian, president, Ms Liz Hoctor, vice president, and Ms Aisling Reast will also speak for the IPU. Mr. Dermot Twomey is chairman of the pharmacy contractors committee of the IPU, Darragh O'Loughlin is chairman of the community pharmacy committee of the IPU and Mr. Séamus Feely is the secretary general.

The HSE representatives are Professor Kamal Sabra, head of the corporate pharmaceutical unit of the HSE, Mr. Seán Hurley from the same unit, Mr. Pat O'Dowd, assistant national director of HSE contracts, Mr. Paddy Burke, chief officer of HSE primary care reimbursement services and Mr. Ray Mitchell, assistant national director of the parliamentary affairs division.

I do not need to introduce the issue, of which we all have been well aware in recent months. When the presentations are made, I ask that consequent issues come through the Chair. I do not want the HSE answering back to IPU and vice versa, and members can take that up. I invite the representatives from the IPU to make their presentation.

Mr. Michael Guckian

I thank the committee for giving the Irish Pharmaceutical Union this opportunity to again address the current crisis in the sector. It is a crisis not only for pharmacists but for the many thousands of people who use our services every day, and the many people who depend on pharmacists for life-saving medicines and advice in particular. They could be patients with cystic fibrosis, heart conditions or psychiatric disorders; the thousands of diabetic people nationwide; or the full-time carers of patients in the home. These are only a few examples.

The services provided to communities all over Ireland is a vital part of the delivery of our health-care service. We deliver a service on behalf of the HSE, attending to patients just like other health care professionals. We give advice as trained and experienced professionals who know their patients well. Customers have always had easy access to medication, advice and a choice of pharmacy.

What is this issue about? The HSE stated recently this matter was about "reducing the wholesale cost of drugs". This is spin, as the HSE cannot and is not reducing the wholesale cost of medicines, but rather the payments to pharmacists. The HSE stated this change will "save private patients 8% on the cost of each medicine". This is again spin as the HSE has no evidence whatever that the costs of medicines to private patients will reduce as a consequence of its proposals.

The HSE stated it is paying twice the European average for wholesale services, with this the reason for the changes. The HSE's own consultants indicated the European averages are not in themselves a reason to reduce payments as each market is different, and any changes should be introduced on a gradual basis.

The HSE has stated this is about reducing the price of medicines. Why has the HSE recently concluded an agreement with the industry that resulted in some of the highest base prices in Europe for medicines and why does it continue to block Irish pharmacists from offering cheaper generics to patients?

The HSE has stated the average discounts in pharmacy are in the order of 8% and no benefit goes to the patient or the HSE from these payments. That is not correct. The HSE has acknowledged that the payments under the medical card scheme are very low and uneconomical. The scheme has been largely sustained until now by the ability of pharmacists to negotiate trading terms with the main suppliers in order to produce greater efficiencies by, for example, making prompt payments and placing bulk orders electronically and at specific times. We also accept that private patients are subsidising the scheme. Incidentally, pharmacists do not get any discounts on products such as insulin for patients with diabetes, controlled drugs such as morphine which are essential for those who need palliative care, or on any medicine purchased from secondary suppliers. This is not in any way to imply that we are not open to change. We are ready to work with the HSE on the issue. The kernel of the matter is the method by which we as pharmacists, working with the Government, can continue to provide pharmacy services in the most effective and efficient manner possible. That is what we want to continue to do. We must, however, be paid a fair price for our service, one which allows us to stay in business. We will not be able to do this if the proposal from the HSE which has not been negotiated or agreed is imposed on us and our patients from 1 March.

I make one thing very clear. We want to talk. We want to discuss the service we provide for patients and how we can assist the Government in maximising value for money. All we are looking for is fair play. After our last meeting with the committee, when the 1 December deadline was deferred, we believed the HSE was serious about engaging in real discussions with us. We offered to go to the table, without preconditions, to discuss a new contract. We even offered to put the issue of pharmacy payments first. We made ourselves available for talks in the weeks before Christmas but are sorry to say they did not materialise. It seems to us that the HSE's door is not open to real discussions with the IPU. It did offer to discuss the issue with us on 5 December but only if we accepted implementation of the proposed cut as a fait accompli and a new flat fee payment structure as a interim measure.

I draw committee members' attention to bullet point no. 3 on page 14, appendix 1, of the HSE proposal lest they think what I describe is not an accurate reflection of what transpired. On 10 January the HSE issued a letter to our members informing them that it would be implementing its plan to reduce the payments to pharmacists by 8.2% on 1 March. The letter also contained an offer of an interim contract. The HSE expected pharmacists to agree to this in advance of talks talking place with the union on a new substantive contract. Acceptance of the interim contract would result in further reductions in the income of our members, in addition to the 8.2% cut in payments to pharmacists from 1 March, and immediately hit the service we provide.

In summary, what the contract document proposes is a flat fee of no less than €5 per item dispensed under all community drug schemes, a reduction in payments of 8.2% and the elimination of all other fees and mark-ups. It also significantly reduces the rights of the pharmacy contractors. While it may seem on the face of it to cushion pharmacists with a high proportion of medical card patients from the impact of the changes, what it is really doing is taking money from other schemes and allocating it to the medical card scheme. That will not work. It will have a negative impact on many pharmacy businesses and the services they provide. Incidentally, this document was not sent by the HSE to the union until seven days after it had arrived at each pharmacy.

Obviously, we cannot agree to the proposal which puts in place a pre-determined outcome to talks, without any discussion, negotiation, evaluation, or analysis of its impact on the sector or the patient. The reductions proposed by the HSE must form part of the review process. If this is agreed, the IPU can start negotiations with the HSE on all other contractual issues. That is why, as long ago as last spring, we asked the Minister for Health and Children, Deputy Harney, to establish an independent body to establish a fair and appropriate system of payments to pharmacists. There should be no changes to the way pharmacists are paid until this body has reviewed the matter, listened to the views of all sides and made a recommendation on what pharmacists should be paid. This would include reviewing the HSE's plan to reduce payments to pharmacists by 8.2% on 1 March and allow for fair play and due process. We are more than willing to engage in such a process at this stage and believe it to be the only way out of this impasse.

These talks must start with our existing contract and assess the impact of any proposed changes, whatever they may be. It should be remembered that we are not the only ones concerned about the impact the HSE's proposed cuts would have. Indecon, the HSE's own consultants, warned in a report published on 13 November last that: "The timing of significant changes in payment terms is crucial. We believe the changes should be evaluated in advance in conjunction with key stakeholders and this needs to be carefully managed to avoid unnecessary market disruption". Market disruption is not the only result of these proposals. The impact on the service our members provide and the patients who use the service would be severe. The HSE has carried out no analysis or evaluation of the impact of its proposals, which is incredible. We know the committee shares these concerns. Mr. Twomey, chairperson of the pharmacy contractors committee, will now outline in more detail what the impact would be.

Mr. Dermot Twomey

I thank the joint committee for affording us in the IPU a further opportunity to appear before it. I am a community pharmacy contractor in Cloyne, County Cork. I serve a rural community and perform my duties as a pharmacist with great pride and dedication, supported by a fine team of ten members of staff. My other role — the reason I am here — is as chairperson of the pharmacy contractors committee, PCC, of the Irish Pharmaceutical Union.

The committee I represent is referred to in the current pharmacy agreement as the body responsible for negotiating the pharmacy contract with the HSE. The PCC has had good relations with the Department of Health and Children for over 35 years. We were always able to come to an agreement when needed. However, our experience since the HSE was set up is that it is attempting to fundamentally change the working relationship with pharmacists as providers of a vital role in a way which will result in a reduced service to patients of the health service.

As the committee knows, our greatest concern arising from the HSE proposals comes from the impact they would have on the service we provide for our patients. The committee may have already heard from local pharmacists of their concerns about their patients. I take the opportunity to thank the Deputies and Senators of all parties who have shown an interest in this crucial issue.

The proposal to unilaterally reduce payments to pharmacists by 8.2% from 1 March would have a catastrophic effect on my business. The shere fact of the matter is that if this decision goes ahead, my business will start making a loss. In total, pharmacists will lose between €85 million and €100 million. This will, undoubtedly, lead to loss of services and job losses. We provided the committee with an overview of funding and profitability of the sector at the last meeting and have set out a summary of this information in an appendix to this presentation.

Ms Aisling Reast from Lucan and I will provide the committee with details of the impact of the HSE proposals on our services to patients. We can provide many other examples, if the committee wishes to see them. We recently conducted a survey of all our members in which we asked them to let us know exactly what the impact of the HSE cuts would be. Today we will present to the committee the results of that survey. It should be remembered that these are the people who provide the service and many have been doing so for years. I will highlight some of the findings which make for disturbing reading.

More than one in five, over 20%, said the HSE cuts threatened the future of their business and that they could close. Based on these findings, this could mean that up to 337 pharmacies could close, resulting in the lost of 2,257 full-time jobs. Pharmacies which survive would have to reduce staff numbers by in the order of 2,500. If the proposals are implemented, this could lead to at least 4,750 job losses in total. This is the potential reality if the HSE is allowed to impose its proposals on pharmacists and why we are asking the committee for its support in having real discussions on contractual issues, including payment models, directly with the HSE and the payment issue referred to an independent body which can recommend appropriate remuneration for pharmacists without preconditions.

We are as concerned as the committee about the cost to the taxpayer of providing medicines and have made a number of proposals to secure value for money for the taxpayer. We want to see this issue addressed properly. Since 2001 the IPU has made numerous submissions to the Department of Health and Children and the HSE in which we have outlined how we could play a greater role in supporting patients in the community, as well as saving money for the taxpayer. For example, generic substitution and the elimination of massive wastage in the system in medicines dispensed could save millions of euro annually. Furthermore, nearly 50% of patients need assistance to take their medication correctly. This would improve their quality of life and reduce the unnecessary costs arising from hospital care. In addition to these initiatives, the union is not opposed to reviewing the existing payment arrangements in a manner that further delivers efficiencies and savings but in a way that will maintain the current level of services to patients.

The HSE can realise savings but it is going about it in the wrong way, both in terms of its proposals and its approach. The committee should know that the Supreme Court, in a case relating to a different contractual issue, has upheld our right to have changes to our current agreements with the HSE fully negotiated. Mr. Justice Kearns, in his judgment in the Collooney case in 2005, stated: "I do not believe it to be unreasonable that the parties who negotiated the agreement or contract would agree to the possible change ...". He further stated: "Nor do I accept that clause 19 reserves to the health boards any exclusively unilateral right to alter the terms of the contract".

I bought my own pharmacy in Cloyne, County Cork, in 1997. I did a major refurbishment job in 1998. When the building adjoining my pharmacy came up for sale in 2005, I decided to purchase it and extend my pharmacy service for my patients. I did another major refurbishment job combining both premises in 2006-07. I have remortgaged four times in ten years in order to develop my services for my patients. There is a fundamental question that I would like members of the committee to consider. Why should I or any of my colleagues take a financial risk in providing a service on behalf of the State if change is to be imposed upon me without agreement by a State body with a dominant position in the market?

I will outline the impact of these proposals on my pharmacy. I will also ask Ms Reast to briefly outline the effect they will have on her business. My pharmacy, Cloyne Pharmacy, is located in a rural part of County Cork. Of the total volume of dispensing I do, 63% of my prescriptions are dispensed under the medical card scheme for which I am paid €3.26 with no mark-up. The current situation — I have been in this business for ten years — is that I have a turnover of €1.5 million. After I have paid my costs, my net profit is of the order of €40,000. If the HSE proposal to reduce the wholesale discount by 8.2% is implemented on 1 March, my profit of €40,000 will turn into a loss of €40,500. The HSE's interim proposal to introduce a flat fee of €5, coupled with the reduction in the wholesaler discount, will mean that my business will go from a profit of €40,000 to a loss of €147,000. This will result in the closure of my business with the loss of up to ten jobs. I have spent ten long years building up this business and will be devastated if this happens.

Ms Aisling Reast

I own a community pharmacy in Lucan village, County Dublin. My pharmacy dispenses 41% of its medicines under the medical card scheme. This is significantly lower than the national average of 75%. My pharmacy has a turnover of €1.18 million and currently makes a net profit of €51,000, every penny of which goes to service my debt at the bank. If the HSE is allowed to proceed with the reduction in its payments to me of 8.2%, there will be a small reduction in my turnover to €1.12 million. However, the loss of €67,000 will mean my pharmacy will make a net loss of €16,000. I may have to close but certainly will have to lay off staff; therefore, the professional patient-focused service I currently provide will suffer. I employ two pharmacy technicians who assist me in the dispensing in order that | can spend time talking to patients, blister-packing tablets, visiting elderly, house-bound and psychiatric patients at night in their homes, and spend hours contacting doctors to make changes to prescriptions in order that my patients have improved health outcomes.

All non-essential services will go if the HSE is allowed both to implement the 8.2% reduction and introduce a flat fee of €5 and my business will make a loss of €135,000. Young pharmacists like me face financial ruin for wanting to play a key role in looking after our community's health. We want this issue to be resolved in a way that will ensure our patients will receive the service they need and that our members will be paid a fair rate for providing that service. All we want is fair play. This can be achieved through real negotiations with the HSE together with an independent review of payment agreements. Accepting the proposed change from 1 March and the interim contract would be de facto agreeing the contract in advance of negotiations. We cannot do that or be expected to do that.

The Minister for Health and Children in an interview on 29 December 2007 in The Irish Times stated that the State is in a dominant position and in that dominant position must ensure there is objectivity and fairness in the manner in which it determines a fair return for the service or contract.

The Minister has also accepted the need for an independent body to make a recommendation on fees paid to pharmacists. She said "an independent group like the higher review group on public sector pay would make a recommendation on the price that should be paid for that contract but above all we ask the members of this committee to put the interests of the people we serve in communities all over Ireland first". These are people who are not mobile, who are ill and who suffer with chronic conditions, requiring care and support in their community. They need the service we provide as trained professionals which we wish to continue to provide for a fair price.

We ask for the committee's support to ensure that no changes are made to the current contractual agreements unless they are discussed and agreed with this union. No changes should be made to payment arrangements until all aspects of pharmacy remuneration are referred to an independent body which has the job of finding a fair and appropriate system of remuneration. At this point, it is very difficult for us to trust the HSE but we will continue to make ourselves available for meaningful talks. If there is genuine discussion between the parties an outcome acceptable to all sides can still be achieved.

