The Irish Pharmaceutical Union is the representative body for community pharmacists and has more than 1,600 members who are committed to delivering a quality, accessible, personal and professional pharmacy service that puts the patient first and has, as its primary goal, the optimisation of the health and well-being of society. I thank the joint committee for affording the IPU the opportunity to address it on some worrying developments that have taken place since 20 December 2006 — the attack on the rights of pharmacists to have a collective input into the determination of their fees and the announcement of 17 September 2007 by the Health Service Executive which, if implemented, will mean that from 1 December pharmacists will be dispensing medicines at a loss to Ireland's 1.5 million medical card patients.
I have collated some background information on the community pharmacy network which has been circulated to committee members. I will be happy to answer questions on this aspect of the issue.
If the HSE decision is implemented as planned on 1 December, delivery of the medical card scheme by pharmacists will become unviable and there is a real risk that the scheme could collapse. The average profit per pharmacy, based on 2005 figures for the medical card scheme, was €76,388, which amount barely covers the cost of employing a pharmacist, let alone the other operating costs associated with delivering the scheme. A business simply cannot survive on that basis. The scheme has been sustained until now by the ability of pharmacists to negotiate trading terms with their main suppliers in return for greater efficiencies, for example, prompt payment, placing bulk orders and placing orders electronically at specific times. These business arrangements which can take the form of discounts are vital for the pharmacy business, particularly for the medical card scheme which has been uneconomic for pharmacists to deliver for some time. Incidentally, they do not get a discount on cold chain products such as insulin for patients with diabetes, on controlled drugs such as morphine which are essential for those who need palliative care, or on any medicine purchased from secondary suppliers.
Included in the presentation circulated to members are examples of situations which will arise if the HSE's proposals of 17 September are implemented on 1 December. I invite members to ask questions on those examples.
The cost price of medicines is agreed by the HSE with the manufacturers of medicines under the Irish Pharmaceutical Healthcare Association agreement. Pharmacists have no input into this process. They receive a fee of €3.26 for each medicine dispensed to medical card patients. Some 76% of medicines supplied by pharmacists under the community drug schemes are dispensed to medical card patients at cost price. On the drug payment scheme, pharmacists earn a profit of 33% plus the dispensing fee of €2.86. However, this scheme only accounts for approximately 24 of all the medicines paid for by the Government.
The total cost of pharmacy services amounted to €1,189 million, of which €906 million relates to the actual cost of the medicines. Pharmacists were paid €337 million in fees and mark-up, which represents 3% of the HSE's non-capital spend. In the same year the sector employed 13,000 and contributed €243 million to the Exchequer in taxes.
Pharmacists are not responsible for the increasing cost of medicines to the State. The Government agrees the price of medicines with the pharmaceutical manufacturers. The rising costs are due to many factors, including the impact of Government decisions such as the introduction of the drugs payment scheme, the extension of medical cards to all persons over 70 years and the Government's cardiovascular strategy. Other contributory factors include the obesity and diabetes epidemics, an increasing and ageing population and the high cost of many new medicines. However, the effective use of these medicines can reduce the need for hospitalisation for many patients.
The union recognises the need for fiscal responsibility in the provision of health services and that the HSE must address the rising cost of the State's medicines bill. Indeed, the union has been seeking to renegotiate the pharmacy contract with the Department of Health and Children and the HSE from as far back as July 2001. The union has made a number of submissions and proposals aimed at maximising efficiency in the use of medicines, including proposals on increasing the use of less expensive generic medicines and conducting medicine use reviews with elderly patients to ensure patients are taking the medicines correctly and to reduce the wastage of medicines. These proposals, to date, have fallen on deaf ears.
Pharmacists play a vital role in health care delivery but still are one of the most underutilised resources in the health service. The primary role of the pharmacist is to improve health outcomes by safely dispensing medicines and advising patients on how to get the optimum benefit from them. However, there is considerable scope to develop the current level of professional services delivered by community pharmacists through a more comprehensive, structured and organised service. This is now happening in many other jurisdictions and community pharmacists tend to be the link for all health care professionals, with 75% of patients using the same pharmacy on a regular basis. It is important that this service, which is vital to patients, particularly given demographic changes, is allowed to continue to develop to its full potential and is not undermined by the confrontational behaviour and short-sighted actions of the HSE.
I will now bring the committee's attention to developments in the past year. I regret to say that relationships with the HSE and the Department of Health and Children are at an all-time low and uncertainty and concern in the pharmacy profession is at an all-time high. I am repeatedly asked by patients and politicians why relations have now become so strained and what has happened to bring things to a head. A number of factors have been significant. My colleagues have grown increasingly frustrated as they have seen both the Department and the HSE drag their heels in the implementation of agreements. They have seen the right to be represented in a traditional way in the negotiation of fees challenged when the HSE indicated that, in its view, competition law outlawed direct negotiations on such matters with representative organisations. The union was advised formally by the HSE on 20 December 2006 that, based on legal advice received by the HSE, it could no longer negotiate fees with the union. The union was encouraged, however, by statements made to this committee earlier this year by Professor Drumm and the Minister for Health and Children. Professor Drumm said to this committee on 15 February 2007: "We hope to set a reasonable and fair price and have it adjudicated on by people independent of our system". The Minister for Health and Children said to the committee, on the same day:
The HSE will be in a position to negotiate contract details with the IPU but there will have to be an independent process for setting fees. There is a way around it and we hope to find such a process soon.
