Is Pharmacy Fitness to Practice fit for purpose?
This is the second in a series of three articles which will examine the process by which the PSI supervises pharmacies, pharmacists and their compliance with the Pharmacy Act 2007 (the "Act")…
Published 2 January 2016
There are many commercial reasons for a change in ownership of a business, from a need for extra capital to ownership structures and succession planning. But what is the impact of this decision on the registration of your business with the Pharmaceutical Society of Ireland (the PSI), what are the hidden cost implications to your business of such a
decision and how can you best handle the problem?
Section 17 of the Pharmacy Act 2007 (the Act) states that a "change in the ownership of a retail pharmacy business shall have the effect of cancelling its registration". The section then goes on to detail specific instances where this may occur including:
This article will explore how these situations may occur, why the costs are triggered and how to best handle the problem when it does happen.
A change in ownership, for the purposes of the Act, may occur in many circumstances where the ownership, or part ownership, of a pharmacy or pharmacy business is transferred to another pharmacist or company.
While "owner" is generally considered, from a legal perspective to mean "beneficial owner", the Act favors the term "pharmacy owner". A "pharmacy owner" is defined as being a person/persons or entity entitled to the profits and liable to sustain the losses of the business. It is arguable that it would have been more appropriate to use the term "beneficial owner" (which is, in the case of a company, an entity holding at least 25% plus one share or for a business/group one which has a controlling interest). Using this definition may have resulted in less onerous obligations on pharmacy owners.
Take for example a local family owned pharmacy where a parent wishes to pass the business on to their child who has followed them into the profession. They may do this by bringing their child in as a co-owner of the business. The intention in this instance would be to ensure that the future of the business will be more stable and allow for a more seamless transition of the business when desired. This would however trigger a re-registration requirement. In addition, where that child subsequently takes over the business when the parent decides to retire entirely, this change will again trigger a re-registration event.
The above example would also apply to a large pharmacy or a medium sized group of pharmacies. Where an additional owner is added to the business this would trigger an event requiring a re-registration with the PSI.
Similarly, in the case of a corporate entity that wishes to reorganise its corporate structure for legitimate tax or commercial reasons, changes in respect of ownership of 50% or more of the shares in the company will result in the requirement to re-register. This is the case whether the restructuring is the result of an acquisition or a disposal of the shares.
As is clear from the above examples, if the Act had allowed for the beneficial ownership of the business to be the deciding factor, many of the above circumstances would not have required the owner to re-register. In the case of the family business, because the parent retained 50% control there would be no transfer of beneficial ownership. Similarly, where a group of pharmacies add or remove an owner, so long as they would not acquire or dispose of more than 50% of their interest there would have been no re-registration requirement.
Section 17 appears to operate to ensure that the PSI maintains a full and accurate record of all pharmacies trading in the State. While it is quite understandable for the PSI to require each pharmacy to notify it of the addition of a pharmacist to the staff in a business or the addition of a pharmacist as co-owner, it is clear that in any of the above instances the current requirement is an onerous one and in many circumstances its relevance to public health and patient safety is questionable.
In relation to re-registration, each separate pharmacy or unit must be re-registered with the PSI. The cost of re-registration for each unit is, at the time of going to press, €3,325.00. In any of the above instances, a fee of this kind would have a significant impact on the cash flow of the business. Take, for example, the family owned pharmacy. If this business held a unit in a major county town and 2 further units in villages/towns around the county the cost to the business of adding the child as a co-owner would be a minimum of €9,975.00.
A further example might be a group of pharmacies undergoing restructuring. It may be the case, for example, that an additional holding company acquires shares in the group. While the beneficial owners of the holding company may be the same as the group owners, the "new owner" of the group would be required to register every pharmacy or unit with the PSI. In circumstances where the group has 15-20 pharmacies, the cost to the group would be between €49,875.00 and €66,500.00.
If you are planning on changes to the ownership or ownership structure of your business it is advisable to consider the following steps:
While possible re-registration is likely to be one of the last factors considered when examining a change in ownership or ownership structure, the re-registration process, if ignored can result in significant costs being added to your transaction in addition to fees for re-inspection and for missing filing deadlines. You should therefore ensure that you are well advised in relation to any decisions of this kind.
Gary Rice and Aidan Healy of DAC Beachcroft Solicitors (01 231 9600) are specialists in the commercial and regulatory issues which arise for pharmacies and pharmacists. They would like to thank Niall Sexton, Solicitor at DAC Beachcroft, for his assistance in preparing this article. DAC Beachcroft, a global law firm, is a recognised market leader in healthcare law. This article is for general information purposes only and does not comprise legal advice on any particular matter. You should not rely on any of the material in this article without seeking appropriate legal advice.