General Medical Services (Payments) Board -2003

Supplement to Audit Report

Issues of Governance

During the course of the 2003 audit of the General Medical Services (Payments)
Board (the Board) issues arose which gave rise to concerns in relation to the
governance of the High Tech Drug Scheme and the Dispensing Doctors Scheme. I
raised these matters with the Chief Officer of the Board and his responses have been
incorporated in this supplement.

1. High Tech Drug Scheme

In 2003 the Board incurred expenditure of €106.8m on the High Tech Drug Scheme.
This expenditure is recorded in Note 6 to the Board's Financial Statements. It consists
of payments of €5.5m to 1145 pharmacists in respect of patient care dispensing fees
and €101.3m to 13 drug wholesalers for the supply of the drugs to the pharmacists.

In previous years I drew attention in my audit reports to the fact that the value of
stocks on hand, as recorded in the annual financial statements, was not reliable. This
was due to the Board not having proper stock controls and stocktaking procedures for
this scheme. As part of this year's audit I examined the payments being made to the
wholesalers under this scheme. This report highlights the lack of controls in place in
regard to acquisition, stock control and recording of high tech drugs.

The Scheme

A wide range of expensive high tech medicines may be prescribed to patients on their
discharge from hospital, such as anti rejection drugs for transplant patients, medicines
used in conjunction with chemotherapy and growth hormones. Prior to the
introduction of the current scheme, such drugs were dispensed to the patients through
hospitals or health boards, which often involved patients travelling long distances to
collect their medicines. The present scheme was introduced in November 1996 so as
to enable patients to obtain their medicinesfrom community pharmacists. The scheme
is confined to drugs which are on a list approved by the Department of Health and
Children (DOHC).

Patients prescribed the high tech drugs are asked to nominate a community pharmacy
of their choice. The Health Board Liaison Officer advises the nominated pharmacist
of the patient's requirements. The pharmacist then orders and takes delivery of the
required drugsfrom his wholesaler and dispenses these drugs to the patient.

Each month the pharmacists submit their High Tech dispensing claims together with
supplier delivery dockets to the Board. The Board pays them a monthly patient care
fee of €49.64 per patient. The Board records on a monthly basis details of the
dispensing fee and the quantity and type of drug dispensed by each pharmacist.
The wholesalers send their invoices for the ingredient cost of the drugs to the Board
by the 2nd day of each month in respect of deliveries made the previous month. The
Board is contractually obliged to pay these invoices by the 6th day of each month.

The Board deducts an agreed 5% discount on invoices it receives from wholesalers

for the supply of high tech drugs to the pharmacists. The Board pays the wholesaler
invoices prior to receiving the corresponding delivery dockets from the pharmacists.
The Board then bills the relevant Health Board with the ingredient cost of the drugs
dispensed inclusive of VAT, where applicable, less the 5% discount.

Cost of the Scheme

The cost of the scheme has increased significantly each year since it was introduced in
late 1996. The following table shows the increase in costs each year from 1997 and
the value of High Tech Drugs on hand as recorded in the Board's Financial
Statements.

High Tech Drugs Scheme

Estimated
Expenditure % Increase Value of
Year Over 1997 Closing
Stock
€ €
1997 27,212,531 1,473,390
1998 33,715,059 24 2,177,068
1999 42,303,174 55 2,177,068
2000 50,505,842 86 3,570,154
2001 63,791,527 134 4,127,751
2002 83,432,337 207 5,696,664
2003 106,818,906 293 8,014,825

The expenditure in 2003 of €107m represents 7% of the Board's total expenditure for
the year. The projected expenditure on the scheme for 2004 is set to increase to
€140m. Also, commensurate with the increase in the annual expenditure there has
been an increase in the value of the stocks on hand at the end of each year.

The main cost drivers of the scheme are the ingredient cost of the medicines, the
number and the type of products authorised for reimbursement under the scheme, the
number of patients to whom such products are prescribed and the number of items
prescribed. The drugs range in pricefrom €20.79 to €7,951.22 per pack. At year-end
2003 there were 225 items approved for dispensing which included 11 new products
(new chemical entities) introduced in 2003.
Audit Findings

• While delivery dockets in respect of drugs received by pharmacistsfrom their

wholesalers are submitted with their monthly dispensing claims for patient
care fees there was no cross check, by the Board, of these delivery dockets
against the invoices submitted by the wholesalers for payment. The Board had
no arrangements in place to enable it to establish that drugs invoiced and paid
for are, in fact, being delivered to the relevant pharmacists.