Both the Minister and the chief executive of the HSE stated unequivocally that there was a need to establish an independent process for the setting of pharmacy fees. However, our experience to date suggests the HSE does not wish to see a process established on this issue, which has implications for a whole range of similar organisations. It is crucial the Department of Health and Children develops a policy on this matter that delivers on the Minister's stated intention earlier this year.
I wish to be clear on this issue. We understand the concerns about competition law. We seek a process that is fair, reasonable and independent and ensures the IPU can fully reflect the concerns and interests of its membership in dealing with these issues. It was to try to achieve such an outcome we proposed what has became known as the Shipsey process. What we cannot and will not accept is the HSE hijacking competition law to bolster its monopoly position as the dominant purchaser of goods and services from the pharmacy sector. On top of all this, and while the Shipsey process was ongoing, the HSE announced on 17 September its intention to unilaterally undermine the basis on which current payments are made to pharmacists. This was done without any consideration of the impact of the decision on the pharmacy sector and without carrying out any economic study on its impact on the delivery of services to patients. In this type of environment, inevitably things will happen that we all wish did not happen and such was the case.
The HSE announced that it would reduce the margins paid to wholesalers for reimbursable medicines on the community drug schemes. This announcement was very misleading. The HSE was not, in fact, reducing wholesaler margins but the price at which it would normally reimburse pharmacists for medicines dispensed to patients under the various community drug schemes, including the medical card scheme and the drug payment scheme. This means that for some products costing, for example, €100, the HSE now states it will only reimburse €91.80.
The HSE made this announcement despite requests by the union that no unilateral action should be taken while talks were ongoing under the chairmanship of Mr. Shipsey, SC. The HSE has acknowledged that, of the projected savings of around €100 million per annum, nearly all will be made from community pharmacies and not from the pharmacy wholesalers. This decision, if implemented, would also constitute a unilateral breach of the contract that exists between each pharmacist and the HSE. The HSE has admitted that it did not carry out any assessment of how its decision would impact on community pharmacies and their ability to provide pharmacy services to patients. In the Indecon report, published yesterday by the HSE, the economic consultants advised the HSE that the timing of significant changes in payment terms was crucial and that changes should be evaluated in advance in conjunction with key stakeholders. It is clear that the consultants warned about taking a cautionary approach to avoid disruption in the sector. The HSE, however, ignored the advice of its own economic advisers and recklessly proceeded with its announcement on 17 September.
If this decision is implemented on 1 December it will threaten the viability of many pharmacies, including those in rural and marginalised areas. It could also lead to the curtailment of services, both at wholesaler and pharmacy levels, which could lead to patients having to wait for urgently needed medicines. This would be unacceptable given that pharmacy is one of the few elements of the health service that works for patients.
HSE officials informed the union at a meeting on 3 October that they made their announcement on the assumption that wholesalers would bring their prices into line with the decree of the HSE on 17 September. The HSE admitted at that meeting that its proposal was unworkable unless wholesalers reduced their prices. This was an extraordinary admission, given the fanfare that accompanied the announcement, and the advice the HSE had apparently received from its own consultants and which it had ignored.
Following the meeting of 3 October the HSE invited wholesalers to a meeting on 8 October 2007. The HSE applied unprecedented and extraordinary pressure on the wholesalers to force them to alter their prices. The three wholesalers were kept in three separate rooms in an attempt to extract various commitments from them over their trading arrangements with pharmacists. Farcically, the HSE indicated that, by keeping the suppliers in three separate rooms, it was overcoming competition law impediments. As far as the union and its members have been informed, the wholesalers and other suppliers will not be reducing their prices.
The HSE indicated on 13 September in a letter to the union that as no agreement had been reached on the way forward, despite the best efforts of both sides over a period of six months, it must now proceed with the reform of the community pharmacy contract. This was four days before its announcement of 17 September. It appeared to the union that the HSE had withdrawn from the process. However, when contacted by Mr. Bill Shipsey at the request of the union, the HSE indicated on 24 September that it was willing to continue with the process and a further meeting was arranged for 11 October. At that meeting, the HSE was not willing to commit to an independent pricing process and Mr. Shipsey decided that he would suspend the dialogue.
Following the withdrawal of methadone services by some pharmacists on 15 October, Mr. Shipsey convened a meeting of both sides to be held on 16 October. After five hours of mediation it appeared that agreement had been reached on a formula to get talks under way. The agreement included a series of commitments from the HSE to deliver on outstanding issues and to postpone implementation of its decision of 17 September for a period of two months to allow time for talks to get under way. Mr. Shipsey drafted the head of agreements of which both parties were required to confirm their acceptance by lunchtime on 17 October. The union indicated its broad acceptance of the proposals. However, Mr. Shipsey informed the union on 17 October that the HSE was unable and unwilling to respond to the substance of the proposal until normal methadone services were restored. He said the HSE had indicated that, if that occurred, it would respond promptly and positively in the belief that agreement could quickly be reached.
