Supreme Court of Ireland Decisions

Both these cases challenge the legality of an agreement made on 31st May, 1996, between the Irish Pharmaceutical Union and the health boards. The purpose and intention of the agreement was to provide a foundation for the enhancement of the role of the community pharmacist and the quality of, and accountability arrangements for, services provided in community pharmacies in the context of furthering the aims of the Health Strategy.

By way of background and introduction, the Irish Pharmaceutical Union in 1994 lodged a claim for a substantial increase in dispensing fees paid to community pharmacy contractors under the General Medical Services (G.M.S.) Scheme. Against the background of public pay policy it was agreed that the best way of progressing discussions on the claim would be to establish a group representing the health boards, G.M.S. (Payments) Board, the Department of Health and the Pharmaceutical Contractors Committee of the Irish Pharmaceutical Union. Its terms of reference required the group to examine aspects of the delivery of community pharmacy services which were of concern to either side and to make recommendations which would underpin the role of the community pharmacy in the provision of an accessible, high quality, cost effective and accountable professional service to G.M.S. patients and persons availing of the community drugs schemes. The three key principles of equity, quality of services and accountability outlined in the Health Strategy were the focus of the group’s work.

One of the recommendations of the group was the new contract which was intended, and did, replace the existing contract, which dated from 1972, for the provision of services under the Health Act, 1970. In the summary of agreed recommendations issued by the Department of Health/Irish Pharmaceutical Union following negotiation of the contract, the new contract was referred to in the following manner:-

“This contract provides a major new emphasis on the professional role of the pharmacist. It also sets out, in the context of the patient/pharmacist relationship, new standards in the quality of community pharmacy services expected. The contract also provides for enhanced accountability by all parties to the agreement in the dispensing of medicines under all publicly funded schemes.”

The contract contained a further provision whereby a sum of £250,000 was made available for the continuing education of community pharmacists, and further recommended that an annual sum of £500,000 be made available in subsequent years for the same purpose. It further provided that community pharmacists be supported in undertaking any necessary upgrading of their IT equipment for the purpose of improving the service. It also provided for a 3% increase in fees payable to community pharmacists under the G.M.S. Scheme, the Drug Costs Subsidisation Scheme and the Long-Term Illness Scheme.

These were significant and tangible benefits achieved at the end of a long and drawn-out process of negotiation between the Pharmaceutical Contractors Committee and the Department of Health. The negotiations date back as far as 1992, but intensified in early 1995 before ultimately reaching a successful conclusion. As Mr. Padraig Staunton, Chairman of the Pharmaceutical Contractors Committee, wrote to individual pharmacists on the 13th June, 1996:-

“The real negotiations which started in early 1995 had to be conducted within the constraints of the Programme for Competitiveness and Work (P.C.W.) and had to take into account, ‘the need for efficiency, flexibility and change…’.

In addition the pressure has been coming for increased accountability. Members will be well aware that the demand for such accountability has been publicised in recent times on T.V., Radio and in the national press.

The PCC therefore was looking for a variety of concessions which would make a significant contribution to the long-term economic well-being of members as well as a public recognition of the professionalism of pharmacists. The Department sought increased accountability and a contractual agreement which would set out how pharmacists would deliver on the professionalism for which they have been seeking recognition.”

The appellants in the present case were not, however, satisfied with certain aspects of the new contract, although they signed up to its terms and provisions, albeit they claim they did so out of necessity and because they had no alternative.

In the case of Collooney Pharmacy Ltd, its representatives sought a meeting with the deputy administrator of the North Western Health Board in September, 1996, to ventilate their concerns and to suggest a number of amendments. A meeting took place on the 3rd October, 1996, at which it was indicated that the North Western Health Board was unable to make any changes to the agreement.

On the 9th October, 1996, Mr. Patrick Durkin of Collooney Pharmacy wrote to Mr. John Hayes, Deputy Administrator of the General Practice Unit of the North Western Health Board in the following terms:-

“As we indicated to you, we intend to seek a judicial review of the North Western Health Boards decision to unilaterally impose the new agreement on us. We have been advised that there are in existence no valid regulations under the terms of section 59 of the Health Act, 1970 which justified the imposition of particular terms of this contract by you on us.

