Challenge by pharmacies opens in Commercial Court

A TEST challenge by more than 20 pharmacies to "unilateral" decisions by the HSE to reduce the amounts paid to them for free provision of drugs and services under the General Medical Services (GMS) scheme has opened before the Commercial Court.

The Hickey group of 24 pharmacies claims the HSE decisions of September 2006 and September 2007 are in breach of the terms of their contracts under the community pharmacy agreement, and will lead to annual losses of more than €2 million.

The challenge aimed at overturning the new HSE payments scheme, which came into effect last March, opened yesterday, and is regarded as a test case for similar challenges by hundreds of other pharmacies. Attempts to resolve the dispute by mediation between the HSE and Irish Pharmaceutical Union failed last month.

The hearing before Ms Justice Mary Finlay Geoghegan in the Commercial Court, the commercial division of the High Court, is expected to run for six days.

In an affidavit, community pharmacist David Hickey, of Garville Avenue, Rathgar, Dublin, said if the HSE was permitted to cut the price payable to pharmacies projected losses for the plaintiff pharmacies would be €2 million for the year ended February 2008 and €2.36 million for the year ended February 2009. He could not sustain that loss in the long term.

Opening the case, Gerard Hogan SC, for the Hickey group, said he was alleging breach of contract by the HSE over its unilateral decisions of September 2006 and September 2007 to reduce the amounts payable to pharmacists under the GMS.

The case centred on the basic ex-wholesale price (BEWP), the price which pharmacists were invoiced by wholesalers, counsel said. For 35 years prior to 2006, pharmacists had received from the HSE the BEWP plus a 17.66 per cent mark-up, and his clients had a contract with the HSE under which they were entitled to be paid the BEWP on that basis.

The HSE was not entitled in September 2006 to unilaterally vary the 17.66 per cent down to 15 per cent for new products or, more importantly in September 2007, to unilaterally vary the BEWP downwards from 17.66 per cent to one of 8 per cent, counsel said.

The HSE also proposed to reduce that mark-up further to 7 per cent in December next.

Mr Hogan said the September 2006 decision was never publicly announced, and the pharmacies only became aware of its effect in early 2007. He also argued the fact that many pharmacists have negotiated their own discounts with wholesalers was not relevant to his claim and was the "private business" of pharmacists.

The HSE argued it was never the intention of the Department of Health when setting up the GMS scheme that pharmacists would retain some of the BEWP, and the HSE was also contending the department was not aware of the extent of the discounts.

Mr Hogan noted the department had suggested in 1993 that the scheme be varied so the pharmacists would only be entitled to the actual price paid by them to the wholesalers but that was not pursued. While it was true the department had expressed unease or even disapproval of the discounts being paid, no steps were taken by any of the statutory bodies involved to stop it until 2006 and 2007.

Payment of the BEWP was part of the trading arrangements between the sides from the 1970s and part of their contract, and if it was reduced a lot of the discount which pharmacies were entitled to negotiate would be squeezed out.