• The Board records, on a monthly basis, the dispensing fee and the type and
quantity of high tech drugs dispensed by each pharmacist. The Board has
pointed out that the returnsfrom pharmacists of drugs dispensed may not be
complete. This is because once a pharmacist has claimed for a dispensing fee
in respect of a patient in any particular month, there is no incentive to return
details of any further dispensing to that person in the same month.

• The Board also has no system in place to record the type and quantity of drugs
ordered and taken into stock by each pharmacist. Therefore, there is no
monitoring or reconciliation of stocks held and dispensed by the pharmacists
during the year or reconciliation to the amount stated in the annual financial
statements.

• It is an inherent feature of the scheme that there will be some unavoidable

element of wastage. All of the drugs acquired by a pharmacist may not be
used, for instance where a patient's prescription is changed and the pharmacist
has no other patient requiring the original drug. Wholesalers are not obliged to
take returns of stock and some high tech drugs with a short life may go out of
date while in stock. As the Board has not got proper monitoring or stock
control procedures in place it is not possible to determine the level, cause and
cost of wastage.

• In response to my enquiries the Board carried out a financial exercise, which

compared the cost of drugs purchased with the cost of the drugs dispensed for
the years 2000 to 2003 inclusive. It estimated that there is a difference of
€23m between the amount purchased and the amount recorded as dispensed,
after taking account of end of year stocks. According to the Board this
difference is accounted for partly by wastage, partly by late claims from
pharmacists and partly by the fact that returnsfrom pharmacists may not be
completed correctly or not returned at the year-end.

As I considered that the controls in place over the acquisition, stock control and the
recording of high tech drugs dispensed under the High Tech scheme were not
adequate and in view of the significant increase in expenditure since the inception of
the scheme, I sought the Chief Officer's views and details of any corrective action he
intended to take to improve matters.
Chief Officer's Response
With regard to the role of the Board the Chief Officer stated that:

• The Board has a relatively narrow remit i.e. that of a processing and payments
board. An independent review of governance and accountability in the General
Medical Service Schemes carried out for the Department of Health and
Children in 2003 had concluded that there was evidence to suggest that the
Board performs this function efficiently.

• The Review accepted that the Board was not responsible for the GMS system
as a whole nor for the cost escalations experienced in the various schemes,
particularly over recent years. It concluded that the Board cannot be so
accountable, particularly as it has no role in the design and planning of the
schemes or in the negotiation of the scheme arrangements with primary care
contractors.

• The review also concluded that the Board had not been in a position to
develop an effective validation regime at contractor level to ensure the
veracity of payments made.

With regard to the level of control in place the Chief Officer stated that:

• As there are 1,145 community pharmacists dispensing drugs/medicines under

the scheme each month and taking account of the timeframe available to the
Board to ensure that it meets its contractual payment obligation to wholesalers,
it is not possible to guarantee that all invoices are matched to delivery dockets
prior to payment. The Board will have issued payment to the wholesaler prior
to the receipt of the delivery docket. The Board does not have the facility
under the current scheme arrangements in a pre-payment environment to
establish that invoices paid to the wholesaler represented supplies delivered to
the community pharmacies.

• The Board is currently developing a functional specification including the

interface in relation to the electronic data capture of invoices from wholesalers
to allow for reimbursement and also to record the data supplied by wholesalers
to community pharmacies. Until the new system to accept claims
electronically from wholesalers is in place, which will allow this validation to
occur prior to payment, arrangements have been put in place to validate a
random sample of invoicesfrom each company to delivery dockets in relation
to either a past or current invoice. No irregular claims have been identified as
result of the exercise.
 • As the order for high tech stocks is made by the community pharmacists there
is no mechanism for the Board to record a purchase order. However, as part of
the project to implement an electronic interface between the Board and the
wholesalers, it is planned that community pharmacists will be directed to
provide details of any stock requests that they made during the year and these
will be tested against the delivery dockets and the invoices received from the
wholesalers. Despite the Board's best efforts over a period of time it has not
been able to engage with the contractors to implement the associated
information technology infrastructure. Notwithstanding these difficulties the
Board has pressed ahead with piloting and testing software components that
would enable the required interfaces to be implemented and has successfully
demonstrated this infrastructure in a live environment through a number of
pilot pharmacy sites.