Following further informal contact between the parties, normal methadone services were restored and the union sought an early meeting on 24 October to discuss the Shipsey proposals of 16 October. The HSE responded by stating it was not prepared to meet the union until it was assured full methadone services had been resumed, despite the fact they had already been restored. This resulted in further unnecessary delays. A meeting was finally agreed for Wednesday, 31 October under the chairmanship of Mr. Shipsey. While there was agreement on some issues set out in the terms proposed by him on 16 October, the HSE was not in a position to confirm that the 17 September proposal would be deferred. It was then decided that the legal advisers for each side should meet Mr. Shipsey on Wednesday, 7 November in a further attempt to make progress on a possible new pricing process. Progress was made at this meeting and proposals were put by the lawyers to their respective clients, which included immediate negotiations on all issues between the parties other than price and a postponement of implementation of the HSE decision of 17 September.
While the union broadly accepted the proposals, the HSE set down a number of new preconditions. First, it sought an assurance from the union that it would neither initiate nor fund legal proceedings against the HSE regarding its decision of 17 September. Second, it insisted that the IPU undertake, prior to entering into negotiations, that even if the negotiations between the parties were going well and progress was being made, it would not seek further postponement of the HSE decision of 17 September. Third, it indicated it would not be prepared to accept the union nominations of Mr. Kieran Mulvey of the LRC or Finbarr Flood, formerly of the Labour Court, as chairman for the negotiations. It further stated that if the union was not prepared to accept these preconditions, it would circulate a draft revised community pharmacy contract to pharmacists the following week, including new pricing arrangements, for their observations and comments. To add insult to injury, it wrote directly to all our members for a third time on 7 November while talks were ongoing seeking their views on a new pricing structure and contract. These preconditions make progress difficult, if not impossible.
To date, the HSE has systematically undermined all attempts to advance this issue. It is determined to force new arrangements on the sector one way or the other and has no plans to be either fair or reasonable in its approach. On top of all this, it has ignored the advice of its own economic consultants on the implementation of change. It appears that "partnership", while being Government policy, does not apply in the Health Service Executive. Sooner or later it must realise that real and lasting change will not happen through diktat or high-handedness. Its announcement of 17 September was ill-conceived, ill-judged and unworkable. Based on its own consultants' advice, it should be reversed.
As I stated, this is not in any way to imply we do not believe the Government has a legitimate expectation and right to seek to achieve maximum value for money on its spend on medication. On the contrary, we fully support it in this endeavour and have been active for the past four to five years putting forward our ideas on how savings can be made. For example, millions of euro are wasted in the sector; there are poor levels of compliance — 50% of patients do not takes their medicines correctly — and there is a ban on pharmacists providing cheaper medication to patients. If our ideas on issues such as these could be addressed, they would bring about real and lasting savings and have real benefits for patients. Alas, until now, these proposals have fallen on deaf ears.
The outcome of this crisis will dictate how the pharmacy profession will evolve for many years to come and how patients' needs will be met as our population ages. The stakes have never been higher; it is an issue we must all resolve. The position of the HSE on the negotiating of fees will also apply to other stakeholder organisations such as the Irish Medical Organisation, the Irish Dental Association and the Association of Optometrists Ireland. This must raise serious concerns about the ability of the HSE to bring about urgently needed reforms and changes in the provision of primary care services to prevent patients from having to avail of hospital services which are far more expensive. Legislative provisions should be introduced to facilitate the orderly delivery of health services.
On a purely practical level, one of the biggest problems the IPU has faced in dealing with the HSE is that there appears to be a dual management structure — those who surround the CEO and those who have line responsibilities. It is never clear who is taking responsibility. Perhaps, this lies at the heart of many of the HSE's problems.
Having said that, I would like to see the Irish Pharmaceutical Union, the Health Service Executive and the Department engaging in a constructive manner on all issues affecting patients, the profession and the HSE in terms of its expectations as a service provider and payer. However, this can only happen when we operate in an environment of trust where change is brought about through negotiation and agreement, an environment without threat, provocation, intimidation or unilateral actions and where there is recognition of the genuine concerns and contributions of all parties. The union, therefore, seeks a reversal of the decision of 17 September to provide space for talks to take place and to have the impact of the HSE proposal on pharmacy services fully evaluated, as recommended in the Indecon report commissioned by the HSE; a fair, reasonable and independent process for the determination of fees and services.
I call on the Minister to intervene in this matter, as it is a policy issue, given that it has implications for other organisations such as the IPU. The same arrangements should apply to all bodies. There should be an independent chairperson to chair and manage the talks process, given the low level of trust and confidence between the parties. These are not unreasonable demands and if delivered, the way will be clear to make progress quickly and deliver on many of our aspirations and those of the Department and the Health Service Executive. That is the challenge for us all. We are up for it, but, regrettably, I cannot say the same for the Department and the HSE.
I thank committee members for their attention. My colleagues and I will be happy to discuss the issues raised in this presentation or any other relevant matters.