I thank the committee for its time. We look forward to answering any questions the committee may wish to ask.

Chairman

I thank the IPU representatives. I invite the HSE representatives to make its presentation.

Mr. Seán Hurley

I thank the Chairman and members of the committee. I will outline briefly what is currently covered by the reimbursement moneys paid to each of the pharmacists. There are three elements to the reimbursement paid to pharmacists. The first element is the ingredient cost of the medicines provided by the manufacturer. The next element is the wholesale distribution of service and the third element is the payment to the pharmacist which covers his or her professional fee and the mark-up. The issue concerning us today is that of the cost of the wholesale pharmacy services and, in particular, how much ordinary patients and the taxpayer should have to pay for them.

The State and patients pay for wholesale services to community pharmacy through the price paid to pharmacies for medicines. This price includes the mark up to which I have referred of between 15% and 17.7% under current arrangements. Prior to September 2006, wholesale margins were included in manufacture agreements. As this is no longer the case, following the agreement the HSE entered into in September 2006 with the manufacturers, the State then sought direct agreement with the wholesalers. However, full-line wholesalers refused to negotiate a new mark up for community wholesale supply. We on the State side were then advised that direct negotiations on fees or margins would breach competition law. Accordingly, in that scenario the State determined fair and transparent arrangements for wholesale procurement supply in line with published Competition Authority guidelines. This process included very significant stakeholder consultation, public submissions and an extensive independent economic analysis.

The reimbursement price paid to pharmacy contractors is meant to cover the cost to pharmacies of the price of medicines.The reimbursement price paid is far higher than the cost the pharmacies pay and the independent analysis, prepared for us by Indecon, clearly shows that more than half the wholesale mark-up is given back to retail pharmacists as discount and rebate. This was also corroborated by the wholesalers directly to us. Irish patients and taxpayers pay more than twice as much for wholesale services as that paid by the retail pharmacy sector. We reimburse 15% whereas the net mark-up or wholesale distribution rate pharmacists must carry is approximately 8%.

The decision on payment for pharmaceutical wholesale services in community and hospital supply will be implemented from 1 March. The following are the new arrangements that will apply. In regard to community pharmacy supplies, the pharmacy contractors will be reimbursed at the ex-factory price plus 8% and 12 months later that will be reduced to 7%, and for hospital deliveries, the hospitals will pay the ex-factory price plus 5%, but there are also some opportunities for further reductions in that 5% wholesale price.

The new community rate reflects two key facts, one being its reflection of the real value of wholesale services where the wholesalers return currently more than half their current mark-up as discount to pharmacies and the wholesalers' submission that 7% is a viable operating mark-up. The new system which we are about to implement will provide far greater transparency in respect of payment. Everyone will know what is being paid and for what it is being paid. It will remove the anomalies whereby patients and taxpayers currently subsidise the wholesaler business model and small and rural pharmacies subsidise large chains and urban shops. The hospital review also reflects the complexity and lack of transparency in current arrangements and the wholesalers' submissions stated that, for them, hospital supply is a loss maker and is being subsidised by the community side, but henceforth there will be a fair payment for hospital supply and there will be no justification for an artificially high margin in the community to support it.

The decision we took was not taken lightly. However, a position whereby patients and taxpayers pay €100 million a year more than anyone else for wholesale distribution of medicines is not sustainable and will seriously compromise the HSE's ability to provide new and innovative treatments for patients. The outcome of the introduction of this measure is included in the HSE's 2008 budget; the reduction in 2008 of the HSE's expenditure of €100 million has been taken into account in determining the HSE's Vote. The Vote allocated to the HSE by Dáil Éireann is Government and national policy and the HSE must introduce this measure on 1 March. There can be no further delay in its introduction because it will cost the HSE money. National policy must be implemented by the HSE.

Three important points need to be borne in mind. First, payments for professional services under the 1996 contract were not changed by us. We are not changing the professional fees being paid to pharmacists. Second, the wholesale mark-up is a payment for wholesale services, not pharmaceutical services or professional services. Third, discounts from wholesalers to pharmacists are not part of the HSE's payment for professional pharmacy services. They form part of the commercial arrangements between wholesaler and retailers, which they are entitled to enter into.

The IPU and contractors are concerned that pharmacies will be charged more for the drugs than they will be reimbursed. The HSE and the manufacturers of the drugs have received explicit assurances from wholesalers that the net monthly cost to pharmacies for reimbursable products will not be greater than the amount reimbursed by the HSE. United Drug has stated in writing to one of the major manufacturers that it will apply individual terms and settlement discounts to each customer account as negotiated on a case by case basis. Therefore, it will seek to ensure that customers will not buy medicines at a loss from it. They also point out that this structure is exactly the same as the system in the UK where the trade price is the fixed price in the market, and the NHS reimburses pharmacies at the lower price with no impact on continuity of supply. Other wholesalers have made similar commitments both to us and to the manufacturers. Under European competition law any manufacturer of medicines is prohibited from agreeing the price at which representative organisations, including wholesalers, may sell to their customers. In other words, any negotiations between the trade price and the reimbursable price must be subject to free competition between wholesalers and individual pharmacies.

As regards implementation, it has been claimed that the HSE ignored the Indecon report on wholesale prices. The HSE and the Department were asked to review medicine costs across the three main sectors in the chain — that is, the manufacturing sector, wholesale sector and, at retail level, dispensing pharmacists. The HSE was asked, as approved by our board and the Department under Government policy, to find a fair, reasonable and transparent price for each of these sectors' components. This process began in 2005 when the Cabinet sub-committee on health decided that work should be done on this area. We in the HSE have now completed our examination of the first two components, that is the manufacturers and wholesale distribution services. We did this following widespread consultation and extensive analysis, including the Indecon report.

The wholesale mark-up reduction, when completed, will have been implemented over two and a half years from September 2006 when we first started the process with wholesalers. The Indecon and other reports clearly showed the impact that structured overcharging for wholesale services has had on the State drug budget. The cost is an extra, and unnecessary, €100 million per year. We now know that the real value of wholesale services is 7%. Ordinary citizens and the State are being overcharged for these services and this obviously needs to be addressed. This is being done and all the arrangements have been approved by the Government. The decisions following on have been taken into account in the financial Vote for the HSE. We will implement the wholesale plan over the next two and a half years.

Professional fees for pharmacy services are not changing. Reimbursement payments under the drug schemes are about 40% of overall pharmacy income. Therefore, the new arrangements will produce an average drop in income of approximately 2.4%. The extensive level of investment by third parties, in particular by wholesalers, in stock, premises and pharmacies, including fit-outs and free bonus offers, such as two-for-one and one-for-one offers, means that the effect on pharmacy incomes will be rather less than 2.4%. There will be no change in professional fees being paid to pharmacists.

Retention of the additional profits, which go all the way back to 1971 and currently stand at €100 million per year, and artificially high prices have obviously been beneficial for existing owners but there are significant long-term disadvantages for the pharmacy sector. These include: huge entry barriers to new pharmacists from inflated market prices — we know that shops have routinely sold for three times the turnover; the associated consolidation of ownership and expansion of chains, particularly in the two-to-ten shop range, as existing owners buy and open more shops; and unsupervised purchase of medicines in other jurisdictions by Irish patients seeking to avoid high retail prices in Irish pharmacies, with an associated long-term loss of business.

As regards the voluntary interim contract, public representatives and this committee, pharmacists and the IPU have raised specific concerns about the potentially disproportionate impact of a reduction in discount level on pharmacies that are heavily dependent on medical card dispensing. I understand that this point was specifically raised last November when the committee discussed it both with the IPU and the HSE.

Pharmacies dependent on medical card dispensing to a great extent, may not have income buffers which are available to other contractors. To address this concern, the HSE has now offered a voluntary contract that will include a much higher single professional fee replacing the current fee and mark-up mix. For GMS-dependent pharmacies, most of whose dispensing does not attract a 50% mark-up, this will greatly enhance their dispensing income. Obviously, take up of the offer is entirely voluntary and will be a commercial decision for each contractor. Within the potential fee range, an analysis based on 2007 figures for each contractor indicates that between 46% and 68% of contractors would increase their dispensing income if they took up the interim contract — that is, if they accepted a flat professional fee to replace the current €3.26 fee and the percentage mark-ups.

The HSE is very concerned about the misinformation in the marketplace in regard to this initiative and the following is the position. The interim contract is entirely voluntary. Pharmacies that do not take up the offer remain on their current contracts and professional payments structures. The offer was made to contractors following its rejection by the IPU which was prepared to leave vulnerable pharmacies without recourse to alternatives. The HSE was not prepared to allow this. The contract is an interim contract pending the introduction of a new substantive contract.

The interim contract specifically addresses the concerns of GMS-dependent pharmacies. Again, we responded to the concerns expressed by many people, including the committee. Contracted professional activities such as phase dispensing and non-dispensing pharmaceutical intervention will continue to be paid.

We sent out the contract in early January to give contractors time to consider the offer before the final figure is announced. It is a matter for each contractor to make an informed decision on the offer. As the contracting authority, the HSE is entitled to communicate directly with its contractors and does this on a regular basis on many issues.

Furthermore, not all contractors are IPU members and membership of the IPU is not, and has never been, a prerequisite for receiving a contract. It would be highly inappropriate for the HSE to differentiate between contractors on this basis and claims that we should do so are disturbing. Contrary to IPU claims, both sole traders and chains have expressed to us interest in taking up the interim contract and given that at the very minimum, at least 46% of contractors will increase their dispensing income, it appears that by opposing the voluntary offer the IPU may not represent all contractors on this issue.

It has been suggested also that the implementation of the new wholesale arrangements should be determined by the Government's independent body. This body will determine the value of services provided under a new centralised or common contract with the State. The wholesale component of the medicine prices is a payment for wholesale services and is not a payment for pharmacy services under the pharmacy contract. The HSE does not have a contract with wholesalers for community supply and, therefore, the cost of wholesale services will not be a matter for the new independent body. The independent body will determine the value of pharmaceutical services under a new substantive contract for which the consultation process has begun.

This issue is solely about what ordinary patients and taxpayers should pay for the wholesale component of their prescription medicines. The prices paid by patients and taxpayers for medicines are among the highest in the EU. We want to produce a fair and transparent price for medicines — one which is sustainable and continues to allow Irish patients rapid access to the best of new and innovative drug therapies. The manufacturing component of these prices has been addressed by us and is moving towards the EU average. It is intended to address the retail component of medicine prices by providing for a proper professional fee for contracted pharmacy services separated from the cost of medicine and this will be determined by the new independent body. This will remove the 50% mark-up DPS patients and for long-term illness and other schemes but it will provide a properly based professional income for contractors. This approach is widely supported in the sector, by the Pharmaceutical Society of Ireland and by pharmacists.

The data relating to the wholesale component are stark. Ordinary patients and the State are paying over twice the value of wholesale services. This has given the sector, at the expense of patients and taxpayers, €100 million per year in additional profits. While the IPU consistently maintains that its members do not control the price of medicines, it is taking court action against the HSE based on a claim that it negotiated the ex-wholesale price with the State. Only one of those claims can be true. If it does not negotiate the wholesale price, it should withdraw the court action and stop opposing this initiative for better prices for patients. If it does negotiate prices, it should accept responsibility for maintaining artificially high prices at the expense of patients and taxpayers.

Following the methadone debacle at the end of last year, some pharmacies have threatened vulnerable patients such as the elderly, those with cancer or suffering with psychiatric illnesses with the withdrawal of services. The HSE has been contacted by extremely distressed patients whose pharmacies have informed them that they will not be given any medicines after 1 March. Given the extent to which the new flat professional fee offer will increase dispensing incomes, there is no reason or excuse for such an action to be contemplated. It is completely unprofessional and the HSE condemns it utterly.

The IPU has produced no data on pharmacy incomes to support this action. It has yet to condemn this further exploitation of vulnerable people for the purpose of allowing one of the wealthiest sectors of our society to continue to overcharge ordinary citizens. Not only that, the IPU is asking the very people who are being overcharged to support its campaign.

The evidence is irrefutable. The current structure is producing artificially high prices for medicines — at a cost of €100 million to the consumer but at considerable benefit to the retailer and wholesaler. This is the issue that the HSE will address on 1 March. This €100 million equates to 60 hospital beds, over 1,000 nurses, medicines for 53,000 long-term illness patients and drugs for over 120,000 medical card patients.

Deputy Kathleen Lynch

How many managers in the HSE would it buy?

Mr. Seán Hurley

The IPU is demanding retention of a €100 million overpayment for a discount that has nothing to do with patients, the professional practise of pharmacy or the health service.

Members seated in the Visitors Gallery cannot ask questions from there. They must take a seat in the committee room when they are called on to contribute.

Senator Geraldine Feeney

Will committee members have the right to ask supplementary questions?

Chairman

Yes. I stated at the beginning of the meeting that the issue has been before the committee since last year and, clearly, this is an attempt by us to move the process on and, hopefully, secure a resolution.

Deputy James Reilly

I welcome both delegations. I have no problem with the Fianna Fáil motion but an addendum to it might get us over the line.

Chairman

I will ask the Deputy to put his motion later. If we reach agreement before then, we will go with it. If not, we will go into private session to discuss the wordings of the motions and the amendment to try to reach agreement. I would prefer if the committee did not divide. We should devote the next hour to securing agreement as I do not want the committee to divide on this or any other issue.

Deputy James Reilly

The preferred way is to reach agreement. Everybody wants this problem resolved. My addendum to the Chairman's motion states: "No changes in the current contract will take place until such a body reports and likewise pharmacists will refrain from any reduction in services".

Chairman

The Labour Party and Fianna Fáil have tabled motions, so I will call their spokespersons to outline the content of their motions before returning to Deputy Reilly.

Deputy Jan O’Sullivan

The Labour Party motion is the names of myself, Deputy Kathleen Lynch and Senator Phil Prendergast. It states: "That no change be made to the contracts between the HSE and community pharmacists in advance of the setting up and reporting of an independent body whose remit will be to make recommendations on the reimbursement to pharmacists for drugs supplied under the State's community drugs scheme in consultation with the interests concerned".

