Press Release

Minister Harney announces reductions in payments to community pharmacists to reduce rapid rise in State expenditure on drugs and medicines

The Minister for Health and Children, Mary Harney, T.D. today (18th June, 2009) announced reductions on payments to pharmacists under the Financial Emergency Measures in the Public Interest Act 2009 to reduce the cost to taxpayers of drugs and medicines dispensed under the GMS (medical card), the Drug Payment Scheme, the Long Term Illness Scheme and other community drugs schemes.

The Minister said, ‘The cost of the drugs and medicines under these schemes – including ingredient costs, payment for wholesale delivery and pharmacy dispensing fees and retail mark-ups – has doubled since 2002 and totalled over €1.68 billion in 2008.

‘This was made up of

  • Ingredient costs €1240 m (ex-factory price of €1040m plus wholesale mark-up of €200m)
  • Dispensing fees and mark-up, including over 70s fee: €440 m
  • Total €1,680m

‘Put simply: it should not cost €640m to get €1.04bn of drugs from the factory gate to the patient.

‘The rapid escalation in cost must be curtailed. An average of a 12.5% increase each year over six years in costs is not sustainable. Dispensing fees alone have doubled since 2002.

‘The measures I am taking to reduce costs must be seen in the context of overall savings needed in public spending in order to use scarce resources for services, and to put our public finances on a sustainable footing, to help return the country to growth and job creation.

‘The HSE’s budget for this year assumes savings of at least €50m in this area. These are essential to avoid the HSE having to make alternative, immediate savings on other services, such as reductions in home helps hours, reduced home support for people with disabilities and reductions in acute hospital activity levels.

‘Pharmacists’ income under these schemes, on a full year basis, can be estimated to be returning to the levels paid in 2006, approximately €418m. In 2009 specifically, this income will be back to the level of 2007. With many people having lost their jobs, and wages and incomes being reduced throughout the economy, it is not unreasonable to bring income to pharmacies from State sources back to the level of three years ago’.

The following are the precise measures the Minister has decided:

  • (a) re-balance the amounts paid in respect of, on the one hand, the GMS and, on the other hand, the Drugs Payments Scheme, Long Term Illness Scheme and other community drugs schemes, by:
    • (i) introducing a new higher dispensing fee structure for the schemes based on a sliding scale as follows: €5 for first 20,000 items, €4.50 for next 10,000 items and €3.50 for the remaining items; and
    • (ii) reducing from 50% to 20% the retail mark-up payable under the community drugs schemes (no mark-up is payable under the GMS);In these two measures, the Minister is responding to concerns expressed by pharmacists that medical card dispensing is cross-subsidised by the retail mark-ups on the other schemes. This should benefit pharmacies with relatively more medical card patients, for example, those serving poorer areas.
  • (b) end a special payment to pharmacists in relation to the automatic entitlement of persons over 70 to a medical card, as that entitlement has been ended; and
  • (c) reduce the ‘wholesale mark-up’ reimbursement price paid for delivery of drugs to community pharmacies, from 17.66% to 10%. This mark-up was intended to pay for wholesale distribution costs but it is almost double the European average for this type of service. Approximately half of this mark-up is being passed back by wholesalers to pharmacists by way of discounts.

The measures will be given effect through Regulations to be issued by the Minister in due course. It is intended to implement them with effect from 1 July.

Impact on Payments to Pharmacists

If the Minister had taken no action, it is estimated that total payments to community pharmacists in 2009 would amount to €550m (this is based on about 71m prescription items being dispensed and assumes that community pharmacists would receive about €100m of the €200m wholesale mark-up by way of discounts).

On foot of the Minister’s decision, actual payments in 2009 will amount to €495m, a saving of €55m this year.

Pharmacists’ income under these schemes, in full-year terms, can be estimated at €418m (including an element of wholesale discount), which is broadly equivalent to the amount received by pharmacists in 2006.