We have been further advised that the decision to impose the following terms in the contract is ultra vires and void for the reasons stated:-

Please confirm to us in writing within 7 days that pending the determination of the proposed judicial review proceedings, that you will not circulate any list of pharmacies at which high tech drugs may be purchased which excludes our above pharmacy and confirm that we will be paid at the same rate as all other pharmacies supplying drugs to eligible persons.”

In the circumstances, it would, I feel, be fair to say that this challenge has been brought because certain aspects of the “package” were regarded as unsatisfactory as outlined in Mr. Durkin’s letter.

I gratefully adopt the more detailed account of the background facts set out in the judgment of O’Caoimh J. in the High Court who, with his customary thoroughness, has not only recited all the background history and facts, but has also dealt fully with the correspondence and the legal submissions filed by both sides. He noted in the course of his judgment (delivered on the 14th May, 2004), that it was not being suggested that the Minister or the health boards should have consulted with some other representative body on the applicants’ behalf or that the interests of the applicants were in any material respect different to the interests of other pharmacists. Nor had it been suggested that objection was ever taken by the applicants to the fact that the Minister and the health boards were negotiating with the Irish Pharmaceutical Union. Furthermore, he noted that the supervising pharmacist of Collooney Pharmacy Ltd. was at all times a member of that union. He further noted the submission that it would have been wholly impracticable and indeed undesirable to have a process of individual negotiations or to have a situation where different pharmacies were subject to materially different terms and conditions in respect of the provision of the same services.

At the end of a carefully reasoned judgment, the learned trial judge refused to grant the appellants relief on any of the grounds argued.

In arguing the appeal before this court, Mr.Gerard Hogan, senior counsel on behalf of the appellants, characterised his challenge and appeal in the following manner:-

(a) The new contract is, in effect, an administrative regulation under the “guise” of a contract and is thus impermissible under s.59 of the Health Act, 1970.

(b) Certain individual provisions of the new contract are themselves ultra vires because they are either irrational or unreasonable.

Without further ado, therefore, I propose to address the two strands of this appeal, commencing with the argument that the arrangements put in place by the new contract are more appropriately the subject matter of ministerial regulation.

Section 59 of the Health Act, 1970, provides as follows:-

“(1) A health board shall make arrangements for the supply without charge of drugs, medicines and medical and surgical appliances to persons with full eligibility.

Mr. Hogan submitted that the new agreement, while contractual in form, was in reality a form of quasi-legislation or quasi-statutory instrument, insofar as it contained elements of regulation of the service provided by the respondents. He argued that the health boards are effectively the monopoly purchasers of the services provided under the G.M.S. by pharmacies such as the applicants. Under the terms of the new contract, the health boards had reserved the right to alter its provisions without the formal consent of his clients. The fact that the new contract provided for a three year requirement in terms of the experience of a supervising pharmacist, together with the power of unilateral alteration of the contract, was a clear indication that the contract was designed to regulate the provision of services under s.59(4) of the 1970 Act otherwise than by means of regulations promulgated by the Minister for Health and Children with the consent of the Minister for Finance. The quasi- legislative character of the contract was also highlighted by reference to individual and specific provisions of the contract to which reference had already been made in Mr Durkin’s letter. Indeed, Mr. Hogan suggested that clause 6(2) of the agreement, which requires that any pharmacy taking up the new contract must ensure that the nominated supervising pharmacist has at least 3 years experience in the practice of community pharmacy, could be seen as an attempt to interfere with the rights conferred by s.2 of the Pharmacy Act, 1962, which provides inter alia that an “authorised person” means a registered pharmaceutical chemist. Under s.2 of the 1962 Act, a person may not keep open shop for the dispensing or compounding of medical prescriptions unless the person is an authorised person and the shop and the dispensing and compounding of medical prescriptions therein are personally supervised by an authorised person. The new contract purported to interfere with the right of any qualified pharmacist to operate as a supervising pharmacist by introducing the 3 year requirement. The statute could not be revoked by a regulation; still less could the respondent achieve by means of administrative practice that which would be ultra vires if it were attempted by means of regulations promulgated under s.59(4) of the 1970 Act. Effectively, therefore, the health boards could not, it was submitted, indirectly achieve under the guise of contract that which the Minister could not do directly by regulations under s.59(4) of the 1970 Act. Section 59(4) impliedly precludes arrangements for the service to be made otherwise than by regulations made by the Minister with the intended safeguards provided therein (consent of the Minister for Finance, power of annulment by either House of the Oireachtas).

