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Another turn of the screw
A thousand cuts
Dr Kerry O'Connor reports
7th of September
Two more manufacturers have announced a switch to the Reduced Wholesaler Model next month and the first of the three large wholesalers have confirmed that for both this will entail a reduced discount for dispensing doctor customers. More manufacturers are expected to follow suit, DDA Online looks at what this might do for the viability of dispensing services in rural areas.
A year ago patients of dispensing doctors rallied to their defence and told the Department of Health "hands off". This happened because dispensing doctors were threatened with execution by a single blow. It is much harder now to rally patient support when dispensing doctors face attrition by a thousand cuts. Every week another turn of the screw is announced that squeezes the profitability and hence viability of the provision of dispensing services to rural patients. The larger pharmaceutical companies are all switching to Direct to Pharmacy distribution which means the wholesalers are unable to offer any discounts to dispensing doctors. In doing so, they are using fewer wholesalers, and so reducing competition. Indeed, the largest manufacturer uses a single wholesaler, and so with no competition at all. Companies that don't quite have enough market power are switching to Reduced Wholesaler Model using two or three wholesalers only, forcing the big three wholesalers to compete and cut costs and hence pass cuts on in reduced discounts to their dispensing doctor customers in order to win their contracts. The PPRS has reduced the overall price of ethicals or branded lines this year and will again next year.
The discount abatement scale (the lowest rate is for up to £2000 basic price per month 3.17% then rising in tiers to over £24000 per month at 11.18% maximum, average discount 11.05%) for dispensing doctors applies across the board. It is a penalty deducted from reimbursement in recognition of the fact that discounts are available in purchasing drugs. It applies to zero discount drugs where by definition, no discount is available. It applies to Direct To Pharmacy brands, where no wholesaler discount is available at all and where overall manufacturers discounts to dispensing GPs are being reduced. It applies to Reduced Wholesaler Model manufacturer brands where for many the wholesalers are forced to give a lower discount than their usual standing trading terms for qualifying ethical lines. It applies to generic lines even though for five hundred of these there is now an entirely separate mechanism for the Department of Health to control the profit margin in the supply chain. This is category M (latest details given below).
Yet, as these discount margins are inexorably eroded whilst staff pay, fuel and rates all rise there has been no mitigation for years in the discount abatement scale. It remains unchanged.
Category M was introduced into the Drug Tariff in April 2005. It gives the reimbursement price of over 500 medicines. It uses information gathered from manufacturers on volumes and prices of products sold plus information from the NHSBSA Prescription Pricing Division on dispensing volumes to calculate margins in the supply chain. Product volume and prices information from manufacturers dispensing volumes from the NHS Prescription Services are used to fix the prices and so the profit margin in the supply chain after negotiation with the PSNC. The prices are usually announced quarterly but occasionally a drug is added mid quarter eg lansoprazole.
The Department of Health have decided to have significant changes in the next Category M quarter. Until we see the prices of these products it is difficult to know how it will affect practices.
The new Category M prices will be available at the end of the week.