Pharmacies got €430m for drug schemes

Rise in the number of pharmacy outlets in the State over the past year despite controversial fee cuts

PHARMACIES RECEIVED nearly €430 million in payments from the Health Service Executive (HSE) last year for the provision of services under the various State drug schemes.

New figures obtained by The Irish Timesalso reveal that the number of pharmacy outlets around the State has increased over the past year despite the introduction of controversial fee cuts put in place by the Minister for Health, Mary Harney, last year.

The figures show that there were 1,639 outlets with pharmacy contracts with the HSE at the start of June this year compared with 1,587 at the start of 2008 and 1,620 at the beginning of 2009.

In 2008, the body representing community pharmacists, the IPU, warned that a survey had indicated that up to 300 outlets could close as a result of reductions in payments proposed at that time.

The IPU said yesterday that the full impact of the cuts introduced by the Government had not yet emerged.

The new HSE figures show that the State’s pharmacies shared €428 million in fees and mark-up across all the various schemes last year.

One Dublin pharmacy, trading as Abbey Healthcare Ltd, received fees and mark-up payments of more than €1.16 million.

The overall €428 million figure included about €32 million in payments owed from previous years. A total of €5.5 million was paid out in 2009 in respect of fee increases due under the Towards 2016 national agreement which had been originally due in September 2008.

Over €20 million was paid in respect of premium payments due to pharmacies from previous years for providing services to patients over the age of 70.

Separately, some €7.6 million was paid out in respect of mark-up which had to be given back to pharmacists on foot of a successful High Court challenge on proposed changes to the payment system.

In 2008 the HSE paid out a total of €421 million to pharmacies. This also included a sum of more than €18 million in respect of fee increases due under the Sustaining Progress national agreement dating back to 2006.

In a statement last night the IPU said the payments made to pharmacists were gross figures out of which they had to pay all of the costs associated with providing a professional service including staff, rent, rates and insurance.

“In 2007, overhead costs were estimated to be €576,000 per pharmacy. Like any other sector, there will be a wide divergence in earnings from pharmacy to pharmacy with many small pharmacies providing vital social services earning relatively small sums from the community medicine schemes.

“PwC has completed a very comprehensive report on the impact of the cuts on the sector over the past 12 months.

“As a direct result of the cuts, it is estimated that 1,600 jobs were lost in the sector with average earnings of a pharmacy falling by more than €100,000. This equates to a 30 per cent decline in public medicine earnings. The cuts reduced pharmacy net profitability by about 38 per cent.

“The net profit margin of an average pharmacy in Ireland was 6.6 per cent in 2007.

“However, the margin today is substantially lower as a consequence of last year’s cuts. Other consequences of last year’s cuts are that services and opening hours have been curtailed by many pharmacies. The full year effect of these cuts will become more evident during the course of 2010,” the IPU stated.

The IPU said the number of new openings was a meaningless figure as some pharmacies closed and others opened.

“In particular, the cuts are potentially devastating for pharmacies carrying any significant level of debt or where the net profit levels are below average for the sector. This will become increasingly so, if interest rates were to rise above their present, historically low levels.

“In 2008, the fees and mark-up earned by pharmacists amounted to 24 per cent of the cost of the community drugs schemes. The vast bulk of the costs [62 per cent] was paid to the pharmaceutical manufacturers.”