Suspicions of fraud went back 18 years

THE Department of Health suspected as long as 18 years ago that pharmacists were defrauding the General Medical Services Payments Board of almost €14 million a year in claims for discounted medicine prices, it was reported in a High Court judgment yesterday.

The disclosure was made in a test challenge by more than 20 pharmacies to the Health Service Executive’s (HSE) decision to slash by half amounts paid to pharmacies for the provision of drugs and services under the General Medical Services (GMS) scheme.

Ms Justice Mary Finlay Geoghegan, delivering a reserved judgment in a case taken on behalf of hundreds of pharmacies, held that the HSE was in breach of contract in reducing payments to pharmacists.

The HSE introduced a new payments scheme in March in a bid to cut the HSE bill under the GMS by millions of euro.

The High Court heard that the basic ex-wholesale price paid to pharmacists by the HSE for drugs provided by them under the GMS had from 1971 included a 17.6% mark-up to reflect what wholesalers were invoicing pharmacies.

The HSE argued the Minister for Health was entitled to reduce the mark-up to as low as 7% because of discounts granted by wholesalers to pharmacists.

The action was taken by the Hickey group of about two dozen pharmacies but the benefits of the decision will affect similar cases.

The judge found that the Hickey pharmacies were entitled to payments including reimbursement of the ingredient cost of medicines and other items supplied under the GMS at the rate of the ex-factory price prevailing in the month in which the item was dispensed plus 17.66%.

The judge will now deal with damages claims by the Hickey outlets.

Judge Finlay Geoghegan said she was satisfied that relevant officials within the department were aware by the late 1980s that there existed a practice of wholesalers giving significant discounts to pharmacies that related to products dispensed under the GMS and other community drugs schemes.

She found as a matter of probability that the officials did not have “verifiable evidence” of the level of discount being granted by wholesalers to pharmacists but said it appeared that by 1990 some officials were in a position to make an educated guess.

A 1990 department memo said: “If one assumes that discounting is at the level of 10% across the board then it could be argued that pharmacists are effectively defrauding the GMS Payments Board of around IR£11million per annum.”

The judge said there was no evidence of any effective steps taken pursuant to this memo.