Court told fees cuts pushing pharmacy group near insolvency

A GROUP of pharmacies has told the High Court that Minister for Health Mary Harney’s decision to cut fees for dispensing drugs and services under the Community Pharmacy Agreement has pushed them towards insolvency.

Gerard Hogan SC, for the Haire group of pharmacies, also known as the Kissanes group, said yesterday the reduction was introduced by Ms Harney to effect savings of 24 per cent but his clients believed that figure was closer to 30 per cent.

The impact of such cuts on his clients, who run pharmacies in Carlow and Kilkenny, was “quite devastating” in terms of the capacity of various companies to survive, Mr Hogan said. Their solvency was “absolutely put at issue”.

This decision to “effectively unilaterally” change the pricing regime agreed under contract with pharmacies was also unconstitutional, he argued. It was also his case that the cuts were vastly disproportionate in terms of the purpose of the 2009 Act under which they were introduced.

That purpose was to effect savings in payments made by the State to mainly medical and legal professionals but the cut in payments to pharmacies far exceeded cuts of some 8 per cent in fees paid to opticians, dentists and others in the medical arena, Mr Hogan added.

Pharmacists were paid €421 million in fees and mark-up last year and Ms Harney says she plans to reduce payments by €133 million in a full year. It is claimed she unilaterally reduced payment to pharmacy contractors by 20 to 50 per cent in relation to the retail mark-up payable under the community drugs scheme and also reduced the reimbursable price of medicines by 6.5 per cent.

Mr Hogan said he anticipated the State would argue that pharmacies were entitled to withdraw from the community pharmacies scheme at 30 days notice but this ignored the fact that practically all pharmacies in the State participated in the scheme. It would be almost impossible not to, and any pharmacy which withdrew would be like a pub with no beer, with serious consequences for their reputations and financial viability.

Mr Hogan was opening the challenge by the Haire group to the measures introduced last July as part of the Government’s response to the economic crisis. The case, before Mr Justice Bryan McMahon, continues today.

The action is against the Minister for Health and Minister for Finance, the Government and the Attorney General, and relates to the application of the Health Professional (Reduction of Payments to Community Pharmacy Contractors) Regulations 2009 to services provided under the Community Pharmacy Agreement.

The Haire group claims the proposed cuts will reduce its profits by €392,279 per annum, putting it into a loss-making situation of €120,899 based on figures for the year ended December last.

It is claimed this would render it unable to repay its bank loans and mean it would have to seriously consider closing some or all of its trading operations, with employment consequences for staff.