In making his submissions, Mr. Hogan relied principally upon the judgment of Henchy J. in McCord v. Electricity Supply Board [1980] I.L.R.M. 153 and the decision of this court in O’Neill v. Minister for Agriculture and Food [1998] 1 I.R. 539.

I would be of the view, however, that neither of the authorities relied upon support Mr. Hogan’s contentions, and I am further satisfied that this ground of appeal must fail.

In McCord v. Electricity Supply Board [1980] I.L.R.M. 153, customers of the E.S.B. were required to agree to certain standard terms and conditions which were determined unilaterally by the E.S.B. and which could be altered as the E.S.B. saw fit. In the course of his judgment Henchy J had stated (at 161):-

“.. it is important to point out that the contract made between the plaintiff and the Board (incorporating the General Conditions relating to supply) is what is nowadays called a contract of adhesion: it is a standardised mass contract which must be entered into, on a take it or leave it basis, by the occupier of every premises in which electricity is to be used. The would-be consumer has no standing to ask that a single iota of the draft contract presented to him be changed before he signs it. He must lump it or leave it.

..When a monopoly supplier of a vital public utility – which is what the Board is – forces on all its consumers a common form of contract, reserving to itself sweeping powers, including the power to vary the document unilaterally as it may think fit, such an instrument has less affinity with a freely negotiated interpersonal contract than with a set of bye-laws or with any other form of autonomic legislation. As such, its terms may have to be construed not simply as contractual elements but as components of a piece of delegated legislation, the validity of which will depend on whether it has kept within the express or implied confines of the statutory delegation and, even if it has, whether the delegation granted or assumed is now consistent with the provisions of the Constitution of 1937.”

The Minister and the health boards were not, in my view, obliged to negotiate with every pharmacist and/or pharmacy owner on an individual basis and those parties acted properly and reasonably in negotiating with the I.P.U., which is a registered trade union authorised to negotiate on behalf of its members. Nor were the appellants obliged to sign the new contract which was negotiated, because they could have opted to carry on with the existing contract if they so wished. It was quite different from the “take it or leave it” dilemma which customers were confronted with in McCord v. Electricity Supply Board [1980] I.L.R.M. 153.

Furthermore, valuable precedent exists to suggest that an arrangement such as that eventually arrived at in the present case is a perfectly valid and proper manner of effecting new arrangements. In Association of General Practitioners Ltd. v. Minister for Health [1995] 1 I.R. 382, there had been a complaint by the Association of General Practitioners Ltd - a company formed to promote the interests of doctors in general practice - that the Minister had declined to consult with them when negotiating the terms and conditions applicable to G.P. contracts for the supply of G.M.S. services under s.26 of the 1970 Act. The Minister had, however, consulted with the Irish Medical Association and Medical Union and then with the Irish Medical Organisation (formed by their merger).

The process of determining these terms and conditions was described by the learned judge in the following terms (at page 388):-

“Accordingly, in relation to the provision of free medical services by general practitioners for eligible persons under the Act, the procedure followed is that the several health boards enter into contracts with the doctors, but the terms and conditions to be offered to the doctors are determined beforehand by the Minister so that uniformity is attained on a nationwide basis.

