Day 2 – Wednesday 23 March

Lawyers representing Health Secretary Jeremy Hunt have defended his decision to slice more than £320m off the community pharmacy budget.

But they have acknowledged that the cuts may make some small pharmacies unviable and that it is impossible to say how many may have to close.

The Pharmaceutical Services Negotiating Committee (PSNC) is mounting a High Court challenge to the cuts, announced in October last year.

With the backing of the National Pharmacy Association
(NPA), the PSNC said up to a quarter of the country's 11,600 community pharmacies may be forced to close.

A flawed consultation?

Mr Hunt's decision was taken after a flawed consultation on the basis of inadequate data, lawyers for the two bodies argued.

But James Eadie QC, for Mr Hunt, has told the court that the cuts are a vital part of NHS efficiency savings that simply have to be made.

On top of the overall funding reduction, four different fees in the past paid to pharmacies will be consolidated into a ‘single activity fee’.

Annual establishment payments of about £23-25,000, made to about 92% of pharmacies, will also be reduced.

But Mr Eadie said the changes include a Pharmacy Access Scheme" (PhAS) which will ‘top up’ the income of pharmacies considered most important to public access.

Those payments will generally be made to pharmacies that are more than one mile from the nearest other pharmacy, although individual pharmacies that are short of that distance apart can ask for a review.

The policy was, in part, intended to address ‘clustering’ in some areas that have several pharmacies in close proximity and ‘consume a greater amount of funding than is necessary to maintain good patient access’.

And the PhAS will exclude pharmacies in the top quartile of dispensing volume, ‘since these pharmacies are less likely to be in need of financial protection’.

Quality Payments Scheme

From April this year, a system of payments will also be introduced for pharmacies ‘that meet certain quality criteria’, said Mr Eady.

The QC added: ‘The changes constituted a package of interlinked measures aimed at increasing efficiency whilst protecting patients' access to pharmacies.

‘The context was a need to make efficiency savings in the NHS budget and they involved high-level, macro-economic and political judgments about how best to implement that need and where NHS funding should be directed.’

Mr Hunt was aware that the cuts would create ‘a risk of some pharmacies becoming unviable and having to close’.

‘Extensive consideration’ to impact of cuts

But Mr Eadie said: ‘The Secretary of State gave extensive consideration over a lengthy period to the impact of the proposals, including the risk of closures.

‘In the context of a macro-economic decision of this kind, it was not necessary for the Secretary of State to seek to determine how many pharmacies would in fact close or reduce their services as a result of any particular level of funding reduction.

‘Nor would it have been possible for the Secretary of State to do so.’

Community pharmacies, many of them small family businesses, operate a wide range of different trading models and ‘it was not possible to make a reliable estimate of the number of pharmacies that would be at risk of closure’, Mr Eadie added.

Mr Hunt had used information available from Companies House to do the best he could in assessing the likely impact on the community pharmacy sector.

And Mr Eadie acknowledged that that information only gave a limited picture of the finances of individual pharmacies.

Actively managing impact of cuts

The PSNC, however, had been ‘consulted extensively’ and was ‘fully aware’ that Mr Hunt was ‘actively seeking to manage’ the impact of the cuts.

The body knew that any information it could provide would be ‘welcomed’ by Mr Hunt and had ‘ample opportunity’ to put in evidence.

Alison Foster QC, for the PSNC, attacked the cuts as ‘unprecedented’ and an ‘irreversible step towards complete re-shaping of the sector without proper debate or analysis’ during the first day of the hearing (21 March).

The changes went far beyond ‘tweaking the system’ and ran the risk of ‘cutting out a whole tranche, maybe a quarter of the sector’, she told the court.

See here for a summary of day 1 of the case.

See here for a summary of day 3 of the case.