PCC win 18 month Category M battle against DHSSPS

A “victory for common sense” was finally achieved at Northern Ireland’s High Court of Justice, following eighteen months of legal wranglings between the Pharmaceutical Contractors’ Committee (PCC) and the Department of Health, Social Services and Public Safety. Laure James reports on the lengthy Judicial Review which finally culminated with a ruling in favour of the PCC on 6 January 2010.

Remarkably, Lord Chief Justice Sir Declan Morgan deemed that the Department had acted “unlawfully” in its application of Category M, marking an important triumph for PCC. However, the negotiating body and Northern Ireland’s 525 pharmacy contractors could still face an uphill struggle before they are appropriately compensated for one of the most misguided Departmental changes in recent years.

“This judgement is a victory for common sense, given that DHSSPS, by its own admission, was making calculations for reimbursing pharmacists using a model which was not fit for purpose for Northern Ireland,” PCC chief executive Terry Hannawin said after the ruling. “It is regrettable that the PCC had to seek legal redress to effectively restore to community pharmacies the income they had earned by providing high quality, accessible care to local communities. However, we want to use this decision as a firm foundation to re-start meaningful dialogue with DHSSPS on the terms of a new contract for community pharmacy in Northern Ireland.”

Problems with the generics market began over a decade ago when in 1999 it experienced unprecedented turbulence. The Department of Health in England issued a discussion paper two years later which gave evidence to suggest that many reimbursement prices were significantly above market prices. The DHSSPS however continued to give consideration to introducing a separate Drug Tariff for Northern Ireland right up until late 2006, after new pharmacy contracts had been negotiated and implemented in England and Wales and in phases in Scotland.

With a much clearer understanding of how each of these three countries would operate under their new contracts, the DoH and the Scottish Executive Health Department began to evaluate how Category M would be amended for their professions. However, without any relevant or up-to-date framework, the Department in Northern Ireland piggybacked on Scotland’s model, using the Scottish Drug Tariff – all the while recognising that this was not fit for purpose.

In a letter to the PCC back in May 2008, the Department’s director of primary care Christine Jendoubi conceded that Northern Ireland pharmacy needs a regionally tailored model. “It was acknowledged by all of us that the problems emerge mainly because of the difficulties in establishing a suitable methodology for determining the effect of Category M here,” she wrote. “This has proven to be a real difficulty for us in the Department. We discussed at length the difficulties caused last year by Category M and how these might be resolved taking into account our respective positions. The methodology developed by the CSA has indicated that the effect of Category M in Northern Ireland was at least £3 million in 2007/08.”

At first glance this rare admission of defeat from the Department may seem encouraging. “On one point I think we are agreed,” she added, “Category M is not fit for purpose for Northern Ireland and we need to replace it.” However, this acknowledgement was made almost eighteen months ago and led Lord Chief Justice Morgan to highlight another crucial failure by the Department.

“Once it became apparent to the Department that the Drug Tariff was not fulfilling its statutory purpose there was a legal obligation on the Department to take steps to achieve that purpose,” he explained. His concluding judgment added that although the Department’s commitment to finding suitable compensation was taken into account, their ‘open table’ approach to negotiating left a lot to be desired. “It is apparent that the negotiations effectively broke down in or about February 2007 and that by May 2008 the Department had ceased work on trying to find a compensatory amount for the years 2007/08 and 2008/09.”

Perhaps most insultingly, the Department’s defence appeared to consider no legal obligation to pay the compensatory amount. When invited to respond, the Department declined to make any further comment until time had been taken to “carefully consider” the ruling.

The judgment continued: “Regulation 9 of the 1997 Regulations imposes a legal obligation on the Department to compile and publish the Drug Tariff. The Regulation expressly provides that this obligation is to be carried out for the purpose of enabling arrangement to be made for the provision of pharmaceutical services… As is clear from the consideration of the statutory background above the terms of service on which pharmacists provide material and services are highly regulated in the public interest. The provisions in remuneration in Regulation 9 and Schedule 2 of the 1997 Regulations inevitable reflect the need to ensure that pharmacists are fairly and reasonably compensated in a timely fashion.”

Throughout the legal process, it became increasingly apparent that determining what constitutes as fair and reasonable compensation was largely guess work. Representing the Department, Mr McClean QC explained that the compensatory amount for 2006/07 was a one-off payment which had been achieved by looking at actual prices before Category M was introduced and based on assumptions.

The BSO (then CSA) head of professional pharmacy services Kathryn Turner then attempted to then use the same methodology to come to a figure for 2007/08. However, by then a further 83 new products had to be taken into account and some of these high-volume and high-cost drugs, so the exercise was abandoned. It also suggests that £3million is firstly a minimal payment for one year and paltry when offered for the two year period. Of course, the Department’s responsibility hasn’t changed.

“The outcome of the Judicial Review clearly shows that the Department must find a fair and consistent way to give community pharmacists the resources necessary to provide these essential primary care services for patients in Northern Ireland,” Terry added. “We hope that the Department will now work on developing a fair and reasonable Drug Tariff and thoroughly consult PCC during this process.

“This really is the culmination of eighteen months of very hard work and the most frustrating part of it was so often having nothing to report, which must have also been very frustrating for contractors. We are of course conscious that the Department has six weeks from the date of the ruling to lodge an appeal, but in the meantime I am delighted to report that PCC were awarded all legal costs which were incurred pertaining to the Judicial Review.”

Although the Department indeed has the opportunity to challenge the decision, an appeal looks unlikely. Firstly, all legal fees involved in this process are now the Department’s responsibility and secondly, it would be impossible to appeal to a higher power – since the Lord Chief Justice sits atop the hierarchy.

Terry continued to say that what he describes as a “resounding victory” for PCC and contractors, may provide the foundations for resuming contract negotiations. “All contractors have now been updated and when we have finished reviewing the details of the ruling with our legal experts we hope to reach a financial settlement with the Department, so that all monies unlawfully withheld can be returned. We also wish to continue a dialogue to agree terms of a new contract for community pharmacy in Northern Ireland.”

John Clark, general manager for Gordons Chemists expressed his relief and satisfaction with the ruling. “We are certainly glad to see a resolution to this ongoing Judicial Review, which has been a very long and drawn out process,” he told NIPinF. “We hope that both parties can now move forward to resolve outstanding issues and use this as a basis to ultimately negotiate a new pharmacy contract for Northern Ireland.”

Michael Guerin, managing director of Medicare Pharmacy Group agrees.“I would welcome an earlier resolution to the matter having proved that it was unlawful, pharmacists need to be compensated for the past three years as soon as possible. When you combine this with the difficult financial conditions that we are all operating in it equates to a high number of pharmacists facing hardship. They need to propose a more realistic way forward and the judge did say in his ruling that the fact that they have contravened statutory obligations by failing to draw up a Drug Tariff for Northern Ireland.”

Although unsurprising, Lord Chief Justice Morgan’s closing comments will be encouraging for the negotiating body. “The real difficulty here was that the Department was wedded to the introduction of Category M whereas the applicants (PCC) contended that the introduction of this arrangement was likely to prevent fair and reasonable remuneration,” he said during the ruling. “I do not consider that the applicants were in any sense unfairly taken by surprise by the Department’s position. They were, however, perfectly correct to point out that the Departmental position did not correspond with the statutory obligation.”

Meanwhile, responsibility for creating a new model is still held by the Department although in terms of finding a fiscal solution, Department officials and PCC must engage to analyse real costs and eventually resume contract negotiations. 2010 is already promising to be a memorable year for Northern Ireland pharmacy.