The Act imposes no express obligation on the Minister to consult the medical profession or its representatives or anyone else before deciding on the appropriate terms and conditions, but the Minister has at all times adopted the very prudent course of engaging in lengthy discussions between representatives of Department of Health and the doctors before completing the blueprint on which the health boards are to act.”

“There is quite a formidable body of precedent in cases where the relevant circumstances were close enough to those obtaining in the present case. Speaking generally, I do not consider that there is an obligation imposed by ordinary law or by the Constitution on an employer to consult with or negotiate with any organisation representing its employees or some of them, when the conditions of employment are to be settled or reviewed.

The employer is left with freedom of choice as to whether he will negotiate with any organisation or consult with them on such matters, and is also free to give a right of audience to one representative body and to refuse it to another, if he chooses to do so.”

I would be of the view that great value and importance attach to the process of securing uniformity, so far as is possible, in terms and conditions applicable to the supply of drugs and medicines to eligible persons under s.59 of the 1970 Act. It would be both impracticable, and indeed undesirable, to have a process of individual negotiation or to have a situation where different pharmacies were subject to materially different terms and conditions in respect of the provision of the same services. In the circumstances the fact that the health boards were not in a position to negotiate with the appellants in relation to amending the terms of the contract gives rise to no valid complaint on the appellants’ part and still less does it provide any basis for impugning the contract or any of its provisions.

However, this still leaves the point whether such a contract is “permissible” under s.59 of the 1970 Act. The appellants sought to distinguish the case of Association of General Practitioners v. the Minister for Health [1995] 1 I.R. 382 on the basis that the statutory provision at issue there - namely, s.26(1) of the 1979 Act - expressly authorised the health boards to enter into contracts of that kind. However, s.26(1), like s.59, refers to “arrangements” being made by health boards. Secondly, and perhaps more importantly, s.26 (1) is equally applicable to the provision of pharmacy services to eligible persons as it is to the provision of G.P. services. It seems to the court therefore that any supposed distinction is non- existent.

I am of the view that s.59 creates both a power and a duty to make “arrangements” whereby the objective of s.59 is effectively achieved. Once it can be said that any contract made does not go beyond what is reasonably necessary in this regard, or contain conditions which could properly be said to be outside the scope of s.59, it follows that the health boards are entitled to include such terms as may be required to secure the provision of a high quality and reliable service to eligible persons. The fact that certain provisions of the contract, such as clause 6(2), address issues which could also have been addressed in regulations made for the purposes of s.59 is not determinative of the issue. The contract is not expressed to be dependent on the existence of regulations. Nor should s.59 be interpreted in such a way as to circumscribe the health boards in making such arrangements as appear appropriate in order to achieve the statutory objectives of s.59.

Mr. Hogan further relied upon the decision of this court in O’Neill v. Minister for Agriculture and Food [1998] 1 I.R. 539. In that case the applicant sought judicial review of the refusal of the Minister for Agriculture and Food to grant a license for the practice of artificial insemination. He further sought a declaration that the exclusivity scheme adopted by the first respondent was ultra vires the powers of the first respondent pursuant to the Livestock (Artificial Insemination) Act, 1947. In allowing the applicant’s appeal, the Supreme Court held that, whilst the major reason for the introduction of the statutory controls over artificial insemination was the desirability of controlling disease and improving the general quality of the national herd, the statutory control was negative rather than positive and there was nothing in the Act of 1947 to suggest that the Oireachtas had intended that the first respondent should adopt such an exclusivity scheme. Essentially, the Supreme Court held that the scheme was so radical that the Oireachtas could not have envisaged that it could be established by a series of administrative decisions which avoided legislative supervision and accessibility rather than by way of regulations.

I can not accept that the facts of the present case are remotely similar to those which obtained in O’Neill v. Minister for Agriculture and Food [1998] 1 I.R. 539. Firstly, the contract at issue in these proceedings imposes no quantitive restrictions. It does impose some qualitative requirements intended to ensure, and only to ensure, more effective delivery of services for which the health boards are responsible. Clause 6(2) is a good example of such a requirement, which is obviously desirable, if not also essential, to enable the modern pharmacist to take full responsibility for the operation of a community pharmacy, particularly one where high-tech drugs are being dispensed. It does not seem to me that, as purchasers of the services in question, and having regard to their own statutory obligations to eligible persons, health boards are precluded from stipulating such a requirement as a contractual condition.

