The High Court declared that the Health Service Executive breached pharmacy contractor agreements when it reduced the rate used to reimburse the ingredient cost of medicines dispensed under the GMS and other community drugs schemes. The court left the contractors’ damages claims, including their value, to be dealt with later.
In a judgment delivered on 11 September 2008, Ms Justice Finlay Geoghegan found that the third to eighth named plaintiffs were entitled under clause 12(1) of their Community Pharmacy Contractor agreements to reimbursement at the ex-factory price in the month of dispensing, plus 17.66%.
The court said the HSE’s decisions in September 2006 and September 2007 to reduce that rate breached the agreements. The 2006 decision lowered the rate for new medicines from 17.66% to 15%. The 2007 decision set rates of 8%, then 7%, with implementation dates later deferred to 1 March 2008. The declarations addressed the decisions and contractual entitlement; the judgment did not determine damages.
The dispute concerned the contractual payment rate, rather than whether pharmacies’ actual net purchase costs exceeded reimbursement. The judgment records that the plaintiffs did not allege the reduced reimbursement was less than the net amount they paid wholesalers after discounts.
The plaintiffs argued that their agreements entitled them to the “basic ex-wholesale price”, which they said was the ex-factory price plus 17.66%. The HSE accepted that it had a contractual obligation to reimburse medicine costs, but argued that the rate could be set to reflect an average or approximate cost across the pharmacy market.
The judge concluded that the ingredient-cost reimbursement was included in the payments covered by clause 12(1). She found the clause allowed the rate to change, but only through a decision by the Minister for Health, after consultation with the Pharmaceutical Contractors’ Committee. The evidence did not establish that the Minister had consulted the committee before the reductions. The HSE’s public consultation on wholesale and distribution services did not amount to that contractual consultation, the judge said.
The HSE also raised competition-law arguments if the plaintiffs’ claimed payment terms were found to arise from arrangements between the Minister and the Irish Pharmaceutical Union. The judge said those issues did not arise because she found the entitlement in clause 12(1) itself. The HSE had not argued that clause 12(1) was void under the Competition Act 2002.
The court will hear counsel on how the claims for damages should proceed. It made no finding on liability for damages or their amount at this stage.