Pharmacists in rural areas claim new HSE regulations will make their businesses unviable, as a March deadline looms, writes Theresa Judge.
Pharmacists' incomes will fall over coming years as a result of the HSE's plans to cut the cost of drugs, a senior official with the executive has admitted.
A bitter row between pharmacists and the HSE is escalating as the latter pushes on with plans to reduce payments under State drug schemes. A number of legal actions by pharmacies against the HSE alleging breach of contract are also expected to come before the commercial court in February.
Pharmacists say they could not afford to continue supplying medicines to medical card holders if the changes - now due on March 1st - are implemented.
As claims and counterclaims are made by the HSE and the Irish Pharmaceutical Union (IPU) over the impact of the proposed new payments structures, a senior HSE official has told The Irish Times he expects pharmacists' incomes to fall.
Ross Hattaway, manager of the corporate pharmaceutical unit of the HSE, said their incomes would fall because the HSE is determined to stop paying fees to pharmacists based on the price of items dispensed - on some schemes pharmacists are paid a 50 per cent mark-up - and because the price of drugs being dispensed will fall following an agreement between the HSE and drug manufacturers.
He also said that if some pharmacists get into financial difficulty it would be because they have "overextended themselves" by buying overpriced businesses or by agreeing to pay very high rents in new shopping complexes. "We want to separate income from commodity price - we will pay a professional fee for a professional service," Hattaway said.
He said pharmacists' incomes have been rising because they have been linked to the price of drugs which has been "increasing exponentially".
The HSE is trying to reduce an escalating drugs bill - up from €332 million in 1997 to €1.5 billion in 2006. It says it can save €100 million per year by introducing reduced reimbursement rates for pharmacists. These reduced rates were originally due to be introduced on December 1st.
Hattaway said the reduced reimbursement rates were included in the HSE's 2008 budget and the delay was costing it €8 million a month and this could not continue beyond March 1st.
Dermot Twomey, a pharmacist based in Cloyne, Co Cork and a member of the IPU's pharmacy contractors committee, said the HSE was trying to "ride roughshod across us" and the reduced payments could result in some pharmacies going out of business. Describing the changes as "drastic", he said they would result in dramatic falls in income for pharmacists, particularly those in rural and less affluent areas, and that this would affect service levels. He said an analysis of his accounts had shown that his income would fall by €75,000 a year.
The IPU had accepted for years the need for reform of State drug schemes and had put forward cost-saving proposals which had not been taken up by the HSE. Twomey says the IPU is only asking that an independent body be given the task of deciding a fair fee structure for pharmacists.
The HSE plans have a number of different elements. Firstly, it plans to reduce the amount it pays to pharmacists to cover the cost of the medicine that the pharmacist has bought from the drug wholesaler. Secondly, it wants to introduce a new contract that replaces all schemes where pharmacists are paid a 50 per cent mark-up with a flat fee for each item dispensed.
The HSE plan to cut the drug reimbursement rate by 8 per cent from March 1st is based on the fact that wholesalers give discounts to pharmacists and the HSE now wants to get the value of these discounts, rather then letting the pharmacist benefit. Hattaway said that in the future it will only pay the net invoice price.
Any assessment of the impact of the changes on pharmacists' incomes would involve complex calculations based on the different fee structures paid by the HSE under different drug schemes and the proportion of a pharmacist's profit that comes from the schemes.
The two main State drug schemes are the GMS scheme for medical-card holders and the drug-payment scheme, in which the State pays for private patients' medicines above a €90-a-month threshold. On the medical-card scheme, pharmacists only get a flat fee from the HSE for dispensing each item, regardless of the cost of the item. This now stands at €3.26. Under the drug-payment scheme, the HSE pays a flat fee of €2.86 per item but also pays the pharmacist a 50 per cent mark-up based on the price of each item. There are also a number of other schemes, such as those covering people with long-term illnesses, where pharmacists get a 50 per cent mark-up from the HSE.
Under a new voluntary interim contract that the HSE has distributed to pharmacists, these schemes would be replaced with a system where pharmacists get a flat fee for dispensing an item, regardless of the type of patient getting it. The HSE has said this will be not less than €5 but will inform pharmacists of the precise fee early in February. Pharmacists can choose not to take up the new contract and stay on the old one, but the HSE intends to impose the reduced reimbursement rates.
Twomey maintained that pharmacists could only continue providing a service to medical-card holders - for €3.26 per item - because of the much higher fee on items dispensed under other schemes. He said an analysis by Boots had found that the cost of dispensing an average item was €9.50. He said the HSE is also failing to take into account that some medicines attract no discounts from pharmacists.
While Hattaway said that on average only 40 per cent of pharmacists' incomes came from State drug schemes, and therefore the impact would not be major, Twomey said that for most rural or non-city high street pharmacies, some 75 per cent of business is from drug prescriptions and about three quarters of these are from medical-card holders.
He said the IPU would welcome a fully independent assessment of pharmacists' incomes, but that, rather than waiting for an independent body to be set up to recommend fee scales for self-employed professionals - which has been promised by Minister for Health Mary Harney - the HSE was pushing through its plans. The HSE says it cannot negotiate pay rates with the IPU as happened in the past because of competition law.
Twomey also rejected an assertion by Hattaway that because of the high level of "vertical integration" between drug wholesalers and pharmacists, it was "difficult to know whose pocket" the 8 per cent cut by the HSE would come out of. Twomey said fewer than 200 of the 1,600 retail pharmacies are owned by wholesalers.
"The HSE has been trying to give the impression that the wholesalers will lose as well, but that's not true - it is only the pharmacists that will lose," Twomey added.