Deputy Margaret Conlon

The Fianna Fáil motion states:

"That recognising the vital role that community-based pharmacies in the delivery of the health service and recognising that changes and adjustments are required to the pricing mechanism of medicine, commends the initiative of the Health Service Executive in its work to ensure that the Irish taxpayer gets maximum value for money in the provision of health services and supplies; and further recognising that the proposed changes to the contracts between the HSE and the pharmacies should be designed to allow financial sustainability, calls for the establishment of an independent body to facilitate negotiations between the HSE and pharmacy representatives with a view to agreeing a new cost relationship between the two parties with regard to the price of medicines".

Deputy James Reilly

My addendum to that motion states after the words "with regard to the price of medicines", to add "and that no changes in the current contract will take place until such a body reports and likewise pharmacists will refrain from any reduction in services". I am on record supporting the HSE's endeavour to reduce the cost of medicines. We all want value for money for the taxpayer and we all want cheaper medicines for the public. However, the method used to get us to where we are now is not acceptable to me or many others. With others, I am angry that unilateral action was taken by the HSE. That action could destroy rural pharmacies and cause the members of the Irish Pharmaceutical Union to withdraw service, thereby disrupting continuity of supply to the most vulnerable and needy in society: the chronically ill, the elderly and those with disabilities.

Rural Ireland has already been denuded of banks and post offices. We cannot allow the rural pharmacy to go also. Surely the mix of large chains, small chains, small groups and individuals ensures competition in the marketplace. Pharmacists, with wholesalers, have developed a service which covers virtually all of Ireland and ensures patients receive their medicines on a same day basis, in most instances. We all want a quality and cost effective service but the cheapest service may be expensive and, possibly, of poor quality. If we accept what pharmacists have told us, it may result in no service, as many of them will have gone out of business. Pharmacy is a business and there are hard nosed bank managers behind many young pharmacists. If those bank managers do not see a capacity to have loans repaid, service will be withdrawn, not by pharmacists but by the financial institutions which will close them down. If the intention is to have the cheapest possible medicines, regardless of the quality of service, we will have large supermarket style chains available only in cities and the bigger population centres, further disadvantaging the elderly, particularly in rural areas.

When we discussed this matter three months ago, members from all parties felt we had bought time. The Minister persuaded the HSE to back off from its deadline, as did the IPU. It is particularly disappointing to find that those three months have not yielded anything fruitful. We now face another deadline in 14 or 18 days' time. Who decided to issue a new contract when the Shipsey process was still in train and why was that decision taken? The tone of the letter accompanying the contract was intimidatory. While the statement issued last night by the HSE indicated it was trying to help pharmacists, the letter appeared to be intimidating them, telling them they might find themselves worse off in March if they did not sign the contract. I do not find that helpful. The Irish psyche is one of generosity and when asked to negotiate, most are willing to give. However, if threatened, they will die defending what is theirs. This sort of threatening letter has further inflamed people and entrenched them in their positions. It is clearly against the spirit of the agreement and what this committee requested.

What was the Minister's role, if any, in the decision to issue a new contract? Last November at this committee she stated she had spoken to Professor Drumm and that he had indicated that an agreement was near at hand. What happened? I expect an answer to that question from both sides. The Minister also said she hoped to put in place a format for dealing not only with the IPU, but also with all groups whose rights to negotiate fall under this interpretation of the Competition Authority. They include dentists, general practitioners and members of Irish Equity. How is it that the Competition Authority prevents the IPU and the HSE from interfacing, when no such problems arose when the HSE negotiated with the Irish Pharmaceutical Healthcare Association, the manufacturers of drugs? How is it that pharmacists in Northern Ireland can negotiate with the health authority there without any issues arising from the British competition authority? Was the HSE in touch with the Competition Authority before the authority began its investigation into pharmacies? If so, who initiated the contact? Has the HSE been in contact with the Competition Authority since and, if so, what was the nature of that contact and who instigated it? Can the terms of reference of the independent body be agreed between the IPU and the HSE? That is a request rather than a question. How does the HSE expect pharmacists to respond to the threatening tone in the letter of early January which accompanied the new contract? Why does it continue to ignore the Indecon report which it commissioned? The report stated clearly that no precipitative action should be taken. It also argued that the complexities of this country's pharmacy arrangements meant they should not be compared with those in other European countries. I emphasise that the report was commissioned by the HSE. What are the views of the HSE and the IPU on why the Shipsey process failed?

The opinion of the members of the committee, across all parties, is that no progress seems to have been made since early December, despite the hard work done to secure an additional three months in which to solve this problem behind closed doors. We also think the letter of early January from the HSE was a example of extreme bad faith. Who is running this country? Is it the Government, or are the autocrats in charge? Do the wishes of an Oireachtas committee mean nothing? Does the Minister not have any say? Transparency and accountability must come into play. Who decided to issue the contract? Why was it done? Was it done with the Minister's consent?

I regret to say there is little trust in the HSE, in general, particularly in recent times. These developments do little to enhance trust in the HSE. I hope I will be able to get answers to my questions. I am happy for them to be banked.

Chairman

We are now one hour and five minutes into the meeting. I would like to maximise the benefit we can accrue from the rest of the meeting. Before I ask the delegates to respond, I emphasise that the committee does not want to have to remind them to answer the questions they have been asked. I ask the representatives of the HSE and the IPU to do their best to answer members' questions. We want to tease out all the issues involved. I hope we can come to some form of consensus or agreement. I will not allow speakers to conclude their responses until those who have asked questions are satisfied that their queries have been answered. I ask Professor Sabra of the HSE to answer the questions he has been asked.

Professor Kamal Sabra

It is fair to say, in response to the last point made by Deputy Reilly, that the amount of money paid to manufacturers in respect of drugs has been reduced for the first time in the history of the State. Such a reduction has never happened before. We have reduced the cost of drugs by 35%. The cost to patients, taxpayers and the HSE of any drug product no longer covered by a patent will automatically decrease by 35%. The price of new drugs which come onto the Irish market will be determined on the basis of the price in nine countries, including Spain. New drugs which have been patented will come onto the Irish market at prices which are, on average, 10% lower than they used to be. The cost of new medicines in Ireland will be in line with the European average. Ireland used to be the most expensive country in the world — not just in Europe — when it came to drug prices. That issue has been addressed.

Mr. Hurley spoke about the wholesale price. The wholesale price is paid, by means of a reimbursement to pharmacists, as a way of moving a product from A to B. If one reads the Indecon report, one will find that it states clearly that we are paying more than twice the European average to move a drug from A to B. As I said at a previous meeting, a wholesale margin of 17.76% is not needed to move gold from A to B. I mentioned Norway at that meeting. I still say Norway is a similar country to Ireland. It has a population of 5 million but is vastly larger than Ireland. Half of it is covered by snow for six months of the year. Wholesalers use snowmobiles to transport drugs from Oslo to northern Norway and the wholesale margin is 6%. The main wholesaler that delivers the service throughout Norway is Celesio which owns Cahill May Roberts, one of the largest wholesalers in Ireland. It is apparent, therefore, that patients and taxpayers have been paying more than twice the wholesale margin they should have been paying to move a product from A to B.

This process started in 2005. The new wholesale market will be introduced by March 2009 if Indecon's recommendations are taken on board. It will have taken two and a half years to achieve that reduction.

At the last meeting at which we were present, Deputy Beverley Flynn stated rural pharmacists will be affected because they dispense mostly in respect of GMS prescriptions. That issue is being addressed and the new temporary contract was introduced purely with this in mind. The issue was raised by Members of the Oireachtas, the Irish Pharmaceutical Union and individual pharmacists. Pharmacists will be paid almost double what they were receiving in GMS fees to address the problem. We have certainly taken it into account.

Perhaps Mr. Hurley will address the next point.

Mr. Seán Hurley

Deputy Reilly mentioned the Shipsey process. The process was established because we could not, under competition law, discuss fees directly with the Irish Pharmaceutical Union. We agreed to engage with Mr. Shipsey and his terms of reference were to work out a mechanism with us whereby we could comply with competition law and arrive at a mechanism for agreeing remuneration for the pharmacists. We did not reach agreement. In early December we had a meeting at which we put our proposals to the Irish Pharmaceutical Union through Mr. Shipsey, and vice versa. He gave us one week to come back to him. Both sides returned and rejected each other’s proposal, thus ending the Shipsey process.

The outcome, which was taken into account in the 2008 vote, was that we continued to implement our strategy, which had been worked out by ourselves and agreed at all levels within the Department and by the Government. The strategy included the issuing of an interim contract. The chief executive officer, Professor Drumm, had no option but to proceed with our plan, which, regrettably, was not acceptable to the Irish Pharmaceutical Union. This is the background to our decision. I refer to how the Shipsey process ended and the issuing of the letter in early January.

Deputy James Reilly

Mr. Seán Hurley

In the early days we had one exploratory meeting with the Competition Authority, in which I participated. We did so because we wanted to find out how we could do our business while ensuring we complied with competition law. That was the only meeting we had with the authority.

I want to ask my questions. He may say the outcome was not similar to that sought with the IPU but he engaged in a negotiation process with representatives of the producers of the medication. He also said, "However, full-line wholesalers refused to negotiate a new mark-up for community wholesale supply". Essentially he is saying that the HSE negotiated with the people who produced the medication and then tried to negotiate with the wholesalers, but the latter would not do so. Effectively, I can only say that the HSE is now using a bullying tactic to make the pharmacists do the work as regards getting the wholesalers to reduce their prices. That is how it appears to us. If that is not the case, then perhaps the HSE will clarify why it did not deal directly with the wholesalers and why it expects pharmacists to address the issue. In effect, pharmacists are getting a raw deal in all of this.

As regards the figures the HSE talks about, it is clear the proposed changes will have a major effect on the livelihoods of rural and urban pharmacists. I have never seen so many public representatives at a joint committee meeting as are here today. The contract is not being proposed for negotiation and discussion, but is being imposed on pharmacists.

I want to make a point as regards the HSE budget and the reasons it gives the committee for introducing this measure. Again, I can only describe this as a bullying tactic. The HSE is saying, in effect, that it cannot negotiate because the budget has already been decided. The consultants took four years, for goodness sake. If the HSE is genuinely treating people with dignity and equality, surely it must allow time for negotiations. To say it has to be imposed on pharmacists because of budgetary constraints seems to be entirely the wrong way to go about achieving a result. We certainly have a serious difficulty with that approach. I have figures from one pharmacy in my constituency which will lose €335,286. It has done a full breakdown of the figures as regards what the HSE is proposing and projected what its income would be under the current scheme.

These are not exaggerations. Representatives are here from all over the country. There is a genuine concern that pharmacies will close. As a committee we cannot accept that this will simply be implemented on 1 March without any discussions or negotiations. That is why the Labour Party has tabled its proposals. Our difficulty is that if our motion is not accepted, while the independent body will go ahead, the diktat will still come into being on 1 March. We want to ensure that there is no change to the pharmacists' contract on 1 March, or until such time as this independent body has looked at all the issues concerned, including the wholesale mark-up as it affects pharmacists.

I find it very disturbing that we appear to be dealing with something different from what the independent body will deal with, and to what we understood coming into this meeting. I am seeking clarification from both sides. We had understood that all of the issues concerned were to be dealt with by the independent body. If the HSE sees matters differently, who decided what the independent body will deal with? Our understanding was that it should deal with everything.

The function of the Competition Authority is to ensure compliance with the Act, not to interpret the law. We are concerned that the HSE went to the Competition Authority rather than simply proceeding with what it believed to be the right thing to do. What is the role of the Competition Authority in all of this, and what does the HSE see as its role?

As Mr. Hurley stated, the original role of Mr. Shipsey was to find a process in which we could conduct negotiations with the HSE and agree services. However, as he progressed, he took on a greater role. From the spring of last year, we initiated the proposal of having an independent body. We put that idea forward in writing in August but it was stoutly resisted by the HSE until the end of November last year, which was regrettable because that solution was in the offing but was never acted upon. The reason Shipsey failed, as Mr. Hurley outlined, was that the HSE had a position and we had a position, and Shipsey felt he could not bridge the gap.

He did not fail, however, in the sense that there has been significant movement from the HSE in so far as it originally told us it could not discuss any issue around payments but its legal advisers now accept it can discuss payment models with the union without breaching competition law. In other words, we can discuss whether payment could be a flat fee or a flat fee with a mark-up, and this is now allowed under competition law. However, it took nine months to get agreement on this issue.

The threat all along has been that a contract would be forced down the neck of pharmacists who did not like it. The other significant development under Shipsey is that, while we are very annoyed at what was done in January, the word "voluntary" has come into play, for which we are glad. We can only surmise that the HSE has been advised by its legal advisers in this regard.

To take up another point raised by Deputies Reilly and O'Sullivan, we find it difficult to sit and listen to the HSE talk about the price of medicines. The HSE sat down with the pharmaceutical industry, which gets €1 billion in payments for medicines, and they agreed a payment system that is yielding a saving of €55 million per year, which is 5% of the bill that is currently going to the pharmaceutical industry. It has been admitted today for the first time that €100 million is being taken from the €300 million being paid to pharmacists, which will reduce our income by one third. I am delighted the spin has today finally been uncovered. It has been spun here that the wholesale margin is being cut. It is not. The HSE cannot negotiate with the wholesalers because of competition law. It tried to do that but, for legal reasons, it could not. From 1 March, any pharmacist who sends a bill for €100 to the HSE will be paid €91.80. In my language, in banking language or in financial language, that is a cut of 8.2%, which tears the profit out of Irish pharmacy.

The HSE does not understand how business operates. I want to make it clear that we are not averse to examining our payment arrangements. We firmly believe that our current payment arrangements can be altered in such a way that can sustain pharmacy services and deliver savings to the HSE. However, the HSE cannot state that because it failed to get agreement with the wholesalers, it will take the money from our pockets. Much play is being made of the interim contract. Essentially, what the HSE is saying is that it will pay us less on a pound of sugar but will pay us more for a packet of cornflakes. There is no net gain. We need to cut to the chase on this issue.

Chairman

Did Ms Hoctor wish to comment on that point?

