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Category M to reduce by £10m per month from November

Recovery rate is a "conservative estimate" of what DHSC wants back

October 22nd 2018

Tagged: DDA news Dispensary guidance news Pharmacy owners' news

By Ailsa Colquhoun

Reimbursement prices in Category M are to reduce by £10 million per month from November until the end of March 2019, resuming previously announced but paused cuts to reimbursement.

In November, this equates to 360 lines reduced by between 10-13 per cent. View the full analysis of price changes.

This is to repay excess margin earned by pharmacies in previous years, in particular during 2015/16, for which the results of the pharmacy margin survey show that there was a significant over-delivery of margin.

However, GP dispensaries – which are reimbursed via Category M – are warned that the agreed levels of margin recovery have been set “to repay a conservative estimate of excess margin”, suggesting the possibility of future reductions in reimbursement. PSNC adds that the cuts to reimbursement have been spread over the longest period possible to avoid greater shocks to the market.

The reimbursement settlement comes as part of an agreement on community pharmacy funding for 2018-19, which maintains current funding levels of £2.592 billion (comprising £1.792bin in fees and allowances and £800 million in medicine margin). Pharmacy contract negotiator for England, the Pharmaceutical Services Negotiating Committee (PSNC) advises that dispensers should see the maintenance of overall funding as an improvement on a previously planned funding cut of £33m for 2018-19.

In accepting the offer, PSNC has called for progress to be made in amending the current margin delivery system to smooth adjustments, and to remove the inequity in delivery caused by the proliferation of branded generics.  It also calls for negotiations on community pharmacy funding for 2019-20 and beyond to start as soon as possible and to deliver a multi-year settlement that will give more certainty for contractors about future funding.

PSNC chief executive Simon Dukes says: “This will necessarily involve substantive discussions… about the development of pharmacies’ role in line with the emerging NHS long term plan.”

In order to deliver the £1.792bn in fees and allowances, the pharmacy single activity fee will be set to £1.26 from the November Drug Tariff, but will remain under review throughout the rest of the year.

PSNC says that by accepting the funding offer, it recognises that community pharmacy is in the very early stages of rebuilding a constructive working relationship with HM Government, its only payer, as well as the need to move away from the adversarial relationship that has halted progress for the past two years.

To learn more about maintaining dispensary profitability, please see the DDA 2018 annual conference reports.

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