Drugs Payment Scheme: how it works

Around 1.4 million people or 35 per cent of the population qualify for the Drugs Payment Scheme (DPS), the scheme under which the State pays the cost of prescription drugs once an individual or family's monthly medicine bill exceeds €85.

But this first part of monthly expenditure that patients pay themselves has made several leaps in the past few years, most recently increasing from €78 to €85 per month from last January.

For patients with long-term conditions who do not satisfy the means test for a medical card and do not qualify for the threshold-free Long-Term Illness Scheme (LTI), this takes the total amount they have to pay to €1,020 a year.

Pharmacists do quite well out of the DPS, receiving a flat dispensing fee of €2.59 per item and a mark-up of 50 per cent on the price of the drugs.

So if a patient is prescribed three different drugs that have a total wholesale cost to the pharmacist of €100, the pharmacist receives a dispensing fee from the State of €7.77 (three times €2.59).

It also receives €150 (wholesale cost plus 50 per cent) less the €85 co-payment from the State.

Add back in the €85 paid directly by the consumer, and the total amount the pharmacist receives is €157.77.

Although pharmacists charge the Government a fixed price, they are savvy enough to negotiate discounts on the manufacturer's wholesale prices, enhancing their profit margins even further.

The mark-up makes it more profitable for pharmacists to stick with the most expensive drug where doctors prescribe patients a medicine by its scientific name.

And if pharmacists were allowed to dispense a generic drug in place of what the doctor prescribes, it could give them even greater power to force deals with generic manufacturers.

There would be no guarantee for consumers that the generic drug prices would be much lower than the original brands.

The Competition Authority, a Deloitte & Touche report and the 2003 Brennan report have all called on the Government to stop paying pharmacists the 50 per cent mark-up and it is understood that the custom is under review.

But the Irish Pharmaceutical Union (IPU) says that by transfixing on the 50 per cent mark-up, the Competition Authority and others are ignoring the fact that no mark-up applies to 72 per cent of the drugs prescribed under State schemes.

The DPS/LTI mark-up is regarded as a trade-off to pharmacists for receiving nothing more than a flat dispensing fee on drugs dispensed to medical card holders.

"We do feel that private patients are subsidising patients on the medical card scheme," says IPU president Dr Karl Hilton. The current flat fee of €2.98 for drugs dispensed to medical card patients is insufficient, the IPU argues.

But critics argue it is dignifying it to say that DPS patients are subsidising medical card patients and it is more apt to say that these Government-guaranteed profits go straight into pharmacists' pockets.