Ms Liz Hoctor

Apart from offering pharmacists a flat fee, the interim contract also takes away pharmacists' right to negotiation and another fundamental right, our right to representation. Also included in that contract is the clause that allows the HSE with three months notice to change pharmacists' terms and conditions without referral to them. How can I or any pharmacist ask a bank manager for a loan to help me run my business if at a moment's notice my principal customer can turn around and change my terms and conditions without input from me? That is unsustainable, unworkable and unfair. All we are asking for is fair play, right to representation, due process and fair procedure. As both of the Deputies stated, this is about the method of the approach. The bullying and intimidating approach that pharmacists have had to suffer from the HSE is unfair.

Chairman

Before I bring in Dr. O'Hanlon, I want to give space to Professor Sabra to answer the issue raised by Deputy O'Sullivan.

Professor Kamal Sabra

On the question asked by Deputy O'Sullivan, the independent body will be appointed by the Minister, on behalf of the Government. It will not review the cost of medicines or the cost of transporting those medicines. Rather, it will review the value of professional pharmaceutical services.

On the wholesale issue, there was the suggestion that pharmacists are being asked to do the work of the HSE. A private or GMS patient who brings a prescription to a community pharmacy does not pay the costs of the medicine and the costs to the wholesaler separately. It is a reimbursement system whereby we reimburse pharmacists for three components: the cost of the drug, the cost of transporting the drug and the dispensing fees. It is not the case that the customer pays for his or her prescription and we then pay the manufacturer, community pharmacist and wholesaler separately.

Deputy Jan O’Sullivan

Professor Sabra has just confirmed my view that the proposal is totally disingenuous.

Chairman

I ask members to bear in mind that other members with an equal authority and insight on this issue also wish to make a contribution.

Deputy Kathleen Lynch

That must be rebutted.

Chairman

I cannot allow members to rebut every point made by delegates. They will have an opportunity to do so later. To be fair, I must allow all members to speak.

Deputy Rory O’Hanlon

I attended a meeting last night of local pharmacists in the Cavan-Monaghan area and they asked me to present two questions to the delegates. First, will the HSE propose the implementation of the scheme on 1 March? Second, why does the HSE claim that wholesale prices have been reduced when it is the price to pharmacists that is being reduced?

We are all disappointed that there has been no progress since our last meeting in November. We all hoped at that stage that the issue would be resolved by now. The delegates from the IPU and the HSE have outlined their respective case well, but there are several discrepancies. The most important consideration is that patients should not suffer. I appeal to both sides to ensure this is the case. I remind the delegates from the IPU that nobody wants to see pharmacists working at a loss. The HSE delegates make the point about value for money and I remind them that nobody presses the executive harder than this committee to find better value for the money spent and to seek greater efficiency in all areas. It is important that we do not lose sight of that.

There is clearly good will on both sides to find a solution to the problem. That is encouraging. Why has no progress been made since the breakdown in December? I still cannot work out why there is such a discrepancy between the HSE and the IPU in terms of the effect the proposal will have on income. As I said, nobody wants to see pharmacists working at a loss, but the HSE seems to be of the view that it will not cause the type of difficulty foreseen by the IPU. Even at this late stage, three weeks remain before the deadline of 1 March. Is it not possible for both sides to work together to devise a formula that will allow progress to be made?

Chairman

I thank Deputy O'Hanlon for his contribution and join him in seeking a response from the two delegations to the questions raised. As he observed, little has happened since November. What does the HSE propose to do? Three weeks remain until the deadline and Members are asking us why the dispute has been allowed to continue since November with no progress. The last thing I want is a divided committee. When summing up, I will ask the HSE how progress can be made. Three weeks remain and if the HSE was interested in resolving this issue, surely its representatives could have reported today on the progress made. If the HSE really intends to sort out the issue within the next three weeks, its representatives should be able to return before the joint committee within a few days to outline the differences it might have in this regard.

The HSE pays pharmacists €300 million per annum in fees and mark-up and now proposes to take away €100 million, or one third of the payment. This ties in with a closure of one third of the pharmacies in Ireland, which obviously will have an effect on patients. Nevertheless, we certainly would sit down tomorrow morning with the HSE, if it did not keep changing the goalposts. We would do so if the goalposts were the same as we believed them to be last November, namely, that an independent body would be established and that no cuts would be made before that body heard the evidence from both sides, evaluated the decision and then made a proposal. That would be a fair and reasonable way to proceed and the IPU is available for discussions until 1 March because the patients we meet in our pharmacies are extremely worried.

One of my patients, an elderly gentleman who is more than 70, heard a representative of the HSE speaking on "Drivetime" last Thursday. He told me that although he thought he lived in a democracy, this was dictatorship. The pharmacy in which I work is the only pharmacy located in a small village. Were this pharmacy to close, he would be obliged to take a taxi to Mullingar, as he did last Saturday when he visited his local councillor. He asked his councillor to make representations on his behalf that pharmacies should be given a chance to negotiate and go through a fair process. This is what we are being told by the people and this is what we are here to tell members today. We ask to be allowed to resolve this issue.

Chairman

I thank Ms Hoctor. We will try to return to the central issue. I will facilitate Deputy Lynch shortly as I am trying to move this on.

Deputy Rory O’Hanlon

Members should hear a response from the HSE.

Chairman

I am trying to get to it. Members have heard a response from the IPU. I seek a response to the questions posed by Deputy O'Hanlon, particularly those pertaining to the three-week window of opportunity, which were backed up by all members present, as well as to the remarks made by Ms Hoctor.

Mr. Seán Hurley

Some progress has been made since the last meeting because we responded to the comments then made by members, the IPU and other pharmacists. We decided to pay a new and enhanced flat fee as part of the interim voluntary contract that is being introduced. As Professor Sabra noted earlier, the new flat fee will be almost double what pharmacists receive at present. The current rate of €3.26 per item will be almost doubled. Based on our analysis of what we expect the final figure to be, we reckon that 68% of all pharmacists will gain as a result of the introduction of the new flat fee. Moreover, of that 68% of pharmacists, 45% will gain an additional €10,000 per year in their dispensing income. There are significant advantages for GMS-dependent pharmacies in what we are doing. That is one of the key areas in which progress has been made. We held a meeting in early January because we wanted to move as quickly as possible to discuss the substantive contract with the IPU so that it could be referred to the new independent body when it is established by the Government. We want to make a substantive contract available to all pharmacies as quickly as possible.

As regards what can happen over the next three weeks, the same question was put to our CEO, Professor Drumm, prior to last week's meeting of the Committee of Public Accounts. He told the committee that unless the Dáil decides to Vote an extra €100 million which the HSE can send to pharmacists, nothing can be done.

It is incumbent on both sides to find some way forward. There has to be a solution. I am not asking what the final decision would be and I understand the position of the HSE, but there are two sides to this dispute. I have seen many disputes in the years I have served in this House. They have all had to be settled. Given that three weeks remain, a solution could well be found. The IPU is not opposed to making savings so perhaps both sides might sit down together to decide where such savings can be made.

Chairman

Spokespersons for the parties have contributed. I now invite committee members to ask questions.

Deputy Paul Connaughton

I want answers to a few straight questions. Regardless of the outcome of this process, as a rural representative I do not want to see pharmacists being wiped off the face of rural Ireland. That is the cornerstone of the submissions made by the hundreds of people who contacted me on the issue and the substance of the advice given by my local pharmacist, who has no reason to tell me anything but the absolute truth.

When I hear that the GMS is being subsidised in the case of smaller operators, it appears to me this is a payment to the GMS customers who comprise 58% of pharmacists' business. I would like to know how that scheme works and its impact on an already small turnover. I understand the subsidy is increasing from €3.26 to €5. Some of those chemists tell me that even if it was €8 or €9 they would not necessarily be in a better financial position than they are now.

My final point concerns the Shipsey process. No organisation in the world should know more about human resources than the HSE because it is embroiled in a row every day, somewhere in the country. It should have learned that it is not a good idea to step on the toes of so many people who have been giving a professional service around the country in an area which is of great importance to everybody, including the young and, especially, the elderly.

I cannot understand one aspect of the statement of the Shipsey team, which reported that each side disagreed with each other. What did the HSE think was happening? Is that not the reason there was a dispute in the first place? As we have seen in the past couple of months in the dispute involving consultants, which took years to solve, a real arbitrator will get into action in such circumstances. The midnight oil has to be burned for a matter which is of importance to thousands of people so why has the HSE not gone down that road since we had the last meeting? Instead, the two sides said they were miles apart and the whole thing evaporated. That is not the way real arbitration happens — it never was and never will be. The HSE talks about a new contract, with the word "voluntary" added, but that is designed to provoke a split between pharmacists who are members of the union and others who are independent.

Deputy Beverley Flynn

Hear, hear.

Deputy Paul Connaughton

I genuinely believe that is the wrong road to be on. I have been around this system for a long time and I have never seen anything good come of that type of approach. Like all my colleagues, I want to see cheaper drugs — it is the least my constituents expect. However, there is a right way and a wrong way of going about it and the HSE is on the wrong track. By setting up the so-called independent body it is carrying out surgery on pharmacists——

Senator Geraldine Feeney

——before they get the anaesthetic.

Deputy Paul Connaughton

Yes. This is a huge issue and I do not see why, between now and 1 March, there cannot be an interim solution that can be worked on in the months afterwards.

Chairman

Taking into account the fact that the front bench have outlined the situation, I ask members to confine themselves to asking questions. I will revert to the group system.

Deputy Margaret Conlon

I agree with colleagues in stressing that three weeks are left. If there was an equal level of goodwill on both sides a lot could be achieved in that time. The pharmacists, in the form of the IPU, have said they are willing, ready and able to sit down and negotiate at the appointed time but I do not get the same sense from the HSE. Last week I questioned the logic of the HSE and its lack of joined-up thinking and today's meeting has not restored my faith. If there was goodwill on both sides this could be solved but one cannot say, as the HSE did in November, that it will postpone implementation of changes to allow time for talks and then set preconditions. It has to sit down in a meaningful way. I am no Bill Shipsey but I can see how it can be solved because there is some room for manoeuvre. There are other areas, as the pharmacists outlined, where savings and cuts can be made. Let us explore those other areas but please do not leave us in a situation where rural pharmacies throughout the country are closed and patients, once again, suffer the consequences when the axe is wielded.

The HSE mentioned the Indecon report, which was prepared by its own consultants. That report recommended a gradual change and stressed the need for the IPU to be part of the process. It warned against maximum reductions to pharmacists. Why does the HSE only choose to accept selectively what it suits them to accept from the report? If a report is commissioned it must be accepted, warts and all. It may not always make palatable reading but the findings must be accepted.

I would also like to know if the HSE has considered the benefits of generic substitution of medicines, where savings could be made. In my constituency of Cavan-Monaghan there is significant dependency on the GMS. If members of the IPU withdraw from the GMS on 1 March — which I hope does not happen — what contingency plans are in place so patients will not suffer because they cannot get their medicines?

I have anecdotal evidence of a HSE official stating on a radio programme that another scheme would be put in place to help struggling pharmacies in remote rural areas. Is there any truth in this and what kind of scheme is envisaged? The figure of 68% of pharmacies making gains was mentioned but what about the other 32%?

I appeal to both sides to resolve the matter whatever it takes. We have resolved bigger conflicts in this country, such as what happened in the North. I am not comparing like with like but there needs to be goodwill on both sides to resolve this impasse.

Senator Geraldine Feeney

I welcome the representatives of both bodies here today. It has already been said that there is no doubt about the public esteem, respect and general goodwill for community pharmacists. I have said this time and again. As Deputy O'Sullivan indicated, one only has to look at the number of Members here to support the pharmacists on this issue.

I recall a time a couple of months ago when I stood up in the Seanad and referred to the pharmacists, particularly the IPU, as bully boys in reference to the stance they had taken withdrawing their services for methadone patients. Today, I will not call the IPU bully boys and there is a question as to who is doing the bullying in this matter.

Like colleagues on my side of the House, I ask the HSE to find it in itself to sit down and negotiate. It should not dictate but try to negotiate. In my time I have never known a bunch of people like pharmacists, either inside or outside the IPU, to come out so publicly on any particular issue. That is the reason they are being supported by so many Members of the Oireachtas today.

When Mr. Hurley states the HSE is only implementing national policy, why does it have to be in this way? We were here in October and again in November. The IPU wrote to the HSE on 12 December, proposing to enter talks without preconditions or predetermination. The body suggested a meeting anywhere before Christmas or immediately after it.

At the same time this letter was sent, the HSE wrote to me as a Senator, telling me it was about to enter into negotiations with the IPU. It also wrote to some IPU representatives indicating the same thing. The same day that letter was written, the HSE wrote to the IPU stating it did not feel there was any point in meeting with representatives to discuss a new contract, as it would deal with pharmacists individually and directly.

As my colleague has noted, it would appear there is not much goodwill on the side of the HSE. This must change. How is the HSE implementing national policy and who said it must be done this way? Why did discussions not take place on other ways of saving, such as the use of generic drugs, or some other forms of saving? The IPU has been talking about this for a long time.

I would have always thought contracts were a two-way process but in this case it appears to be a one-way process in terms of what the HSE is imposing on the IPU. It would appear also that when the wholesalers were not prepared to talk to the HSE that the HSE was not innovative and did not bother to put any thought into what could be done but went ahead, with no emotion but a sharp knife, and said this is how it would be done, take it or leave it.

We have heard Mr. Hurley talk about the IPU using threatening approaches to vulnerable patients. I did not like that and would like to know the basis of it. In page 4 of his presentation Mr. Hurley referred to the interim contract and said there is nothing binding the IPU into signing up to the new contract. I am glad to hear that. I did not think the IPU started well but it improved as it moved along. I mean that as a compliment. I am not normally hard on the HSE, I try to see good in everything, but today I am a little cross with it. I am glad to note that the IPU is not bound by the new contract, that it can stay with its old contract until something better has been arranged. Perhaps I can hear its views on that issue. Will it provide a breakdown of pharmacists throughout the country and indicate what percentage of community pharmacists or hospital pharmacists it represents?

It appears that the wholesalers' discounts scheme needs reform and the large mark-up on medicines is also in need of reform. Both are subsidising the GMS as we know it, which is the majority of prescriptions. There should be complete, not piecemeal reform which in itself would only serve at this stage to remove the income of individual pharmacists.

