After a long wait, judgment was handed down on May 18 on the PSNC and NPA’s application for judicial review of the Department of Health’s decision to impose a reduction in community pharmacy funding for England.
Despite indicating that he could not quash the Department’s decision, Mr Justice Collins made some trenchant criticisms of the way it had behaved.
The cuts, which are substantial and have no precedent, mean pharmacy remuneration has been reduced by 4 per cent in 2016-17, and will fall by 7.4 per cent in 2017-18. In practical terms, contractors have already seen the average item value for a prescription in England fall from £9.08 in November 2016 to £8.67 in February 2017.
Neither PSNC nor NPA could challenge the amount of the funding cut: instead they claimed that the way it was imposed was unfair and in breach of statutory requirements. PSNC believed that the Department had failed to carry out a lawful consultation, while the NPA focused on arguments that the DH had failed to properly discharge its equality duties.
The judgment is not an easy one to follow. According to PSNC chief executive Sue Sharpe, “there are many ambiguities and unresolved issues [in the judgment] being examined by the PSNC legal team.” PSNC is therefore considering an appeal.
It would seem that Mr Justice Collins had some sympathy with PSNC’s case. For instance, he used words like “regrettable” and “unjustified” to describe the Department’s failure to disclose a Companies House analysis, which purported to show that community pharmacies have an operating margin of around 15 per cent (a figure that has since been discredited).
The DH also came under criticism for its inaccurate briefing of the Prime Minister. A letter sent to Mrs May in August 2016 stated that £2.8bn is spent dispensing around £7.2bn of drugs. The judge said this was not an accurate statement “since it fails to have regard to services beyond dispensing which are provided by pharmacies”.
PSNC submitted that the cut in funding involved a misuse of the Drug Tariff to achieve a fundamental restructuring of community pharmacy and a reduction in pharmacy numbers, but the judge did not entirely agree. Although the Tariff had not been used in this way in the past, it was within the scope of the power conferred by legislation, he suggested.
“While I have no doubt that a reduction in the number of pharmacies was regarded by the Department as desirable, the changes were not made with that intention. The changes were to save costs and to implement the required savings that were dictated by government,” he said.
In a judicial review the bar is set very high for proving that the Department had acted unlawfully. While the judge said that “clearly there had been a significant lack of disclosure of any of the material on which the [DH’s] proposals were based”, he did not think that the disclosure would have made any difference to the outcome.
In other words, the consultation which DH had with PSNC might have been poorly conducted, but it was not so unfair as to be unlawful. “I have with some regret concluded that I cannot properly quash the [DH’s] decision,” Mr Justice Collins said. “It is equally unfortunate that the goodwill which existed between the PSNC and the Department has been lost.”
And he indicated some displeasure with the way the Department conducted its case. “There is undoubtedly blame to be placed on the Department for failing to provide the analysis leading to 15 per cent and for not producing, as soon as it was known that proceedings were contemplated, all the materials that [it] has now produced.”
So there it stands – unless, of course, PSNC decides to appeal against the judgment (see update at the end of the article). But there are consequences – and not just financial ones – should there be an appeal. The judicial review sets no formal precedent, but decisions made in the Court of Appeal may determine legal points that could come back to influence pharmacy, for better or worse, in the years to come.
While costs have yet to be apportioned, it is usual for the unsuccessful party to pay the costs of the successful party, so PSNC and NPA could be expected to pick up the DH’s legal costs.
In its submission for permission to appeal, PSNC argues that the Department’s conduct in failing to disclose relevant information in a timely manner warrants a departure from this general rule, and argues that the DH should only be able to recover around half of its costs.
So where do we go from here? Much depends on whether the case goes to appeal and how those “unresolved issues and ambiguities” are addressed.
A judicial review is a legal process by which decisions made by Government ministers and departments, local authorities and other public bodies can be challenged on the basis that they are unlawful, irrational, unfair or disproportionate.
It is a directly accessible check on abuse of power, a means of holding the executive to account, and of providing redress when public agencies and central Government act unlawfully. In a country without a written constitution, it plays a particularly important role.
What is clear is that relations between the DH and PSNC are at an all-time low. While routine work at an operational level with the Department has continued, at a more senior level doors have been closed for 18 months and could stay that way for some time to come. Whether the result of this month’s general election offers the opportunity for a ‘reboot’ remains to be seen.
There is some evidence that the publicity campaign engineered by NPA and PSNC to highlight the damage the funding cuts might cause is altering perceptions about what community pharmacy offers. Never before have the election manifestos of the three major parties in England all mentioned community pharmacy and made specific pledges.
The NPA says that the judgment recognises the important role of community pharmacy in primary care, which some ministers and officials have sought to diminish.
Chairman Ian Strachan believes it has also established an important legal principle, namely that the health secretary must now have serious regard to the duty to reduce health inequalities when making decisions about the NHS.
Outside the court precincts, the reality of a substantial pay cut has driven pharmacies to engage with the quality payment scheme. Whatever contractors might think of its implementation, it is arguably the only positive development to come out of the past year’s wrangling. It will be interesting to see how many contractors are able to deliver against the four gateway criteria and the eight quality criteria by the next claim date on November 24.
The NPA, in its submission, raised additional issues. The NHS Act 2006 says the Secretary of State “must have regard to the need to reduce the inequalities between the people of England with regard to the benefits they can obtain from the health service”.
While the DH argued that the Pharmacy Access Scheme would mitigate the impact of any potential closures in areas where pharmacy access was sparse, the NPA said that it had failed to take into account that in deprived areas, where distance was not a factor, there was likely to be an increased need for access to services.
The judge recognised that there would be a real risk that access could be reduced and that pressure on GP services could increase. However, overall he concluded that the DH had taken “proper regard” to its equality duties.
Relations between the DH and PSNC are at an all-time low
Update June 23rd:
PSNC has been given permission to appeal in its judicial review case against the secretary of state over the funding cuts imposition.
In making his decision, Mr Justice Collins stated: “While naturally I am not persuaded that I failed in any of the respects alleged … I recognise the real effect of the cuts on pharmacies and the apparent reliance on the 15 per cent [margin estimate] and the non-disclosure [of this information to PSNC].”
The appeal is not likely to be heard for several months.
Sue Sharpe said that ideally PSNC would not wish to pursue an appeal, but will do "what we feel is right to protect pharmacies and the patients they care for.”