R (Pharmaceutical Services Negotiating Committee & another) v Secretary of State for Health

This appeal challenged the lawfulness of the Secretary of State's package of changes to community pharmacy funding announced in the Final Package of 20 October 2016. The court applied conventional public law review principles: the duty of sufficient inquiry under the Tameside line of authority (subject to Wednesbury review), the statutory consultation duties in s.165 of the National Health Service Act 2006 and the requirement to have regard to duties in ss.1–1C of the 2006 Act (notably s.1C). The key administrative documents before the Secretary of State were the Impact Assessment and the Duties Document. The court held that (i) the decision-maker was not irrational in concluding that no reliable estimate of pharmacy closures could be obtained, (ii) the Decision did not proceed in material reliance on an alleged 15% average operating profit margin derived from a limited Companies House sample or an informal “industry insider”, (iii) the consultation process was not rendered unlawful by limited disclosure about that figure, and (iv) the Secretary of State had properly had regard to the duty in section 1C by considering access, the Pharmacy Access Scheme (PhAS) mitigation and the risk to deprived areas. The appeals were dismissed.

Background and parties: The appeals arose from judicial review of a package of funding changes to community pharmacies (the Final Package announced 20 October 2016). The Pharmaceutical Services Negotiating Committee (PSNC) and Susan Sharpe were appellants in one appeal; the National Pharmacy Association (NPA) was an appellant in the other. The decision under challenge consolidated fees, reduced some fixed establishment payments, introduced the Pharmacy Access Scheme (PhAS) and a quality payment, and reduced overall pharmacy funding.

Nature of the claim / relief sought: Judicial review of the Secretary of State's Decision; declaratory relief and orders quashing the Decision were sought on a range of grounds including failure of sufficient inquiry (Tameside), unlawful consultation, reliance on erroneous factual assumptions (a purported 15% operating margin), misuse of statutory powers to effect market restructuring, and breach of the s.1C duty to have regard to reducing health inequalities.

Procedural posture: This was an appeal from Collins J's order dismissing PSNC and NPA challenges: R (PSNC & Anor) v Secretary of State for Health [2017] EWHC 1147 (Admin).

Issues framed: The PSNC advanced six grounds (Tameside insufficiency of inquiry; erroneous reliance on a 15% average operating margin; significance of nondisclosure and consultation failure; failure to consider particular evidence; and improper use of statutory remuneration powers to restructure the market). The NPA advanced an additional ground under section 1C of the NHS Act 2006 (duty to have regard to reducing inequalities).

Court's reasoning: The court reviewed the documentary record (Impact Assessment and Duties Document), the consultation process and the departmental background analysis (including a limited Companies House exercise and references to an anonymous industry source). It applied Wednesbury/Tameside principles with healthcare-policy sensitivity (a broad margin of appreciation where prospective policy and reform are concerned). The court accepted that although references to an indicative 10–15%/15% operating margin appeared in documents and ministerial answers, the Decision did not rest on that figure. Officials and ministers repeatedly recorded that the impact on closures could not be robustly estimated and that the PhAS and other mitigations addressed access risks. On the Tameside point the court held that the Secretary of State had taken steps that were reasonable in the context and that it was not irrational to conclude further detailed inquiry would not have produced reliable, proportionate information. On consultation the court held that the process, though imperfectly open about the margin figure, was not unfair in law because the figure was not material to the Decision. On the alleged improper purpose to restructure the market via remuneration changes, the court found no legal bar to using payment mechanisms to deliver legitimate savings; anticipated closures did not show improper purpose. On the s.1C argument the court held that the Secretary of State had had regard to inequalities, considered impacts on deprived and rural areas, and was entitled to prioritise maintaining reasonable access (with PhAS mitigation) while balancing competing statutory duties. The appellate court therefore dismissed both appeals.

Appeals dismissed. The Court of Appeal held that the Secretary of State's decision to implement the Final Package was not irrational or unlawful: the decision-maker reasonably concluded that reliable quantitative estimates of pharmacy closures were not obtainable; the Decision did not materially rely on the disputed 15% operating margin; the consultation process was not unfair in law; there was no unlawful misuse of statutory remuneration powers to effect an impermissible market restructuring; and the Secretary of State had properly had regard to the duty in section 1C of the National Health Service Act 2006, including measures (PhAS) to mitigate access and inequality risks.

Appeal from the Administrative Court (Collins J) where permission was refused/dismissed and the judicial review challenge was rejected: R (PSNC & Anor) v Secretary of State for Health [2017] EWHC 1147 (Admin); appeal decided by Court of Appeal (Civil Division) [2018] EWCA Civ 1925 (this judgment).