I was very taken by the presentation made by Ms Liz Hoctor but that did not surprise me as she comes from a good town and is a townswoman of my own. She outlined very well how it will affect one if one approaches the bank and makes proposals for expanding one's business, taking on extra staff or whatever. There has to be room for manoeuvre and both sides have to come together and talk. Before our meeting finishes, let us keep a watching brief on what is going to happen between the two bodies.

Chairman

I invite a response from the HSE and the IPU.

Professor Kamal Sabra

With regard to the generics of the institution, Dr. O'Reilly would know that the law states that whatever the doctor prescribes the pharmacists have to dispense, so it is not within our power to change it.

Senator Geraldine Feeney

Can we change that?

Professor Kamal Sabra

The Government will have to change it. We only implement policies, we do not make policies. The law states that generic substitution is not allowed, although in hospitals we do have it. I am a pharmacist. In hospitals pharmacists cannot make changes because they operate under the auspices of the board of the hospitals. Dr. O'Reilly will correct me if I am wrong. If he prescribed a specific drug, the pharmacists have to dispense that drug. To remedy this pending a change to the legislation we have reduced the cost of the branded product by 55% and now the generic product comes in at least 50% below what it used to be. We addressed it in terms of what we could do within the restrictions we face. We do not make policy, we only implement it.

With regard to addressing the three parts of the issue together, the Government's policy on this area was announced in 2005. We were told that we need to address the cost of medicine for patients and taxpayers, as they have been paying the highest price for it not only in Europe but in the world. There are three aspects to this issue, two of which we have addressed. It seems we are damned if we do and we are damned if we do not; when we appeared before the committee on the last occasion, we were specifically told to address the rural pharmacy issue. We were asked to suspend the implementation of this measure and that we needed to address the rural pharmacy issue because those pharmacists depend on GMS fees. We have done exactly what the committee requested. We will end up paying double the existing rate for GMS dependent pharmacy voluntarily. The other 35% that were mentioned mostly provide private prescriptions and front-of-shop service and they will opt to continue to provide the more profitable part of their business.

Our figures, as Mr. Hurley indicated, are clear in this regard. We have facts and figures. We did not pull them out of the air. We have the detail of exactly what every pharmacist will earn in this respect. The rural pharmacies will end up making more money. Senator Ross will know that pharmacies command the highest price in the business sector. Pharmacies who command those prices do not lose money. I was a pharmacist and am still one.

The other issue is that we are open to examining all cost savings that can be made. Cost savings do not stop within the area of generic prescriptions. Pharmacies have much to offer in other areas, but pharmacists are tied by legislation. If pharmacists want to charge for checking people's blood pressure, a process for which doctors charge, will we end up paying for the two processes at the same time. This area needs to be addressed. We need to move quickly to put in place a substantive new contract that will address all these issues, to ensure that services will be independently priced and that this area will be sorted once and for all. However, in the meantime there is the issue of patients who pay for their medication, the HSE has a drug budget within which it must operate and we must move on from that.

As Mr. Hurley said, our drug budget has been allocated. We have two choices. While we are not here to subsidise the wholesalers and multinationals, either we do that or certain patients will not get the medication they require. Ireland is the most liberal country in the world when patients need drugs. Everybody here would know that. There are medical people here who would confirm it. If there is a clinical need for patients in Ireland to be given medication such as Herceptin and other drugs, they are given it, but that is not the case for patients in the rest of the world. We cannot maintain that provision if we do not achieve the savings from the wholesale sector that we are supposed to achieve.

Chairman

Fine.

Mr. Séamus Feely

I have just one final point.

Chairman

That point is clear. I want to bring in people who raised the question and I also want to bring in some of the people who are next in line. We will then come back to the outstanding issues. In this group I have Deputies Lynch and Flynn and Senator Frances Fitzgerald.

Deputy Kathleen Lynch

I hope I will not repeat anything that has been said, even though that will be difficult. The issue has been well covered. At this stage, we are beginning to get more and more information, which clearly was not being given out freely a while ago. It shows the benefit of an interaction like this. Is Mr. Hurley prepared to go back into negotiations with the IPU to resolve this issue before 1 March and to withdraw the threat he has issued concerning that date? Is he prepared to withdraw that? Far bigger issues than this have been resolved. What everyone needs to know is whether the HSE is prepared to enter negotiations in whatever format they will take, whether involving Kieran Mulvey, Bill Shipsey or somebody else.

To remove €100 million from the budget and then tell pharmacies to provide the service for less than one third of the original budget is an appalling way to do business. Is the HSE prepared to enter into negotiations with the IPU and withdraw the 1 March threat, because that is really what this meeting is about? It is not about the flimflam, the jargon, the percentage of retailers and wholesalers, the dispensing fees, etc. This meeting is about whether the HSE will enter into negotiations with the IPU. We got the answer from the IPU very early in this meeting. We need to know whether the HSE will withdraw the 1 March threat and enter into negotiations.

Deputy Beverley Flynn

I thank the groups for the two presentations. I came to this debate with a completely open mind. I do not have an interest in a pharmacy but I am a consumer and, like most consumers, I would like to see a reduction in the price of drugs. That makes me typical of most citizens.

I refer to the HSE's presentation in regard to the contract. Does this threat of 1 March still exist given that the interim contract is entirely voluntary? Today was the first time I heard this word. If the pharmacists reject it, they will continue to be paid on their existing contract.

Is the IPU happy with this situation or does it believe it is a divide and conquer mechanism whereby some pharmacists — the larger retail groups and the chains — may decide to avail of this measure and thus lessen its negotiating ability? I would like the HSE to make it crystal clear that pharmacists will continue to be remunerated on the basis of the current contract if they do not opt for the interim contract.

Mr. Seán Hurley began by saying that "wholesale price concerns us today". If that is the case, why are the pharmacists here? He said full-line wholesalers refused to negotiate a new mark-up for community wholesale supply. It is clear the HSE tried to negotiate with them. It is the largest purchaser of drugs in this country. I gather 60% of all drugs are purchased by the HSE through the schemes. It was unable to negotiate with the wholesalers yet it expects the IPU and the pharmacists, through a large number of individual contracts, with various discounts and with a lot less buying power, to bring this about through the back door.

The HSE has made a number of false claims in regard to the commitment by the wholesalers. Mr. Hurley said that it had received explicit assurances from wholesalers that the net monthly cost to pharmacies for reimbursable products will not be greater than the amount reimbursed by the HSE. I have attended public meetings and the wholesalers have said the exact opposite. The HSE has not provided any evidence of letters from wholesalers. If it has done so, it has not included it in its presentation. I am in receipt of two letters from wholesalers stating precisely the opposite, namely, that they will not reduce wholesale prices.

Professor Kamal Sabra

May I correct that? It is true that they will not reduce the invoice price. The net price being charged to pharmacies will not be more than what the HSE reimburses. That is exactly——

Deputy Beverley Flynn

That is a different thing altogether and I will tell Professor Sabra why. Rural pharmacies directly concern me. Some rural pharmacists are obtaining wholesale discounts of 2% to 3%, which are much lower than those obtained by others. This is acknowledged in the presentation. Our guests claimed that pharmacists will be better off if flat fees are paid. The latter will not prove to be the case unless wholesalers agree to the 8% change. As already stated, some pharmacists only receive wholesale discounts of 2% to 3%. When does the HSE pay pharmacists for drugs? Is it after 90 days?

Under an agreement with wholesalers and depending on their circumstances, pharmacists avail of wholesale discounts by choosing to pay after 60, 30 or zero days. As a result of their buying strength in the market, pharmacists can avail of better discounts. However, the HSE is trying to buy into a situation where it will get the benefit of this. The latter is despite the fact that many pharmacists operate on overdraft facilities provided by their banks which allow them to do as I have outlined in the first instance. It is clear that many younger pharmacists, because of their financial position, cannot pay after zero days and are obliged to avail of 90 days' credit.

The HSE made great play of the fact that it is implementing Government policy and stated that it has asked for cuts of €100 million. I accept that the HSE is not responsible for the making of policy. However, it must take responsibility for how it implements that policy. The task of implementing policy has been delegated to it. Government and politicians may well take the hit in the public domain for the manner in which the HSE implements policy. I am not happy about that.

I studied industrial relations 20 years ago. I have never come across circumstances where one of the two parties involved in negotiations, through an independent intermediary, put a proposal to the other and where the process came to an end as a result of that proposal being rejected. That is not negotiation, it is unilateral action. The rejection of a proposal should never result in the ending of the negotiating process. I would expect that, as in the case of the consultants, the HSE would put forward many proposals, which would be rejected, and that the IPU would submit counter-proposals, which would also be rejected.

I do not want members to be obliged to negotiate what the handling fee or the mark-up should be. This is a matter for the HSE and the IPU to hammer out between them. We should be kept out of the process.

I am concerned that ordinary people should obtain value for money. In what areas other than that relating to the pharmacists' contract has the HSE sought €100 million in savings? Has it made a proposal to the Department of Health and Children regarding a legislative change in respect of generic drugs? Has it examined the scheme under which €260 million is paid to pharmacists each year in handling fees relating to the distribution of high-tech drugs to cancer patients and others who need them? A pharmacist with whom I am familiar informed me that €15 million could be saved in respect of this scheme. A box of the drugs to which I refer might cost between €5,000 to €10,000. If a patient's consultant increases the strength of the drugs he or she requires, then the high-tech drugs in that box will pass their sell-by date and be put in the bin. No one from the HSE collects drugs which cost between €5,000 to €10,000 and which are not being used.

I was approached by a pharmacist who offered to transport these high-tech drugs to the HSE office in his town because he did not want them to go out of date. He stated that they were extremely valuable and could be given to someone else. The pharmacist was told not to bring them to the HSE office. Surely the HSE is in a position to employ people to manage the way high-tech drugs, particularly those of an expensive nature, are handled. It would be a major step forward if €15 million could be saved by employing two people to make telephone calls and drive around in a van in order to collect unused high-tech drugs.

I am angry that we have been informed that the only way to obtain the €100 million in savings is by running roughshod over pharmacists. I represent a county in which a wholesale distributor is based and in which there are 100 jobs in the wholesale sector. Many rural pharmacies will go out of business because they will not be better off as a result of the introduction of the flat fee, particularly as they cannot obtain commitments from wholesalers. All I ask on behalf of my constituents and the pharmacies I represent is that a serious effort be made to stop wasting our time and to sit down and genuinely get involved in negotiations that will bring about a result. On 1 March I do not want GMS patients in my constituency approaching me to say their prescription has not been filled by their local pharmacist. That is causing unnecessary upset which can be avoided if two reasonable parties get together to resolve the issue.

Senator Frances Fitzgerald

We are approaching the deadline of 1 March. When Mr. Hurley was asked whether the deadline could be taken away, he said it could not because of the budgetary implications amounting to €100 million, which is the primary problem. I have many questions about why this amount was agreed in advance of negotiations and a deal, which may not be appropriate for this meeting. Has the HSE held discussions with the Minister or the Department of Health and Children to remove the deadline?

Let me clarify the point I was making. We seriously need to recognise that the three main wholesalers account for 95% of total business in Ireland. One of them, Uniphar, is totally owned by community pharmacists. Another, Cahill May Roberts, is part of Celesio which owns the largest chain of community pharmacies in Ireland. There are 71 shops in the chain in question. The third wholesaler, United Drug, which has a warehouse in Deputy Flynn's constituency supports community pharmacy to the tune of approximately €300 million in stock and refurbishment loans, etc. We do not know who pays what to whom. We do not know if a wholesaler takes money from the right-hand side and gives it to the left-hand side. There is massive vertical integration. We need to consider the audience for which wholesalers give their figures. The wholesaler in Deputy Flynn's constituency will be safe, incidentally. It stated it needed a wholesale margin of 7% to maintain its profitability. Its mid-year report which was published yesterday shows how happy it is with the profit it is making in Ireland. It will not close because it will have a wholesale margin of 8% in one year and 7% in the following year. This process has taken two and a half years — it did not start yesterday. When we started to talk to the union in October 2006, 13 months ago, there was no movement whatsoever. It wanted to leave everything as it was. It did not want anything to be changed. That is the reality.

The Deputy asked whether we were doing anything else to make savings. We said we needed to consider the cost of a drug to the public, patients and taxpayers. In that context, we need to bear in mind the cost of manufacturing the drug, the cost of wholesaling it and the cost of dispensing it. We are addressing each of these three aspects. It is obvious that there will be negotiations with the IMO and medical professionals such as dentists, etc. It was rightly pointed out that an independent body would determine the fees to be paid with regard to the high-tech issue. That is why we want to make progress on the substantive contract that will address this issue. We are to start the process almost immediately. There will be public consultation and pharmacists will have a lot to offer. However, we cannot proceed until we have the long-term contract, about which we are very anxious. At the last meeting with the union we agreed to leave our differences aside and proceed as quickly as possible. Ultimately, the contract is the one that everybody, including ourselves, patients, taxpayers and pharmacists, would want. There is no reason this could not be considered. The HSE will start the public consultation immediately.

Deputy Beverley Flynn

From 1 March, if the new interim contract proposed is not accepted, will the current contractual arrangements apply for pharmacists?

Deputy Paul Connaughton

Will they?

Deputy Mary O’Rourke

As they have.

Deputy Paul Connaughton

Will Professor Sabra clarify the matter?

Professor Kamal Sabra

From 1 March the new wholesale margin will be applied but the fees——

When did Professor Sabra last have contact with the Minister to the effect that the HSE should go ahead on 1 March?

Professor Kamal Sabra

Chairman

We will bring that point into the debate. Mr. O'Dowd is responding.

Mr. Pat O’Dowd

My response is not based on my personal view but on the advice of legal counsel and that of the Attorney General's Office to the effect that under the Competition Act 2002 community pharmacists are individual undertakings. Therefore any approach of a collective bargaining nature on the determination of fees is precluded and prohibited under the law.

We have received no indication from pharmacists that they intend engaging in disruption of services or terminating their contracts. If there is disruption of services that will raise professional and ethical issues about which we must deal with the pharmacists involved and their professional regulatory body. We hope it will not come to that. The contract places an obligation on contractors to give three months' notice of an intention to terminate. Within that timeframe the HSE will be endeavouring to put robust contingency arrangements in place. The committee may have to judge us on form in that regard. The last time we had to invoke contingency arrangements was a recent situation when some community pharmacists, unilaterally and with minimum notice, withdrew services from methadone patients, who are a very vulnerable sector of society. The HSE was obliged to put contingency arrangements in place, which by and large worked, in a very difficult situation, and patients continued to receive their services. The HSE is mindful of its obligations and will do what is necessary to ensure continuity of services. However, at this time we do not envisage service disruption or termination of contracts.

