Hickey v Health Service Executive

• Jurisdiction: Ireland
• Court: High Court
• Judge: Ms. Justice Finlay Geoghegan
• Judgment Date: 11 September 2008
• Neutral Citation: [2008] IEHC 290
• Docket Number: [2007 No. 8432 P & 2008 No. 180 COM]
• Date: 11 September 2008

[2008] IEHC 290

THE HIGH COURT

[8432 P/2007]

[180 COM/2007]

Hickeys Pharmacy & Ors v Health Service Executive

BETWEEN

PATRICK HICKEY, DRISHLAWN LIMITED, HICKEY'S PHARMACY LTD., WHEATON PHARMACY LTD., GLEESON'S PHARMACY LTD., PHILIP DILLON LTD., ESTHERFIELD LTD., DGM PHARMACIES LTD., T/A HICKEYS PHARMACY

PLAINTIFFS

AND

THE HEALTH SERVICE EXECUTIVE

DEFENDANT

HEALTH ACT 1970

HEALTH ACT 2004

HEALTH ACT 2004 S63

COMPETITION ACT 2002 S4(1)

HEALTH ACT 1970 S59(1)

IGOTE LTD v BADSEY LTD 2001 4 IR 511

KRAMER v ARNOLD 1997 3 IR 43

PRENN v SIMMONDS 1971 1 WLR 1381

REARDON SMITH LINE LTD v YNGVAR HANSEN-TANGEN 1976 1 WLR 989

PLUMB BROS v DOLMAC (AGRICULTURE) LTD 1984 271 EG 373

I P U & ORS v MIN FOR HEALTH & ORS UNREP HIGH CLARKE 29.6.2007 2007 IEHC 222

COMPETITION ACT 2002 S4

COMPETITION ACT 2002 S4(1)

CONTRACT

Terms

Written agreement - Construction - Remuneration clause - Elements of remuneration provided for - Whether entitlement to reimbursement of ingredient cost price of drugs at fixed rate - Variation of remuneration clause - Whether variation validly effected - Plumb Brothers v Dolmac (Agriculture) Ltd. (1984) 271 EG 373, Prenn v Simmonds [1971] 1 WLR 1381 and Reardon Smith Line v Yngvar Hansen-Tangen [1976] 1 WLR 989 followed; Igote Ltd v Badsey Ltd. [2001] 4 IR 511 applied - Competition - Payment variation clause - Requirement to consult with representative body - Whether requirement to reach agreement between Minister for Health and Children and representative body regarding price - Whether clause void - Competition Act 2002 (No 14), s 4(1) - Relief granted (2007/8432P - Finlay Geoghegan J - 11/9/2008) [2008] IEHC 290

Hickey v Health Service Executive

Facts: The plaintiff pharmacies claimed that they entered contractual agreement for the provision of community pharmacy services in the 1970s and that the defendant was in breach of its contracts with them by virtue of a decision to reduce the amount paid for in the reimbursement of costs for community services drugs in 2006. The defendant denied that it was in breach of contract and alleged that the terms contended for by the plaintiff were void by reason of s. 4 Competition Act 2002.

Held by Finlay Geoghegan J. that the plaintiffs had a contractual right to receive payment under the terms of the originally concluded agreement. It was an express entitlement and no findings as to implied terms were need. There was no issue in respect of s. 4 Competition Act 2002. Counsel would be heard as to the claim for damages for breach of contract.

Reporter: E.F.

1 Ms. Justice Finlay Geoghegan delivered on the 11th day of September, 2008

2 1. The first named plaintiff, Mr. Hickey, is a pharmacist and the majority shareholder of the second named plaintiff. The second named plaintiff is a holding company which owns twenty-four shops which trade as "Hickeys Pharmacies". The third to eighth named plaintiffs are companies within the Hickeys Pharmacy Group which have entered into individual community pharmacy contractor agreements for the provision of community pharmacy services, under the Health Act, 1970 ("CPC agreement"). Those agreements are each in standard form and were agreed in 1996 following negotiations between the Minister for Health and Children ("the Minister") and the Irish Pharmaceutical Union ("IPU").

3 2. The defendant is the body established by the Health Act, 2004 to manage the health services and perform the functions assigned to it by that Act. The CPC agreements entered into by the third to eighth named plaintiffs prior to 2004, were with the relevant health board. Pursuant to s. 63 of the Act of 2004, those agreements now have effect as if the defendant is substituted for the health board and are enforceable by and against the defendant.

4 3. In this judgment, save where I expressly otherwise state, insofar as I refer to the plaintiffs, I am referring to the third to eighth named plaintiffs who are now parties to a CPC agreement with the defendant.

