Drug firm hits out over HSE margin cuts

THE chief executive of United Drug has claimed the Health Service Executive (HSE) is trying to make up for its own budget shortfall by cutting the profit margins for drug distributors.

Liam FitzGerald told the Irish Examiner yesterday that his company and other distributors were “sitting ducks” for the HSE, which last month announced plans to cut the margin paid to distributors from 17.6% to 8% from the beginning of 2008. Additional cuts are proposed for 2009.

He said the cuts threatened many pharmacies, particularly those in rural locations, and that his company would mainly focus its future investment outside of Ireland. He called on the HSE to publish the recommendations of a report drawn up by Indecon on the cost of distributing drugs.

Mr FitzGerald called on Health Minister Mary Harney to carry out a full regulator impact assessment of the HSE’s move.

He was speaking as United Drug upped its earnings forecast for the year sending its shares up as much as 6%.

The company said in a trading update to investors yesterday that earnings in the year to end September would rise by “double digits” on the 2006 performance.

Shares in United Drug shot up 6.2%, their biggest one-day gain in more than two years. They eased back in later trading to end the day up 3.3% to 3.41.

United Drug said it experienced good trading conditions with strong revenue growth across its four operating divisions.

The company said its distribution business had managed to cope well with the new pricing regime implemented for branded drugs in March this year. This cut 20% off the price in branded drugs where a generic alternative is available.

It also said it made significant progress in its supply chain services division towards the development of a European pharmaceutical contract packaging business.

The trading statement said: “The group acquired two contract packaging businesses, Budelpack in Belgium and MPF in Holland. Both of these businesses have performed well since being acquired.”

The company added: “The group remains positive about the fundamental dynamics driving the demand for healthcare goods and services in our core markets ... despite the ongoing challenge presented by government regulation impacting on parts of the business.”