Deputy Dan Neville

Most of my questions have been asked at this stage, and I am not going to repeat them. The HSE obviously has done a good deal of research as regards payment to pharmacies under its new proposed contract. It says 32% of pharmacies will get less. What is the profile of such pharmacies? Our concern is that there will be certain demographic aspects to this. What pharmacies will get less, because these are the outlets that will be closing their doors, as has been impressed on this committee? As regards the interim contract being voluntary, could the IPU outline what the implications are for pharmacies that do not take up the offer and remain with their present contracts and professional payment structures? It is not quite clear what the HSE is saying in this regard. Although some people are quite clear as regards what is going to happen, I am not sure of the implications. I know what the facts are, but what are the implications for everybody?

I thank Professor Sabra for making it clear that it was the Minister who insisted the new wholesale margin must be implemented.

Deputy Mary O’Rourke

He did, after he presented it to her. He did not come up with the idea.

Chairman

I hope we are not going to turn this into a political debate. We shall move on.

Deputy Bernard Allen

Chairman

When we sum up this meeting and discuss the motions, the amendment and all the proposals, it will be up to us to get our heads together to see if we can sort this out.

Deputy Bobby Aylward

We started out saying that this would not get political, but it is turning out that way now and I do not think it should be political.

(Interruptions).

Senator Geraldine Feeney

There is one particular party at it.

Chairman

Members, please stop interrupting.

Deputy Bobby Aylward

We came here as a committee to try to find solutions among the two bodies concerned, and that is what it is all about. We would want the wisdom of Solomon to interpret some of the things that were said and to find out who is right and who is wrong. I do not think we are getting straight answers and both sides are putting spin on it.

I prepared some questions in carrying out research for this meeting and I will ask them as this is the forum in which to do so. An internal HSE study of June 2007 found that the annual increases in the number of people using the schemes, rather than rising costs of medicine, were responsible for the overrun. In a 2005 report, the Comptroller and Auditor General found €23 million of medicines were purchased but not dispensed between 2000 and 2003. The management of such demand-led schemes has therefore caused concerns —€23 million is a great deal of money.

Does the HSE have effective mechanisms to monitor the nature of drugs and medicines prescribed to patients under the GMS, the drug payments scheme and the long-term illness scheme? Has the HSE undertaken a study of international practice in similar health systems on the promotion and prescribing of generic drugs?

Does the HSE have concrete proposals to promote the prescribing of generic drugs and medicines among GPs in hospitals and to generate public awareness regarding the availability of these drugs? I ask this because in my research on the Internet I found that for the treatment of one illness in the coming year, the UK is hoping to save £25 million by using generic drugs. Overall, in the next year or two, the UK hopes to make a saving of £250 million in this area. It is my understanding that the USA has a system in place whereby doctors and GPs when supplying prescriptions can legally tick a box which is then taken to pharmacies and chemists, who in certain cases then prescribe generic drugs instead of the ones recommended. Whether legislation is needed, this should be considered in Ireland.

Has the HSE examined the possibility of the over-prescribing of certain medications? This is a problem. When a patient seeks a prescription, the easy way out for GPs is to over-prescribe and send them away without thinking of the consequences, which can include over-dependence on these drugs. The HSE claims that the introduction of a restructured reimbursement scheme will effect savings of €100 million per annum. Surely the HSE can explore other avenues where economies can be achieved in the GMS, the drugs payment scheme and the long-term illness scheme, which represent approximately 90% of patients. The cost of proprietary drugs is markedly higher than the generic equivalent. The HSE should consider the reintroduction of concrete measures to promote a greater use of generic substitutes which are significantly cheaper than branded medicines and just as effective. Will the HSE explain its initial logic in applying a variation in the dispensary fees paid to pharmacists for items dispensed between the GMS and the drugs payment scheme?

We want co-operation, not conflict. I do not want the GMS scheme to be affected. I do not want the vulnerable or the marginalised used as pawns. I ask both sides to sit down together to try to come to a conclusion.

Deputy Charlie O’Connor

My colleagues from different constituencies have articulated in a very effective way the concerns of rural pharmacies. The Chairman will know from my accent that I cannot claim to be from a rural community.

A Member

Is the Deputy from Tallaght?

Deputy Charlie O’Connor

Yes, I am. I was not born in Tallaght but I am from there. It is the third largest population centre in the country and has different challenges, although I do not under estimate what was said about rural communities, on which I offer my solidarity. I am more concerned about the community pharmacists in my community, including those in disadvantaged areas. I will not be unfair by naming them all. The HSE and IPU will know I strongly support pharmacists in communities where it is difficult or nearly impossible for them to operate. We should support people providing a service that might not otherwise be offered. I accept what was said in respect of the rural situation but there is another side to consider.

In the course of this meeting, I was obliged to remind myself of what it is we seek to achieve. I was disappointed by the HSE's submission. I do not wish to bash the HSE delegates but I am not afraid to speak up when that body deserves censure. Some of the phraseology in the presentation suggests a lack of input by any person with diplomatic skills. That is regrettable because we hoped that something positive would come out of this meeting. Colleagues have made the point that there has rarely been such an attendance at a committee meeting. There is often not such an attendance in the Dáil Chamber. That indicates the importance of this issue throughout the State.

Delegates are welcome to visit Tallaght, which is no different to anywhere. People there are extremely concerned about the implications of the new scheme. I do not accept the point made by the HSE delegation that pharmacists are stirring up this concern. The latter provide an excellent service. I underwent heart surgery eight years ago, from which I recovered well. I still take tablets every day and my local pharmacist has always been good to me. I do not want to go to my local supermarket, as pleasant as the staff there are, to purchase my prescription. I prefer to go to my local pharmacy where I can receive good service and advice and be properly looked after. We must stand up for that type of service; none of us wants it to break down.

We are all agreed that the HSE and IPU must continue to talk. It is not good enough to say that is not possible. The presence of Deputy Blaney, who is a co-chairman of the British-Irish Interparliamentary Body, reminds me that we on this island have overcome far more difficult problems because people were prepared to talk. I give the Taoiseach credit in this regard, if my colleagues from the Opposition do not object. As Deputy Allen said, there are positives and negatives on both sides. In any negotiation, each party must be prepared to give a little.

Other members have already asked most of the pertinent questions. What is the estimation of both delegations of the effect of the proposed reduction in payments on pharmacies throughout the State? What is the HSE's response to the claim that jobs will be lost? I live in a town where several of the wholesalers that were mentioned tonight are situated.

Chairman

We must move on. Will the Deputy ask his final question?

Deputy Charlie O’Connor

That was my final question. I am concerned about job losses. I am also concerned to safeguard the excellent service provided by my local community pharmacist. This problem is capable of being solved and it must be solved.

Deputy Niall Blaney

We could all learn a lesson from the way the Chairman has handled this meeting. Both delegations have already attended a meeting of the committee, although they did not, on that occasion, present their submissions side by side. I was displeased at that time with the unprofessional manner in which the IPU lobbied politicians. Its methods have since become far more professional.

I am let down by the HSE because it has misled the committee. We were given an undertaking at the last meeting that the executive had secured agreement with wholesalers on price. We are told today, however, that this is not the case. I have been contacted by pharmacists throughout my constituency and further afield in recent days to state they have received letters from their wholesaler to the effect they will not receive any price reductions from 1 March onwards.

I speak from a moderate perspective. Holes have been picked in the HSE's presentation and although I was hard on the IPU at the previous meeting, no one has picked holes in its submission. Although this is one issue among many on which the HSE must enter negotiations, it has started from a very poor footing. It is clear that members from all parties do not agree with the reform the HSE is trying to implement in respect of this contract. I certainly do not agree with it.

My recollection is that before the Christmas recess, the Taoiseach made a statement allowing the extension of the deadline from December until 1 March. The Taoiseach who speaks for the Government stated the extra time had been allowed to facilitate negotiations under Mr. Bill Shipsey. The HSE has made a poor effort to enter negotiations and as a Member representing County Donegal, I feel let down by its efforts to do so.

Had the matter on today's agenda been negotiated professionally, this meeting would not have been held. Although these are strong words, I am obliged to make this point. It is nonsensical that members are trying to perform work that should have been carried out by the HSE with a little give and take. It is sad to have reached this position. I would like to see the HSE show some cop-on and to get down to negotiating like it should. This nitpicking should stop. Both nitpicking and bully-boy tactics have been employed, which is not helpful to anyone. It certainly is not helpful to the further negotiations in which the HSE must engage.

Chairman

We will move to the final part of the agenda and I thank everyone for bearing with us. We are trying to get moving in this regard. We now come to the part in which I promised that members who had expressed an interest in this subject in recent months would be allowed to participate.

Deputy Bobby Aylward

Will members receive answers to their questions?

Chairman

Yes. We will put everything together because shortly we will move to deciding on the tabling of motions or on how to avoid conflicts of opinion, while recognising simultaneously that much time has been lost.

We will return to Deputy Aylward's questions as promised. However, I am conscious that although the delegates were promised a two-hour meeting, its duration is approaching four hours. Members should bear with me and we will revert to the answers thereafter.

In this slot I will call those members who have attended since 3 p.m. I refer specifically to Deputy Ó Caoláin and Senator Healy Eames, followed by Deputies O'Rourke and Higgins. Senator Ross has left. I will facilitate Deputy Dooley before finishing with Deputies Andrews and Scanlon. Senator McFadden also is included and I apologise for the omission. Although I had her name, unfortunately, I could not read my own handwriting.

Deputy Caoimhghín Ó Caoláin

I join in the welcome extended by joint committee members and other colleagues to both delegations. It has been an interesting spectacle. While it is understandable that many of the questions have been directed at the HSE, it cannot have escaped its representatives' notice that there is near unanimity on the part of the elected Members present that there is a major deficiency in its approach to the talks with the IPU.

I afford the IPU representatives a further opportunity to respond to a point made in Mr. Hurley's presentation. On the voluntary interim contract, he stated "the interim contract specifically addresses the concerns of GMS-dependent pharmacies". What is the IPU's response to this claim? It is contained in the text of the presentation and has some currency. It will see the light of day in other fora and I would like to know the IPU's response

Mr. Hurley stated: "Contrary to IPU claims, both sole traders and chains have expressed to us interest in taking up the interim contract". Will he be more specific regarding the extent of that interest? The IPU may also give us its opinion on the accuracy of Mr. Hurley's statement based on its consultations with members. The chains do not surprise us but I am particularly interested in learning the extent of interest among small traders.

It may be of some comfort that Professor Sabra and others have clearly indicated the HSE's role in implementing Government policy but we were also told that the executive had an ongoing engagement with the Minister and her support team. I accept a missive was received from her on 1 February but I got the impression that the relationship was hands-on. If political issues arise, we should address them collectively because implementation is critical.

The question has been put on a number of occasions of whether the HSE will postpone implementation of its so-called interim contract to allow time for fully participatory talks. That is the question we want answered because 1 March is fast approaching. At its last meeting the committee made a unanimous decision to seek discussions with the Minister before today. Unfortunately, that opportunity was not realisable. That we are all concerned about what will happen on 1 March is patently obvious from the length of time members are willing to devote to this meeting. We are reflecting the concerns of our respective communities; therefore, we would appreciate a proper and positive answer to the question of whether the HSE will postpone implementation of the contract.

Given that the HSE acts as agent for Government policies and in the context of the network of pharmacies throughout the country, would the IPU like to indicate what enhanced role it could play in the delivery of services? I could outline several such services off the top of my head but I have no doubt that the IPU could give a more complete reply. Surely, many areas are worthy of engagement between the two representative bodies to ensure improved delivery of community focused health care services, in which the IPU could have a role to play.

Chairman

The IPU will have a chance to respond to questions when we are wrapping up.

Senator Fidelma Healy Eames

I do not like what I see or have heard. As the meeting has gone on for hours, information has come forth and things are beginning to unravel and become clearer. We have a mess on our hands and a solution must be found. As so many Deputies and Senators have said, it can be found but the will must be there on the part of the HSE as well as the IPU.

I held a meeting with pharmacists in Galway last night. This is what is coming down the tracks if we go with the 1 March contract. There will be unemployment, as every pharmacist in the room put up their hands to indicate they would either lay off one full-time or two part-time staff. We heard a figure of 2,500 people nationally mentioned earlier. I am speaking about what I heard and what I believe. I would be quite rigorous in my questioning.

We are also talking about the sickest patients being the worst hit, which is very serious. Some of the medicines they require may not be held by the pharmacists. What about patients being discharged from hospital at 5 p.m. or 6 p.m.? They will come home with scripts and the local pharmacy may no longer be there. How will that be handled by the HSE?

Why is all this happening? We are all avoiding the issue: this is Government policy and the HSE is out there to deliver it. We learned today that the Minister knew about this contract and has supported it all along.

Chairman

On a point of information, all we have learned is that cuts have been looked at within the HSE budget and not specific to this area.

Senator Fidelma Healy Eames

Chairman, please let me finish.

Chairman

That is my interpretation of it.

Senator Fidelma Healy Eames

The Chairman has been very kind to let me in and I ask him to let me finish. This is what I have learned today.

I have a number of questions. Did the Minister for Health and Children ask the HSE to make the savings of €100 million using this method with the pharmacies? How does the HSE propose to supply medicines to patients in towns and villages where the only pharmacist is now likely to be closed, such as Carraroe in Connemara, Corofin in Clare and Kildysart? I know these places are under this threat.

Why is the HSE blaming pharmacists for the price of medicines when the HSE agreed the price with manufacturers? It was stated at the outset that this issue is about reducing the cost of drugs for patients. Has there been an assessment or have ways been considered, using the Oireachtas, to bring in approved generic substitutes?

Would it not be more helpful in this meeting if we considered constructive ways to work together and reach those savings? I look forward to the answers to these questions.

