Chemists (Payments) (Hansard, 25 January 1984)

§ Mr. Kenneth Clarke

Last June an inquiry, which had been carried out with the agreement of the pharmaceutical services negotiating committee, showed that the average trade discount which chemists had obtained on drugs since October 1980 had been considerably greater than the amount taken into account in fixing their payments, which were intended to reimburse them for the actual cost of the drugs they dispensed. As a result we reached agreement with the PSNC in August both on a new discount scale for the future and on a surcharge to that scale to offset the excessive past payments. We informed family practitioner committees of the new rates to apply to prescriptions dispensed from 1 August 1983.

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In October a newly formed group, the post 1980 contractors' committee, took legal proceedings to challenge the arrangements for taking account of discounts on drugs. At a hearing in the High Court in November we accepted that the form in which the changes had been made was not legally valid and undertook to suspend the operation of higher discount scales and to pay the additional amounts already deducted as a result of these scales.

The full hearing of the committee's action is due to be held on 9–10 February. Among other things the committee's case is that it is illegal to withhold money to compensate for past overpayments. It is a well established feature of the remuneration arrangements for all four contractor professions — pharmacists, general medical practitioners, dentists and opticians — that over and underpayments by the Government are made good in future years. The ability to make such adjustments is in the interests of contractors and Exchequer alike, and it is important to be able to continue to do so. Such adjustments have been made to increase payments to compensate professions for underpayments at least as often as they have been made to recover overpayments on behalf of the taxpayer. The legal position of all such adjustments has been challenged and prolonged litigation might be needed to resolve it. The Government have therefore decided to take the opportunity to introduce into the Health and Social Security Bill a clause to remove doubt, for both the past and the future, by restoring the position to what Governments and professions have assumed it to be over the years.

Negotiations will commence with the PSNC on the period over which the discount scale should be adjusted to offset the excessive payments made on this occasion in the past; this period will not begin until the Health and Social Security Bill has received Royal Assent.

The period of excessive payment involved in this particular negotiation with the pharmacists extends back over an unusually long time, and the sums involved are large. I am therefore prepared, exceptionally, to make a special adjustment in favour of those chemists who entered into contract with the National Health Service after the discount inquiry began in October 1980, although they could have been expected to know when they did so that under long-standing practice their future remuneration would be reduced to reflect what the inquiry showed to have been overpaid in the past. This will be without detriment to the other contractors. The arrangements for this adjustment will be discussed with the post 1980 contractors committee and the PSNC.

The Government are urgently considering ways of improving the existing arrangements for payment for pharmaceutical services and I am anxious that serious negotiations on this should begin with the PSNC as soon as possible. One aim will be to avoid the build-up in future of large over or underpayments. I believe that the profession would welcome this and would wish to see a clearer agreement negotiated that will be fair to both parties. In preparing our proposals for discussion with the PSNC we will be assisted by Binder Hamlyn, Chartered Accountants.