Nor do I accept that clause 19 reserves to the health boards any exclusively unilateral right to alter the terms of the contract. This is the other major bone of contention advanced by the appellants. As a matter of fact, neither clause 19(3) or 19(5) provide for unilateral alteration. On the contrary, neither the appellants nor the health boards can bring about any change in relation to these clauses other than by the mechanism contained in the new contract which provides that both sides agree to accept changes as may be agreed between the Minister and the Pharmaceutical Committee. Again this does not strike me as some impermissible use of a contract by way of making arrangements in respect of the service provided.

In conclusion on this aspect of the case, I am satisfied that neither the contract as a whole nor the particular provisions identified by the appellants constitute an attempt to achieve by “administrative practice” that which the Minister could not indirectly do by regulations under s.59(4) of the 1970 Act.

I will deal briefly with Mr. Hogan’s second line of appeal, because to a very large degree the findings in relation to his first ground of appeal govern this aspect of the case also.

It almost goes without saying that any nitpicking exercise whereby each and every line of a contract is perused will yield up a term, clause or provision which at first blush appears unreasonable, or even irrational. In my view, the new contract must be approached and interpreted for what it is, namely, a package of agreed measures developed over a lengthy process of negotiation between representatives of the pharmacists and the Department of Health. In any package there are plusses and minuses.

The plusses comprise the increase in fees, the provision of educational grants and ongoing financial and other support. The minuses, if such they may be described, focus on certain particular provisions which might have unfortunate consequences if strictly applied by the health boards. However, as O’Caoimh J. noted, and as has been confirmed to this court, the supposed problems and difficulties are entirely hypothetical in nature insofar as no particular instance has been indicated to this court whereby the applicants, or indeed anyone else, have been adversely affected by any application of the clauses at issue.

Obviously the contract must be construed in a reasonable manner and must be construed strictly and operated fairly. I have already indicated that in my view clause 6(2) is a reasonable provision designed to ensure a high quality of service to eligible persons. Having regard to the fact that high-tech drugs are now being dispensed, I would support the view of the learned High Court judge that it can not be said to have been unreasonable or irrational to stipulate a requirement for 3 years relevant experience in the case of a supervising pharmacist.

Nor do I see this requirement as trenching upon the rights conferred by s.2 of the Pharmacy Act, 1962. It is clear that pharmacists may continue to act under the terms of the Act of 1962 in circumstances where they are not bound by any contractual terms such as those relating to the appellants herein. The contract does not purport in any way, nor could it, interfere with the provisions of the Act of 1962, and in particular s.2 thereof. The purpose of s.2 of the Act of 1962 is to establish a minimum legal and professional requirement of a pharmacist. It does not mean that the respondents in entering into major contracts for the supply of pharmaceutical service to eligible persons are not entitled to seek that that pharmacist be one with primary professional responsibility and having also the appropriate level of experience.

In relation to clauses 19(3) and 19(5) which relate to any proposed changes to the agreement, I do not believe it to be unreasonable that the parties who negotiated the agreement or contract would agree to the possible change in question.

With regard to the provisions for termination of the agreement set out in clauses 19(1), 20(1), 22(3) and 22(6), there is undoubtedly a certain degree of difficulty in reconciling the language of these provisions. However, I am of the view that the learned trial judge was absolutely correct in the conclusions which he reached about these various provisions and am further of the view that this court should not act as a “contract review body” to rewrite that which the parties themselves have agreed. It is not a jurisdiction lightly to be undertaken by the court in the absence of any evidence of significant problems in the operation of the contract over the last 8 years.

In all the circumstances, I would reject all the arguments advanced on behalf of the appellants and confirm the order of the learned High Court judge made herein.