Deputy Mary O’Rourke

I thank the Chairman for his excellent work in chairing today's session. I also thank those who came forward. My first statement is political because I want an answer. I am afraid that with a conglomerate answer I will not get a direct reply. Mr. Hurley stated the HSE was operating to a Dáil Éireann mandate but Dáil Éireann did not give the HSE a mandate to take €100 million from the pharmacists. At least if it did so, I did not hear of it. The witnesses should not shake their heads as we are entitled to respect, which we afford to the witnesses.

Professor Kamal Sabra

I am just saying——

Deputy Mary O’Rourke

We are all spending hours here but we are all entitled to make known our point of view. The rest of the statement became blatantly political as it was indicated the HSE heard from the Secretary General in the Department of Health and Children. I was Minister for Health for a short but enjoyable period. I know the labyrinthine workings of the Department.

The Minister for Health and Children, Deputy Harney, did not approach the HSE to advise it that she wanted it to take €100 million from pharmacists. As I understand it, when the HSE was allocated its budget, it was told to dream up ideas as to where it could cut costs. It came up with what it thought was a simple way to do it, namely, to target the rich pharmacist sector which could take a big hit. It imposed such a cut and engaged in some subtle press inoculation prior to doing so. That was the intention, lest it go from this meeting that the Minister told the HSE one day that she wanted a sum of €100 million and that it was to take it from pharmacists. She did not say that; rather the HSE approached her and told her it had a great idea, namely, that it could very easily take €100 million from pharmacists, QED. It would be a simple measure, easily done and there would be no uprising or revolt, but there was. I know that is the way it happened and I am not asking for confirmation, although I note Mr. Hurley is nodding. I like to see a nod; it is good to see. I know well that is the way it happened. However, the impression was given that suddenly the Minister had a bright idea.

My second point is that I did not hear one person here today — man, woman, HSE official, or pharmaceutical union representative, although he or she might be modest about it — mention the huge interaction between customers and their local chemist, as they are called — we do not call them pharmacists, a word which is even hard to spell. No one puts a price on that service. A customer can go to his or her chemist to seek advice, which often is not easily obtained in GP practices with their crowded waiting rooms. No one has put a value on or mentioned that service.

We must sort out this issue and will have to see what further interventions may be made. I do not understand how a group of professionals have been manipulated into a situation where they have no employee rights, no right to stand up for themselves or no right of representation. The attitude is that they must take what is dished out and what will be their lot on 1 March and if they do not, this measure will be imposed on them. The Berlin Wall was torn down and a policy of peresztroika introduced, whereby everyone would work together in a mood of consensus. However, no such mood is evident here; rather the mood is one that we will get our way and our rights and by gum this group will cow down. It reminds me of the lock out strike of 1913 about which we read in the history books and people ask: is that what happened? The same thing is happening before our eyes and we cannot allow it to continue.

Irrespective of whatever other bright ideas the HSE approached the Minister and the Department of Health and Children with, this one will have to put on the back burner. It will have to be abrogated until there is decent interaction and a parley between the HSE and pharmacists — notwithstanding the massive work done by the Chairman today — in order that they can reach a position where they can consider each other's ideas.

I am saddened that the service provided by pharmacists has not been mentioned. There is no charge for it and it is unsolicited. The reassurance, confidence giving and the intimacy with which the advice is given by local pharmacists to their customers are being set at naught, as if they did not even matter.

Deputy Michael D. Higgins

I welcome the opportunity to say a few words, and I shall be brief. I am in my new incarnation of substituting for Deputy Kathleen Lynch.

A number of the points have been raised already, but over the past three hours some fundamental areas of agreement have become very clear. Most people who have spoken or made presentations are anxious that both sides should back off from a disastrous situation on 1 March. If that is done, then the obstacles must be removed so that any independent outsider who might help achieve a resolution could be offered a clean sheet on which to develop proposals. Standing in the way of that, however, are a number of obstacles preventing progress from being made, not just on this issue, but on others. It would be disastrous if, by 1 March progress could not be made, while there was total agreement about defending the rights of patients. In the same spirit as the last contributor I believe it is important to bear in mind the social role of the pharmacist in the community. If this social role were to be addressed it might also be conceded that there should be a reduction in the cost of medicines to the consumer, and thereby a reduction in the burden the taxpayer has to carry. The problem arises, however, in the achievement of this position.

The figure of €100 million appeared rather arbitrarily from a group of people who said they did not want to talk to the HSE or negotiate with it on a parity basis, namely, the wholesalers. The other part of the question is as regards those who produce. One might consider the Competition Authority's role in all of this. I am talking about the Act as it is. I sought to clarify and change section 4, but that is history. We are now talking about the Act as it is. In the event, the Competition Authority would have gone after the Pharmaceutical Society of Ireland. In the explicit judgments that we have had, Mr. Justice Fennelly, on the basis of the Supreme Court case involving the Irish League of Credit Unions, for instance, did not rule that because pharmacists are not PAYE workers they cannot be represented. He found there was no basis in law for such an interpretation. There was in that the bullying tactic that was used in the case of Irish Equity on the steps of the court, where that union signed an agreement to the effect that it would not represent certain kinds of workers.

The other part of the argument emerges in the case of the Association of Optometrists Ireland, for example, where the explicit judgment was that there was no prohibition on the right to be represented. So the right to collective representation exists in the judgments of the courts. I shall be very positive, now, in saying that it also exists as regards the European decisions — as well as in relation to the two ILO directives that govern the right to collective representation. How do we go forward from that? It may be done by achieving a back-off that will facilitate us by 1 March. It may be done by agreeing on the need for a reduction in the costs of medicines and thereby the burden on the taxpayer. However, we want to address this issue generally. I suggest the HSE holds discussions with the Minister for Health and Children and her Department as regards removing the pressure on the discovery of the hypothetical figure of €100 million in this way. The HSE should also seek clarification from the office of the Attorney General on the role of the Competition Authority.

I will hear out the people who have been present since 3 p.m.

Deputy Jan O’Sullivan

If some of our members cannot be present tomorrow I presume we can substitute people who are available.

Chairman

Absolutely.

Chairman

We take the Senator's point. We will have to take that hit and work on from there. I call Deputy Timmy Dooley.

Deputy Timmy Dooley

I compliment the Chairman for the excellent way in which he has organised this meeting. I thank the witnesses for attending and for their presentations.

My biggest concern is for the patients — the consumers of the services that have been provided. I too am somewhat concerned at the way in which the HSE put forward its presentation and this notion that the cost of distribution it is paying for at present is approximately 17% but that the agreement would bring it to the real cost of 7%, which includes the cost of 5% and a profit of 2%. As the professor put it, the difference goes in a kickback or a rebate to the pharmacists. As I understand it, that kickback or rebate is a requirement to fund the bottom line of existence of many of the community pharmacists.

What analysis has the HSE undertaken of the kind of figures that have been put forward by the two pharmacists, which are not dissimilar from what I have seen from pharmacists in the county I represent? I have had an opportunity to examine the books of a number of pharmacies in detail — I do not want to reveal the locations because it is sensitive issue. These clearly set out for me that it is not just an issue of cutbacks or a drop in staff numbers but that it will not be possible to maintain the businesses.

While I am not suggesting I am unconcerned about the drop in staff numbers, business is business and sectors change. I do not necessarily jump to the IPU's issue of "God, it is our business. You have got to protect it." Business is hard-nosed and one must get on with it. It is the same as the deregulation of any other facility. My primary concern is for the patients in a dispersed population base in rural areas throughout County Clare and other rural constituencies.

What analysis has the HSE undertaken of the kind of figures that have been put forward today? I would not imagine it is difficult for the HSE to do this as it has all the figures. It may not have the front-of-house sales figures for cosmetics and so on but not much hair spray or boot polish is sold in the front of pharmacies in rural areas and in small villages. While this might happen in the likes of Boots, which have low numbers in terms of sales of drugs and pharmacy products generally, these are really high street stores. I do not want us to have just one or two Boots-type facilities in our large towns and expect people to travel to them.

Is the HSE prepared to accept the closure of rural pharmacies? I have examined the figures not just with pharmacists but with their accountants, who have given me open-book access. I have asked questions and I have had accountants associated with me go through the books to make sure it is not just a question of the way the figures were presented to me. They tell me a number of these pharmacies will close.

It is not so much behind the scenes. It is a press release which furthers the spin and does nothing to get these people back around the table and involved in some kind of process that will ultimately achieve a resolution. Everybody accepts that no matter what the problems are, a resolution has to come about by virtue of people sitting down together. Can Mr. Hurley ask his spin doctors and behind the scenes press staff to be more responsive to us when we put questions to the parliamentary affairs division? It is very difficult to obtain information from it but the staff are prepared to work behind the scenes.

I would like to make a proposal. On the basis of the way the meeting has been handled, will the Chairman use his good offices or the committee to facilitate an informal discussion or meeting with representatives of both sides to encourage them to avail of the appropriate mechanism to resolve this issue?

Chairman

It is one thing hanging the Minister for Health and Children for this but the Deputy will not hang me. We will work something out later.

Deputy Barry Andrews

The Chairman has shown remarkable patience and determination in presiding over this meeting. If, as the HSE states, the budget was a great concern and if it was such an important issue, why did the discussions not commence, as we were informed, last December? I suspect the reason was the consultants were being dealt with and this issue was kicked to touch until 1 March but the HSE has returned to the scrum to force it over the line. As Deputy Aylward stated, we have been given a significant amount of information but the HSE is trying to blur the big picture. I have met almost every pharmacist in Dublin South East and they are extremely open to discussion. They provide a human and humane service and this issue highlights the need for meaningful discussion. The partnership process has served the country well but it seems to me and the people I represent that the HSE is determined to introduce a new regime, under which there will be no process, everything will be forced through and nothing will be discussed or dealt with in a meaningful, conciliatory and open way.

Deputy Eamon Scanlon

I am not a committee member; therefore, I am grateful for the opportunity to contribute. The reason I am present is I represent a rural constituency, Sligo-North Leitrim, which has many small pharmacies, the owners of which are very anxious and concerned. When I grew up in Ballymote, County Sligo, there were 100 children on the street on which I lived. If a child fell or was cut, the first place he or she was taken was the pharmacist. If she could deal with the child, she would because nobody could afford to visit the doctor. If she could not, she would send the child to the doctor and then give him or her the medicine afterwards, whether the child's parents had the money. That woman is owed thousands of euro. She is aged over 80 years and I visited her last week. She still runs her pharmacy, employing six people. Although she cannot work in the shop, she is very concerned. She survived because she worked seven days a week. For example, she is open after mass on Sunday to fill prescriptions. She thought she was over the worst and while no one lives forever, she is genuinely concerned, particularly about her staff, a number of whom have given dedicated, loyal service for more than 20 years.

I was confused about the situation. I understood the Health Service Executive has been trying to reduce the wholesale cost of drugs but because of competition law, it cannot deal with wholesalers directly. That has forced pharmacists into a situation whereby the 8% is to be taken directly from them. That is wrong. We are reducing the cost of medicines from €300 million to €200 million but three into two does not go. There is no doubt that people will lose jobs and shops will close. My home town has three modern chemist shops which, I am sure, cost a lot of money to develop. We should consider changing the competition law to allow a customer which spends €200 million per year on drugs to negotiate with its suppliers.

I understand doctors are not allowed to prescribe generic medicines but they should be allowed to do so. Reference was made to a drug which costs €24 here but €2 in Spain. Something has gone badly wrong if that is the case and the HSE, as the body with responsibility for setting the price of medicine, needs to address that. I appeal to everyone concerned to sort out this matter because we are going nowhere at present.

Deputy Dara Calleary

In his presentation, Mr. Hurley referred to correspondence between United Drug and a major manufacturer. I understand from United Drug that the reference was taken out of context and the correspondence in question had nothing to do with the pharmacies contract. I have asked the company to write to this committee on the matter.

I presume the Health Service Executive, as one of the largest organisations in the country, has significant purchasing power on the back of which it can make deals with various suppliers. Given that it is forcing this model on pharmacists, when we come to setting the HSE budget next September or October can we reduce it by all the discounts it gets as a large purchasing organisation? That seems to be the precedent being set in this instance. Any enterprise has a right to commercial arrangements according to its business model. It is unfair of the HSE to attack the pharmacists as a way of getting at wholesalers and manufacturers.

Mr. Hurley stated: "Discounts from wholesalers to pharmacists are not part of the HSE's payment for professional pharmacy services". Unfortunately, the payment for professional pharmacy services is so low that it makes all the HSE's schemes unviable without the discounts. Therefore, these discounts have everything to do with professional pharmacy services and should be part of the contract.

Last November, I asked the parliamentary affairs division of the HSE which wholesaling company proffered the legal advice that it would not be allowed to interact with the IPU but I still have not received a response. I ask that my question be addressed.

The HSE is obsessed about €100 million, a nice round figure. Can this committee be provided with a cost-benefit analysis of the impact of the closure of pharmacies throughout the country on other aspects of the health system? What will be the effects on general practitioners, for example? Deputy Scanlon spoke about a rural pharmacist who effectively acts as the local GP and a smaller version of an accident and emergency unit. The impact of pharmacy closures on accident and emergency units and GPs must be taken into account in the context of the €100 million figure. The HSE is trying to ram the proposed discount mechanism down the throats of those who work in a sector that is operating well. It is difficult to have confidence in the HSE's ability to reach a share agreement on the fees issue. Part of it is running radio advertisements imploring people to approach their pharmacist, rather than their doctor or other health service professionals for assistance in respect of certain matters. That is no good to pharmacies which this time next year will be closed because another part of the HSE has decided to pull the rug from under them.

The pharmacists I have met who have had the greatest impact on me are those who are younger than I am and who have either just graduated from college or gained a few years experience in their profession. On the back of the existing contract and the strong relationship that developed between the health system and the pharmacy sector over a number of generations, these individuals entered into business loans with banks, either for capital purposes or to purchase premises, and, through no fault of their own, now find themselves in financial difficulties. The attitude of the HSE is that this is tough and that it is not its problem. I respectfully suggest it is its problem, particularly if it wants to guarantee the level of service currently being provided. I would appreciate if our guests could respond to my concerns; if not now, then at the earliest possible date.

Chairman

To be fair, we do not expect responses this evening.

Senator Ivor Callely

The circumstances relating to the dispute between the HSE and the IPU are regrettable. The current state of affairs cannot be allowed to continue and the proposal relating to 1 March cannot be brought into effect. An alternative will have to be found.

