Minister for Health Mary Harney and the Health Service Executive (HSE) will ask an independent body to asses and recommend new prices for the General Medical Card Scheme (GMS) drug payments for pharmacists.
A row has developed between the HSE and 1,600 pharmacists over plans to reduce the Government's spend on the drugs scheme by €100 million.
The HSE hopes that an agreement can be reached with the pharmacists, who are represented by the Irish Pharmaceutical Union (IPU), through the independent body.
The Irish Pharmacy Union said it is extremely concerned by the announcement made by Minister for Health and Children today that she is supporting the proposal by the HSE to reduce payments to pharmacists from 1st March.
In a statement the union said it "views the announcement of the establishment of an independent body as a step in the right direction. However, there was no consultation with the Union on either the membership of the proposed Body or on its terms of reference.
"The terms of reference do not allow the Body to consider alternative payment models but rather to come up with a flat fee model which is in effect to pre-determine the outcome of the independent review".
Pharmacists are threatening that medical card holders will have to pay for their drugs from March 1st and seek refunds from the State unless the HSE abandons attempts to get them to sign a new, lower-paid contract before then.
Taoiseach Bertie Ahern has said that wholesale margin [for drugs] "in this country is more than double that found in any other country in Europe, including Northern Ireland."
The HSE is proposing a revised rate of an 8 per cent margin on wholesale drugs, compared to the 15-17.66 per cent paid now.
Following public consultation, which included wholesalers, the HSE believes that 8 per cent of the costs of medicines for wholesale services is fair and reasonable.
The IPU last week told a Dáil health committee if the changes went ahead on March 1st, up to 337 pharmacies could close, resulting in 2,257 jobs being lost. It said a further 2,500 jobs could be lost as a result of other pharmacies having to reduce staff numbers.