5 4. The plaintiffs claim that the defendant is in breach of its contracts with them in reducing the amount paid for the reimbursement of cost in the payment in respect of the cost of drugs dispensed under the GMS scheme and other community drugs schemes. Such reductions were decided upon by the defendant in September 2006 and September 2007. The defendant denies that it is in breach of contract and asserts that if the Court was to uphold certain of the contractual terms contended for by the plaintiffs that they are void, by reason of section 4 (1) of the Competition Act 2002.

6 5. The plaintiffs' claims, and the defendant's defence thereto, requires the Court first, to determine what were the relevant contractual provisions between the plaintiffs and the defendant in September 2006 and September 2007 in relation to the payments which have been reduced by the defendant. Whilst there are almost no facts relevant to those issues in dispute between the parties, it is necessary, for a full consideration of the contractual arrangements, to set out the relevant factual background in relation to the supply and distribution of medicines dispensed under the GMS and other community drugs schemes leading to the 1996 CPC agreements and the contested decisions taken by the defendant in 2006 and 2007.

7 6. The persons participating in the supply and distribution of drugs in Ireland and the arrangements made in relation thereto for supply, under the General Medical Services (GMS) scheme, include the following:

8 (i) The manufacturers and importers of proprietary and non-proprietary drugs and their representative organisations which, at different times, were the Pharmaceutical and Allied Industries Association, the Federation of Irish Chemical Industries ("FICI") and the Irish Pharmaceutical Healthcare Association ("IPHA").

9 (ii) The wholesalers and their representative body, the Pharmaceuticals Distributors Federation ("PDF").

10 (iii) The pharmacists, referred to in the agreements as "the contractor", and their representatives, the Irish Pharmaceutical Union ("IPU"), and its committee, the Pharmaceutical Contractors' Committee ("PCC").

11 (iv) The Minister and his/her Department ("the Department").

12 (v) The health boards.

13 (vi) The GMS (Payments) Board.

14 (vii) The defendant, as successor to the health boards and GMS (Payments) Board.

15 7. The Health Act, 1970 provided for the reorganisation of the health services and the introduction of the General Medical Services ("GMS") scheme. It also provided for the establishment of health boards. Section 59 (1) obliged the health boards to make arrangements for the supply, without charge, of drugs, medicines, and medical and surgical appliances, to persons with full eligibility. It also permitted health boards to make provision for the supply of such drugs, medicines, etc., to other persons. From the outset, it was intended that drugs be dispensed by privately owned pharmacies free of charge to eligible persons and that such pharmacies be remunerated for such supply by the health boards.

16 8. In 1971, the Minister (through his Department) and the IPU, entered into a memorandum of agreement in relation to the proposed arrangements for the supply of drugs by pharmacies, for the purposes of the GMS scheme ("the 1971 memorandum"). The 1971 memorandum envisaged that a standard form of agreement, to be entered into between a pharmacist and the relevant health board, would be negotiated between the Department and the Joint Negotiation Committee representing community pharmacists.

17 9. Paragraph 13 of the 1971 memorandum stated: "It is proposed that in general the provisions of the agreement shall be based on the terms of this memorandum".

18 10. The 1971 memorandum, under a heading of "Basis of Remuneration" provided at paras. 20 and 22, the following:

19 2 "20. The pharmacist will be remunerated on the basis of the recoupment to him of the ingredient cost of prescription items dispensed for eligible patients under the scheme, together with a fee for each item (subject to paragraph 25). The fee will contain specific elements to cover the cost of containers, capital investment and obsolescence ...

20 22. The price of a proprietary item to the pharmacist will be taken as the basic ex-wholesale price ruling during the month the prescription was dispensed. The ingredient cost of non-proprietary items will be arrived at on the basis of lists agreed between the Department of Health, and the Joint Negotiating Committee..."

21 11. The 1971 memorandum then sets out at paras. 23 to 33 under a heading of "Details of Remuneration", certain detailed fees to be applied, and also made provision for advance payments.

22 12. A standard form contract was subsequently agreed in 1971. This was the agreement entered into between each pharmacist ("the contractor") and their relevant health board, between that date and the introduction of the new CPC agreement in 1996. The only provisions relevant to payments to be made to the pharmacist are those at paras. 10 and 11 which provide:

23 2 "10. The board shall in consideration of the service provided by the contractor in accordance with these terms and conditions and on foot of claims made in the form and at the times directed by the Minister for Health make payments or arrange for payments to be made to the contractor in accordance with such rates as may be approved of or directed by the Minister from time to time after consultation with the Pharmaceutical Contractors' Committee.

24 11. The contractor shall not demand or accept any payment or consideration whatsoever, other than payments made under paragraph 10 in reward for the supply of medicines and appliances under section 59 (1) of the Health Act, 1970".

25 13....