I raised this issue at a parliamentary party meeting in November and had a motion passed in respect of it. I raised it again last week and had another motion passed. I have just come from a parliamentary party meeting, at which I again raised it and strong views and a great deal of support for community pharmacists were expressed.

Deputy Scanlon has referred to a community pharmacist who bandages wounds, weighs babies, etc. My in-laws have been involved in the pharmaceutical industry for some time. When my wife arrived home the other day, she was extremely upset. A man who had been travelling along the road on which the business premises where she works is located felt unwell, saw the green cross over the door and went inside to seek assistance. The pharmacist did everything possible to save his life but unfortunately the man died before the ambulance arrived. Every single community pharmacist offers such support. We must acknowledge and respect them for what they do and thank them for it.

I have a deep respect for community pharmacists and hold them in high regard. The vast majority provide a great service for their customers and the wider community. They undertake major risks in stocking a broad range of drugs and their shops are often vandalised and broken into. They are obliged to employ security cameras and put in place CCTV cameras, alarms, etc. Some of them cannot rest because they are on call 24 hours a day.

Pharmacists have done an extremely good job in providing services for drug addicts through the methadone programme. They have facilitated the reintegration of these individuals into their communities by allowing them, with no stigma attached, to enter their premises to obtain medication.

Senator Healy Eames stated we should solve this problem and referred to the introduction of generic substitutes. That is not the answer. I do not envisage a solution being arrived at by merely swapping generic substitutes for certain medicines.

I understand a particular health care association has agreements and arrangements in place on structures and prices. I equally understand it is the Government's policy to continue to encourage multinationals operating in Ireland to engage in research and development, creating a significant number of jobs and other opportunities in the process. We should acknowledge that they play a role in the economy.

I was very interested to hear about the shared services of the HSE, that it has set up its own department to achieve best value. It is appropriate that it should be applied in other areas.

I have the height of respect for everybody working in the health service, as they are very committed individuals. I have stated the following publicly and will do so again: the jury is still out on whether the HSE as a body has been a success. That is not necessarily a reflection on the individuals involved. There is a generally accepted view of the authority. My own views are well known. I realise from speaking to my colleagues that others are equally concerned. Previously we had a body to which there was a democratic input, with locally elected representatives, doctors, pharmacists and dentists all participating. The number of health boards was probably wrong and we needed to streamline it. However, with respect to the delegates present who are very committed, the HSE——

Chairman

We are not moving in that direction or going down that road today. As a member of a Government party, I was party to setting up the HSE. We must be fair.

Senator Ivor Callely

Will Mr. Hurley or Mr. Feely get back to me, either in writing or whatever way is suitable, to outline their own position following the discussion today on the best way to move forward and resolve the issues involved?

Deputy Jan O’Sullivan

Will the committee, rather than an individual member, receive that reply?

Chairman

Absolutely, I will clarify that point in a few minutes. I call the final speaker.

Senator Paddy Burke

I am not a member of the joint committee either but I am delighted to make a contribution. I will be very brief.

This is a bizarre situation and I am disappointed with the Minister for Health and Children and Professor Drumm for allowing it to reach this stage. It is crazy we are in this position.

Like all other public representatives, I attended a meeting in recent weeks. One of the drug wholesalers told us that the sector was owed €240 million by pharmacists who are made out to be wealthy. That works out at an average figure of €70,000 per pharmacy, whether the pharmacist is new to the profession, young or old. It is obvious that the drug wholesalers are owed a large amount of money.

The submission made today indicates that if a sum of €100 million is not found, the HSE's ability to provide new and innovative treatments for patients will be compromised. The drug companies make deliveries twice daily to the 6,000 or 7,000 pharmacists operating in the country. I come from a remote part on the west coast and we have pharmacies in Knock, Louisburg, Achill and range of other locations which will have to close if the proposals made are implemented. Two pharmacists raised the case of a patient who had been discharged from hospital on Christmas Day and had to go to a pharmacist. There were 14 items included in the prescription, of which the pharmacist only had three or four. The pharmacist had to call the wholesaler to get him to make a delivery on Christmas Day. He drove a good number of miles to the pharmacy to make the delivery to the patient who was in need. Another patient was sent from hospital on a Saturday afternoon. Again, the pharmacist only had a certain number of the 12,000 drugs that can be prescribed in stock. On this occasion the pharmacist had no choice but to ring the wholesaler and delivery was made within two hours to the patient who had been discharged from hospital.

Given the savings proposed, how will the HSE provide a better service in rural Ireland for the many pharmacists in remote parts and the most vulnerable in society? From the discussion so far, I gather the HSE estimates that the price of drugs is 8% below the invoice price. How can the HSE explain that? Let us face it, whatever goes on between pharmacists and wholesalers is their business. I do not see why we or anybody else should indulge in any discounts they get. These discounts have been built up by pharmacists over many years. When they were computerised they ordered on-line, and perhaps paid in cash, or obtained 30 or 90 days credit. I understand the 8% discount has been built up over a period. However, my understanding of the HSE's position is that it figures the price of drugs is 8% below the invoice price, which I cannot understand.

Chairman

I thank everybody concerned for remaining here for four hours, as the meeting was originally scheduled to last two hours. I cannot expect the witnesses to answer all the questions but I will invite the IPU and the HSE to do a short wrap-up.

Deputy Bobby Aylward

As a member of the committee I am disappointed that my questions will not be answered.

Chairman

To be fair, many questions have been posed.

Deputy Bobby Aylward

I sat here for four hours too.

Senator Fidelma Healy Eames

On a point of order, while the Chairman has done a marvellous job, our concern is that we have asked questions that require answers. Will we get the answers in writing or at tomorrow morning's meeting? The questions need to be answered.

Chairman

We do not want to leave this room with people arguing with each other. That is not the idea of the meeting at all. I know people have been here since 3 p.m. but I also gave a commitment to the HSE that we would try to stick to the timeframe. We have not done that and I have received no notes from people asking me to rush the meeting. We have been here for four hours. We have agreed to put back the motions and how we will deal with them until the morning. I am quite certain that long before 1 March the responses to issues that have been raised here will come in from the IPU and the HSE. We will have a forum in which to debate them. If I take one response I will have to take every response and I just cannot do that.

Ms Liz Hoctor

The kernel of the issue here today is that the HSE is proposing to take €100 million from community pharmacists' pockets. That is the question all the Deputies and Senators asked about. They also asked whether the interim contract would mean we would still remain on the same terms and conditions. We will not remain on the same terms and conditions. That is very clear. The interim contract is offering a flat fee of €5 and taking away the mark-up. In fact, €5 is not double €3.26 because the latter figure multiplied by two equals €6.52. I wish to clear that item up as well.

Setting aside the flat fee, what that interim contract also does — and it comes back again to the kernel of the issue — is that it takes away the right of representation of pharmacists. It also inserts a clause in the contract which allows the HSE to change pharmacists' terms and conditions, and if pharmacists do not like it then they can just withdraw from the contract. Many Deputies and Senators have realised today what that contract means. They have highlighted that fact and have asked why anybody would accept such a contract. That is the core of the issue.

We did not put a time limit on this meeting because we know what the impact of the HSE's proposals will mean. It was very chilling to sit in a room on 3 October when we met the HSE. We put the same questions that most committee members have put today. We asked the HSE's representatives if they had evaluated what impact this would have either on patients or on community pharmacists. Their blank faces told a story because they had not done so.

I invite the HSE to make its final wrap-up.

Mr. Seán Hurley

This initiative started in 2005 when the Cabinet sub-committee on health asked the Health Service Executive to examine all elements of this subject. The sub-committee received regular reports on what was happening in discussions with the different segments, including the manufacturers and wholesalers. Everyone was fully au fait with what we were doing at all stages. To clarify, the figure of €100 million was not plucked form the air. Based on our figures, we estimated that reducing the wholesale cost to paying the manufacturers’ price plus a further 8%, would save the HSE €100 million.

At the end of last year, the Department of Finance removed the sum from our requirement for this year. Deputy Allen, as Chairman of the Committee of Public Accounts, knows that Professor Brendan Drumm, as Accounting Officer, must live within his budget. He is starting off this year with the €100 million on the basis that the proposal we are implementing is already gone. He made it quite clear that he had no option but to deliver in that regard. It is quite clear, therefore, where and how this issue arose.

Deputies O'Rourke, Flynn and Scanlon, like all of us, acknowledge and appreciate the great contribution community pharmacists make. They were not mentioned today. As far as we are concerned, today is about the cost of the wholesale distribution service. The next phase for us is to have discussions and frame a new substantive contract, which will be put before the independent body. It will comprise the occasion, forum and process for acknowledging the contribution of pharmacists. Although we acknowledge the role of the pharmacists, we did not talk about it because it is a matter for another day.

Let me correct a point Ms Liz Hoctor stated twice today. Her point that the €100 million is being taken from the €300 million is incorrect. We are reducing our costs by €100 million. The fees currently paid to pharmacists for professional services run to approximately €300 million. As I stated in my presentation, those professional fees are not being reduced. The €300 million for professional fees will be paid. The ingredient cost, as it stands, combined with the 15%, runs to between €1.3 billion and €1.5 billion. This is the basket that is being reduced by €100 million, not the €300 million being paid to pharmacists. I need to clarify that.

I have said on several occasions that this afternoon is about the cost of the wholesale distribution service. We want to pay a reasonable, transparent price for the service. One wholesaler, in its submission to us, stated the cost of providing the distribution service to the community pharmacists and the hospitals runs at 5.5%. They have all acknowledged that the real cost to the wholesalers, when they take into account the discounts and so on, is 7% or 8%. We want to achieve value for the Exchequer and taxpayer and for the private patients who must pay the first €90 themselves. The cost should be reduced by 8% for them also. That is the rationale behind what we are doing. I said wholesalers and retailers can come to whatever arrangements they want, which we accept, but the correct approach for us is to pay the true cost of delivering the service and not to use taxpayers' money to subsidise any other arrangements.

Professor Kamal Sabra

On the wholesale issue, I heard it said the HSE misled the meeting. I confirm what we have said. The chairman has confirmed it personally with the managing directors of the companies. We have a statement in writing from the manufacturers also. It is stated clearly——

Deputy Niall Blaney

The wholesaler.

Professor Kamal Sabra

I am sorry, the wholesaler.

Mr. Seán Hurley

The managing director of one of the wholesalers on two occasions categorically assured me that it would abide by the agreement we had with it after we told it the new arrangements. We did not negotiate the new arrangements with it. When we informed it of our decision, it categorically reassured us to the effect that Professor Sabra has outlined. I had two telephone calls with one of the managing directors.

Deputy Niall Blaney

Does Mr. Hurley have that in writing?

Chairman

We cannot look at price——

(Interruptions).

Chairman

What will happen on 1 March?

Chairman

Mr. Seán Hurley

——that the agreement we have with them will be adhered to. We made it quite clear to them that if they did not abide by that, there were alternative options available to us.

(Interruptions).

Deputy Jan O’Sullivan

They are refusing to negotiate, but now he is telling us——

Mr. Seán Hurley

We can put the wholesale distribution service out to tender. That was an option.

Chairman

Members are concerned about the fact that there is no written agreement. Deputy O'Rourke asked where we go from here, something which should have been asked hours ago. We are wrapping this point up now. Questions have been asked and it is very important that the HSE delegates respond as quickly as possible.

I want to thank Áine and Marie and particularly the broadcasting staff who have remained here all evening. We are here as committee members to bring some help to the situation. It has been said to us all along that the fears among the general public are great, particularly among medical card holders. That is why so many people are here for such a long time today. That is the real issue for us.

As a committee, we are not in a position to defer the start from 1 March, but we are hoping to get a position on that. Members have asked about the Minister and I understand that, but she was not requested to be here today. I also understand that the buck stops with the Government and the Minister on this issue. Deputy Rory O'Hanlon stated hours ago that we have a three week opportunity. We do not want to come in here at tomorrow morning at 10.30 a.m. and divide committee members who want to find a resolution. It is very important the HSE delegates get their heads together overnight and that this committee does not divide or try to force through a solution. We must work on this together.

The central issue of all this debate has been the €100 million. Some people can suggest that the Minister told the HSE to get €100 million off the pharmacists. That point was raised, but we contend otherwise. The HSE must reduce overhead costs, in particular those to the Government.

We recognise the significant contribution of the pharmacists. We are afraid to park that matter or create an impression that we are not interested in progressing their issues.

I must make the following point to the HSE, although I know this has been a very tough meeting for its representatives. I was out sick and did not chair the meeting in November, but it has created a major problem for the members of the joint committee that nothing has been achieved since November. I am not out to blame the HSE, as I was a member of the party in government when it was established. There is no point in bashing it, when I clearly believe the way forward is through the workings of a single body. All members are committed to finding a solution. We are not playing a game but trying to find a way to reach a solution to the issue. The IPU has made great points but we recognise that the HSE has a responsibility to reduce the burden of costs on the taxpayer, not just in this area but under many headings. The members of the joint committee feel let down by the HSE because nothing has happened since last November. To take the words of a former Minister for Health, Deputy O'Hanlon, I am asking those present to show their bona fides in helping us to find a solution in the remaining three weeks. We are committed to reaching a resolution.

I extend my thanks to everybody. We are prepared to take submissions overnight, not that we want to be sitting up all night long.

JOINT COMMITTEE ON HEALTH AND CHILDREN debate - Tuesday, 12 Feb 2008

Community Pharmacies: Discussion with IPU and HSE.

Mr. Michael Guckian

Mr. Dermot Twomey

Ms Aisling Reast

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Michael Guckian

Mr. Michael Guckian

Professor Kamal Sabra

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Seán Hurley

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Seán Hurley

Mr. Seán Hurley

Professor Kamal Sabra

Ms Liz Hoctor

Mr. Séamus Feely

Ms Liz Hoctor

Professor Kamal Sabra

Ms Liz Hoctor

Ms Liz Hoctor

Ms Liz Hoctor

Mr. Seán Hurley

Mr. Seán Hurley

Professor Kamal Sabra

Professor Kamal Sabra

Mr. Séamus Feely

Professor Kamal Sabra

Mr. Séamus Feely

Mr. Séamus Feely

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

Professor Kamal Sabra

JOINT COMMITTEE ON HEALTH AND CHILDREN debate -
Tuesday, 12 Feb 2008