• The implementation of a fully integrated, robust, information technology

solution, which includes order processing, delivery notification, invoice
payments and stock reconciliation will require a significant investment and
commitmentfrom all and will require that the stakeholders revisit the original
agreed arrangements.

With regard to wastage, the Chief Officer stated that:

• Under the current scheme arrangements the acquisition of drugs and medicines
under the scheme is outside of the Board's control and it is accepted that all
stakeholders including community pharmacies have a role to play regarding
the levels of stocks carried in the pharmacy to ensure that the level of wastage
is kept to a minimum.

• There are many situations where wastage can occur and the absence of a
mechanism for returns, redistribution of broken packs, prior notice for request
or discontinuation of particular medicines, and prescribing for shorter periods
must be considered but in view of its limited role i.e. that of a reimbursement
agency, these matters are largely outside the control of the Board.

2. Payment of Fees under the Dispensing Doctors Scheme

In 2003 the Board incurred €2.3m on fees paid to Doctors who prescribe and directly
dispense medicines to their patients who hold medical cards (GMS patients). This
amount is recorded under Note 4 in the Board's Financial Statements. As part of my
2003 audit I examined the payments being made under this scheme. This report
highlights the deficiencies identified in the scheme, which came to light during the
audit, and sets a context for the qualification in my audit report on the Board's
Financial Statements for 2003.
The Scheme

The dispensing doctors scheme has its basis in an agreement reached with Registered
Medical Practitioners for the provision of services under section 59 of the Health Act
1970. The Department of Health and Children's (DOHC) circular of May 1972
(13/72) which was issued to all health boards sets out the general arrangements for
prescribing and dispensing drugs. In particular, paragraph 41 of the circular provides
that where a doctor's main practice is three miles or more from the nearest pharmacy
then all his GMS patients should be asked by the relevant health board whether they
wish to have their prescriptions dispensed by the doctor or by a retail pharmacist.

Under the scheme doctors can supply medicines free of charge to their GMS patients
who opt to have their medication dispensed by the doctor. The doctor is paid a
dispensing fee and he receives all his medicines for his dispensing patients free of
chargefrom his local pharmacy by completing an official stock order form, which is
cleared by the relevant health board. The doctor records the details of the medicines
dispensed on a form, which is signed by the doctor and the patient and returned by the
doctor to the Board. Because of other data capture priorities the information on these
forms has not been recorded, compiled and analysed by the Board since 1997.

In August 1999 following agreement between the DOHC and the Irish Medical
Organisation a revised scheme was introduced. Dispensing doctors were required by
1 October 1999 to decide on one of the following options:

• Cease to be a dispensing doctor and receive a once off payment of €1270.

• Cease to be a dispensing doctor and continue to receive the existing dispensing

fee of €9.33 per patient per year in respect of the number of dispensing
patients on his/her panel at 1 January 1999. The fee would increase with
national increases.

• Continue to be a dispensing doctor and receive an increased dispensing fee of

€24.12 per patient (linked to national increase) based upon meeting a
minimum level of 70% of the items required by his/her dispensing patients. A
level of dispensing above or below this requirement would give rise to a
proportionate increase or decrease in the fee respectively. Failure to meet the
70% threshold in three consecutive years would bring about removalfrom the
scheme. This fee became effective from 1 April 2000.

To start off the new arrangements a pilot scheme was introduced in late 1999, which
was to be evaluated with a view to extending it nationwide as early as 2000. Twelve
doctors were chosen under the pilot scheme and were awarded a dispensing fee of
€34.61 per patient with effect from 1 January 2000 based on a dispensing
performance level of 85%. Also, a dispensing manual was prepared in collaboration
with the IMO for circulation among dispensing doctors to address dispensing practice
issues.
In return for the payment of a significantly enhanced dispensing fee, under the
agreement dispensing doctors who wished to remain in the scheme would have to
have computer systems in place by 1 January 2001 which would enable them to
transmit dispensing data electronically to the Board. This data would allow:

• The compilation of accurate dispensing data for management and statistical

purposes.

• The monitoring of the level of dispensing and calculation of the performance

related fee.

• The monitoring and reconciliation of stocks held and dispensed by doctors.

DOHC issued a draft circular to each health board stating that the new arrangements
were introduced in recognition of the fact that the existing dispensing arrangements,
procedures, criteria and standards of performance relating to and required of
dispensing doctors needed to be amended and updated:

• To bring about better and more rigorous accountability.

