Pharmacy group loses court case

A group of pharmacies has lost its High Court challenge to the Minister for Health's decision to impose substantial cuts on fees paid to them for dispensing drugs and services under the Community Pharmacy Agreement.

Mr Justice Bryan McMahon rejected claims by the Haire group of pharmacies the cuts of some 24 per cent introduced last July as part of the government's response to the economic crisis breached their property rights and rights to equal treatment under the Constitution.

The judge accepted the cuts, introduced via regulations made under the Financial Emergency Measures in the Public Interest Act of 2009, may be a great burden for some pharmacists. "But the State's concern to get value for money cannot be ignored either", he said. The State was obliged to achieve its statutory obligations on "a best value basis".

Given the "exceptional" threat to the economic well being of the State and to the people, he had no difficult accepting the 2009 Act is exceptional and capable of affecting people adversely.

That was "one of the objectives" of the Act but he was not satisfied it was "draconian". It was "a measured, proportionate and carefully drawn" piece of legislation with a number of "significant safeguards" inbuilt.

While the Haire group had claimed it could become insolvent if the cuts stood, no accountancy evidence to that effect was given to the court although the State had invited such evidence, he noted.

The Haire group, also known as the Kissanes group, operate pharmacies in counties Carlow and Kilkenny and brought its action against the Ministers for Health and Finance, the Government and the Attorney General.

The court was told pharmacists were paid €421 million in fees and mark up last year and Minister for Health Mary Harney has stated she planned to reduce payments by €133 in a full year.

In his judgment, Mr Justice McMahon ruled the pharmacists have no contractual/property right preventing the Minister changing unilaterally, after consultation, the rates of payment in their contract.

It was accepted a contractual right was a property right but the pharmacies had no entitlement under the Community Pharmacy Contractors Agreement - their contracts - for their rates of remuneration to continue into the future, he said. The Minister had every right both under the contract and the 2009 Act to introduce the cuts, he ruled.

The Minister could also recast the whole structure of the existing scheme, provided she gave proper notice, and introduce a better scheme, he added.

The Minister had, in fact, decided to implement the cuts under the 2009 Act rather than the contract because presumably she felt the 2009 Act was a more effective way of achieving the changes, he said. She also engaged in a serious consultation process under the Act sufficient to satisfy the consultation requirement under the contract.

In all those circumstances, there was no breach of the pharmacies property rights. Nor was there an "unjust attack" of their property rights given the unusual economic crisis that led to the 2009 Act. All the evidence showed the State is facing an unprecedented economic crisis forcing it to introduce drastic economies and cuts "across the board".

On claims the cuts breached the pharmacists right to equal treatment given that lesser cuts of 8 per cent were imposed other health professionals and public workers, the judge said no comparative evidence was given of disparate treatment so the court could not rule on this issue. Equality protection under the Constitution extends only to human persons and may not be availed of by companies, he noted.

The purpose of the 2009 Act was clear - to reduce State spending and, if necessary, to unilaterally reduce payments to service providers, he said. The pharmacists had produced no proof the cuts imposed on them were wholly disproportionate and unequal.

Rejecting further claims the cuts were unreasonable and arbitrary, he found there was "clear rationale" for the cuts made, including a sliding scale for professional fees which acknowledged smaller pharmacies needed the greatest protection.

The pricing model was "anything but arbitrary" and the court had heard evidence, when deciding what cuts to recommend, each of the health professionals involved were assessed separately and on their own merits.

The evidence was the Minister, in fixing the rates, did bear in mind what level of payment would ensure an economic return and guarantee the continuation of a network of pharmacies country-wide to deliver the services.

The judge added it was neither unreasonable nor unfair for the Minister to take into account discounts and rebates which pharmacies got over years from wholesalers when she was reviewing the rates paid under the contract. The rebate system meant pharmacy retailers could increase their profits greatly by getting from the wholesalers a portion of the wholesaler's 17.66 per cent profit on the ex-factory price and retailers were able to get an average 8-10 per cent discount from wholesalers.

The Irish Pharmacy Union (IPU), which represents 1,800 pharmacists, expressed its disappointment at the ruling.

The IPU noted Judge McMahon said the Financial Emergency Measures in the Public Interest Act 2009 was "exceptional" and "clearly it is capable of affecting persons adversely and that was one of the objectives of the legislation".

The union said it "would be taking the opportunity of the forthcoming review of payments by the Minister to demonstrate the impact of the cuts on members".

The IPU said it will review the ruling and its implications with its legal advisers "in due course".