The vast majority of prescriptions made by the NHS in England each year are dispensed by retail pharmacy businesses operating in communities around the country. These pharmacies are privately owned commercial entities but are partially funded by central government through the 'Drug Tariff'.
On 20 October 2016, the Secretary of State announced a package of changes to reduce the overall amount of funding for pharmacies and amend the payments that they received. It was accepted that the proposals would be likely to lead to the closure of some pharmacies.
In order to protect vulnerable pharmacies necessary for patient access, in rural areas for example, a Pharmacy Access Scheme (PhAS) was introduced to provide additional support to pharmacies with no neighbouring pharmacies within one mile.
A challenge to the proposals was brought by the Pharmaceutical Services Negotiating Committee (the PSNC) - the body tasked by statute with negotiating the Drug Tariff on behalf of community pharmacies - and the National Pharmacy Association (the NPA), the trade association which represents around half of the community pharmacies.
The claim failed at first instance and the PSNC's appeal centred on the following two main grounds -
- The Secretary of State could not rationally have made the decision on the basis of the information obtained. He had therefore failed in his 'Tameside duty' to make sufficient inquiries before making the decision as set out in Secretary of State for Education & Science v Tameside Metropolitan Borough Council.
- The Secretary of State had unlawfully misused the Drug Tariff to achieve a fundamental restructuring of the community pharmacy system in order to reduce the number of pharmacies, without resort to amendment of primary statute.
The NPA argued that, in adopting the relevant measures, the Secretary of State breached his obligation under section 1C of the National Health Service Act 2006 to 'have regard to the need to reduce inequalities between the people of England with respect to the benefits they can obtain from the health service'.
The Tameside Duty
Both parties were agreed that it is for the decision-maker to conclude what information is relevant and to decide upon the manner and intensity of the inquiry to be undertaken before a decision, subject to a Wednesbury challenge only.
The appellants submitted that the only evidential basis for the decision was one informal secret conversation with an 'industry insider' and an analysis of one set of yearly accounts obtained from Companies House for 52 pharmacies (out of approximately 11,600). They argued that better evidence on the number of potential closures was required.
The Secretary of State's response was that it was rational to conclude that it was not realistically possible to reach reliable conclusions on the impact on pharmacy numbers and that the PhAS scheme was there to ensure a reasonable distribution of, and access to, community pharmacies. He also asserted that the two sources identified by the appellants were simply background information and did not determine the policy.
The Court of Appeal agreed with the Secretary of State, finding that the successive submissions from his civil servants on which the policy had been based had emphasised the impossibility of estimating the number of potential closures with any accuracy. The decision not to pursue additional information was therefore rational.
The use of the Drug Tariff to reshape the industry
The judge at first instance found no evidence to indicate a positive intention on the part of the Secretary of State to reduce the number of pharmacies. The intention was to deliver cost savings. It was expected that this would result in some closures but it was unclear how many.
The Court of Appeal agreed with this analysis and pointed out that even if a reduction in numbers was expected, and thought generally desirable, this did not make alterations to the Drug Tariff unlawful where those alterations were otherwise justified as a means of achieving legitimate savings.
The equality ground
NPA argued that the Secretary of State's approach to his Section 1C duty was too narrow as he -
- focused solely on the dispensing of prescriptions and not the other services that community pharmacies provide, such as giving advice in areas with poor GP coverage, and
- did not offer sufficient protections for pharmacies in deprived communities.
However, the Court of Appeal emphasised that the documents provided to the Secretary of State by his officials were to be read as a whole, in their full context, and in a fair and straightforward manner. They were not to be subjected to the same strict textual analysis as would be appropriate in interpreting a statute.
The Court also drew attention to the fact that the legislation imposes a range of high level duties on the Secretary of State which he has a substantial degree of flexibility in discharging. In doing so, he is required to take into account arrange of complex socio-economic factors which may be in conflict. The balancing of these factors involves the exercise of considerable discretion, judgment and assessment.
The duty in Section 1C duty is to 'have regard' to the need to reduce health-related inequalities. In assessing compliance with such duties the Court reviews the process, not the merits. It is for the decision-maker to decide the weight to be given to relevant factors and the Court will not impose to high a burden on such decision-makers.
In this case, the Court of Appeal held that the Secretary of State did not focus solely on the dispensing of prescriptions.
He was also entitled to consider that, in implementing the unprecedented reduction in pharmacy funding, the maintenance of reasonable universal access to pharmacy services through the PhAS should be given greater weight than the need to reduce the inequalities with which section 1C is concerned.
In having regard to the need to reduce those inequalities over time, the Secretary of State was also entitled to conclude that the correct balance between competing policies would be met by maintaining reasonable access in all areas whilst not having any significant detrimental effect on the pharmacy services provided in less affluent areas, where these inequalities are currently higher.
Simply because the Secretary of State gave those different policies the weight that he did, was not in itself evidence that he failed properly to have regard to the need to reduce the inequalities upon which section 1C focuses.
The appeal therefore failed on all grounds. Although it does not break any new ground, the case is a useful reminder of the discretion afforded to decision-makers in regard to both the collection and weighting of evidence on which complex decisions are based, and the balancing of competing factors when discharging 'have regard to' duties.