• To ensure the highest criteria and standards of performance by dispensing

doctors.

• To reflect changing demographic patterns and needs.

In 2000 the Board set about providing the dispensing doctors with the required
software and drew up specifications for the computerisation of the scheme.

In July 2000 the DOHC instructed the Board that it could make payment for 2000 on
a flat fee basis without performance measurement. It also instructed the Board that

• From 1 January 2001 it was intended that all participating doctors would be
paid strictly on a performance related basis as envisaged in the 1999
agreement.

• In the event of a participating doctor who received such revised payments

failing to meet the requirements of the scheme by the relevant date (that is 1
January 2001) the monies paid to him or her (in terms of differential between
the standard and the revised fees) should be recouped by the Board from other
GMS scheme payments made in 2001.

The dispensing doctors scheme has not been computerised as of October 2004 and, as
a result, the improvements envisaged in the DOHC draft circular have not been
achieved. Notwithstanding this, the doctors who opted into the scheme continue to be
paid the enhanced fee in the intervening period on a flat fee basis and their dispensing
performance has not been measured.
Cost of the Scheme

The amount paid in dispensing fees has increased significantly since 1999 as follows:
€
1999 745,913
2000 1,660,240
2001 2,161,778
2002 1,631,024
2003 2,393,349

In 2003, 146 doctors who elected to remain in the scheme received €1.88m in
dispensing fees. The doctors who were involved in the pilot scheme were paid at the
rate of €37.26 per patient and the other opt-ins were paid at the rate of €32.30 per
patient. Thirty-four doctors who opted out of the scheme received their continuing
payment of €10.61 per patient, which amounted to €155,841. The balance of
expenditure for 2003 in the order of €357,000 is accounted for by arrears and
miscellaneous payments.

In addition to this cost a total of €12m was paid to Pharmacists for supplying the
doctors with the required drugs. The stock of dispensing drugs on hand at 31
December 2003 was €2.1m.

Audit Findings

While the amounts involved are small when compared to the total annual expenditure
of the Board, I considered that there was an issue of regularity involved. I estimated
that for 2003 the additional cost associated with paying the enhanced fee is in the
order of €lm over and above the cost of the original scheme. As a result of the failure
to have the scheme computerised, payments have been made under the scheme
notwithstanding the fact that the conditions, which govern the scheme, remain
unfulfilled. As a consequence, the benefits expected in regard to better accountability
have not materialised.

In particular the conditions of the scheme have not been met in that:

• Doctors are being paid the new enhanced fee on a flat fee basis instead of
being paid in accordance with their dispensing performance, with the distinct
possibility that they are not receiving their correct payment.

• The DOHC's direction of July 2000 has not been implemented with the result
that participating doctors who failed to meet the requirements of the scheme
have not had excess payments recoveredfrom them.

• Doctors are not making returns in electronic form.

The benefits, which were envisaged as flowing from the revised arrangements, have
not materialised since:

• The manual of good dispensing practice, which had been prepared in 1999,
has not been issued to the dispensing doctors and there are no national
guidelines regarding stock ordering and quantities which can be dispensed.

• At October 2004 computerisation has not been introduced and therefore it has
not been possible to compile accurate dispensing data for management and
statistical purposes.

• There is no monitoring of the level of dispensing.

• There is no monitoring and reconciliation of stocks held and dispensed by

doctors during the year or reconciliation to the amounts stated in the annual
Financial Statements.

As it appeared to me that the systems of internal control which the Board operates for
this scheme are inadequate and deficient and that payments are being made which are
contrary to the conditions of the scheme I sought the Chief Officer's view on my
findings and the source of his authority to continue paying the enhanced fee.

Chief Officer's Response

In his reply the Chief Officer informed me that:

• In 2000 the Board set about preparing a functional specification of the

computerised dispensing system.

• Despite the Board's best efforts to engage with all interested parties including
the general practitioners and software vendors it was not possible to reach
agreement and secure the transfer of data in electronic form.

• Due to the fact that the payment element of the scheme was implemented
before the system was in place it has proved very difficult to engage and move
the issue forward to a resolution. The issue is now being addressed under the
auspices of the Health Board Executive.

• The Board does not measure the performance of dispensing doctors and in the
absence of such a monitoring system it would not be possible to cease
dispensing payments.

John Purcell
Comptroller and Auditor General
O.O. November 2004