High Court rules pharmacy funding cut was not unlawful

High Court rules pharmacy funding cut was not unlawful

May 18, 2017

The funding reduction imposed on community pharmacies on 20th October 2016 and the consultation relating to it were not unlawful and cannot be quashed, the High Court has ruled.

PSNC and the NPA had both brought Judicial Reviews of the Secretary of State’s decision to impose the funding reduction. The cases were heard in a joint hearing in March.

Mr. Justice Collins, who heard the cases, has concluded that the Secretary of State’s actions and decisions were not unlawful. His judgment was handed down at 10:30am on Thursday 18th May.

The Judge considered the case in the context of the need to find £22bn in savings across the NHS, and found that: “The need for saving of money was inevitably driving the decision and careful consideration had been given to the possibly damaging effects.”

Mr. Justice Collins said: “I have with some regret concluded that I cannot properly quash the decision”.

Despite ruling in favour of the Secretary of State, Mr. Justice Collins was critical of the Department of Health’s failure to provide key analysis to PSNC, calling it “regrettable” and “unjustified”.

“There is undoubtedly blame to be placed on the Department for failing to provide the analysis leading to 15% and for not producing as soon as it was known that proceedings were contemplated all the material which JH [Jeannette Howe, Department of Health] has now produced,” he said.

The decision means the changes made in the December 2016 Drug Tariff, which implemented a funding cut and introduced a new Single Activity Fee, among other changes, will remain in force. Funding for 2016/17 was set at £2.687bn and for 2017/18 at £2.592bn.

Further information is included in a summary of the judgment and a selection of Frequently Asked Questions:

PSNC Briefing 031/17: Summary of the Judicial Review judgment (May 2017)

Frequently Asked Questions on the judgment (May 2017

Read the full judgment: PSNC & NPA v SoS for Health

 Statement from Sue Sharpe, PSNC Chief Executive

“PSNC is disappointed with this result. Our lawyers and QC felt that we had a good case; and there are serious criticisms of the consultation process and of the Department of Health made in the judgment. Unfortunately, the fact that the Secretary of State has very wide powers to decide what is relevant to his decisions, coupled with the Department withdrawing reliance on analysis they had undertaken means that we failed to establish that the inadequacies in the process were sufficient to make the process unlawful.

A critical point in the case was the Department of Health’s conduct regarding its analysis of Companies House data which led to a figure of 15% operating margin for community pharmacies. PSNC first saw this figure when the impact assessment was published alongside the imposition on 20th October 2016. The report has since been discredited by experts at PricewaterhouseCoopers. Extraordinarily, although the Minister laid emphasis on this study when announcing the imposition in Parliament and it was repeatedly used in briefing papers disclosed in the litigation, counsel for the Department of Health stated at the hearing that no reliance was placed on it. 

The judgment also refers to an inaccurate letter sent to the Prime Minister in August 2016, and to the failure of the Department to disclose information immediately after it was clear that proceedings were being considered.

A mass of information regarding the policy and thinking behind the funding cuts was disclosed through the legal proceedings allowing us, at last, to see the masterplan behind the 17th December 2015 letter which was devised in mid-2015 and which the Department denied existed. Had we seen this when the letter was published, we would have had the opportunity to interrogate and challenge the Department’s thinking, and the consultation period would have been very different. But it was withheld from us.

The Judge noted the ‘hardships’ that would inevitably be suffered with any reduction in remuneration. We know that the impact on community pharmacies and their patients could be severe in some cases, and we will continue to highlight the impact that this will have on patients, as well as on wider health and social care services and livelihoods. As the Judge noted, there is a real concern about the unintended consequences of the imposition in increasing pressure on GPs and A&E departments.

On the issue of pharmacy closures, the Judge found that these were a recognised and desired consequence but not the specific intention of the funding cut, noting comments made by the Chief Pharmaceutical Officer about there being too many pharmacies. PSNC could not and still cannot predict the number of closures that will result from the changes – as we all know, community pharmacy contractors, as any business owners, will do anything they can to avoid closures and they will all seek to find ways to survive by reducing costs and services.

The Committee voted unanimously in favour of this legal action to challenge the 20th October 2016 funding imposition given the issues at stake and the lack of a fair consultation with us. Our priority now is to ensure that the valuable contribution that community pharmacies make to local communities and the NHS is never again disregarded as it so clearly was in the process leading up to the letter of 17th December 2015.”

Statements from PSNC Committee Members

“I have been a member of PSNC’s Negotiating Team for a number of years, but the past eighteen months have been like no other time. As the Judge noted, we have previously tried to have constructive conversations with the Department of Health. But following the letter of December 17th 2015 each member of the Negotiating Team noted a change in the tone of engagement; unlike in previous years, this time there was no willingness to negotiate with us or explore options. And it appeared to us that this time, none of the representatives from the Department of Health or NHS England had the usual room for manoeuvre throughout the discussions. 

I share the anger of many community pharmacy contractors at the way in which the Department of Health has conducted itself, and everyone on PSNC will be disappointed that we have not been able to persuade the Judge that the Department’s conduct amounted to unlawfulness. But it was important for us to challenge the decision, to ensure that we are getting the best possible funding arrangements for contractors. The past eighteen months have been important both in building support for the sector from patients and MPs, and finding out where we stand when it comes to the need to make savings across the health service. We very much hope that the Department will take on board some of the findings of this hearing, and that we can return to more open and meaningful discussions about community pharmacy’s future without delay.”

Garry Myers, Independent Contractor, Member of PSNC, and Member of PSNC’s Negotiating Team

“As a community pharmacy owner and a member of PSNC I’m both frustrated and disappointed with today’s decision. PSNC has always sought to work constructively with the Government so that pharmacies can do their best for patients and the NHS; but in the last year it doesn’t feel like that effort has been appreciated. I’m very disappointed that we were not able to meet the very high threshold needed to prove that the Department’s actions were unlawful and needed review. 

Of course any legal process costs money, but the sums of money that we will end up spending on this litigation, although large, are nothing in comparison with the cuts that we were seeking to prevent. We felt that we needed to challenge the conduct of the Department, in particular its reliance on a 15% operating margin figure for community pharmacy and withholding information from us, in order to do our best to support the interests of contractors. The judgment contained a number of criticisms of the consultation process and the Department. Everybody on PSNC, including the representatives from the large pharmacy organisations as well as the independents, voted in favour of taking legal action after lengthy discussions and careful examination of the issues.”

Mark Burdon, Independent Contractor, PSNC Member and Chair of PSNC’s Resource, Development & Finance Subcommittee

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