What does the new funding announcement mean for you?


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By Léa Legraien
Reporter

23 Oct 2018

There will be no extra funding for community pharmacy, the Pharmaceutical Services Negotiating Committee (PSNC) has revealed. The Pharmacist’s reporter Léa Legraien gives pharmacists all the information they need to know about the settlement.

 

What has been announced?

 

Following ‘lengthy’ negotiations with the Department of Health and Social Care (DHSC), PSNC agreed to a funding of £2.592bn to last until March 2019, with £800m allocated to the retained margin and £1.3bn to the single activity fee (SAF). The remaining £480m will be split in other fees and allowances, it announced yesterday (22 October).

PSNC also said that the single activity fee (SAF) will be set at £1.26 from the November drug tariff – a three-pence drop compared to the current £1.29 – while category M prices will reduce by £10m a month between November and March 2019.

 

Is the announcement good news for me?

 

PSNC chief executive Simon Dukes argued that the funding offer was a ‘difficult decision’ to make in light of the multiple challenges many contractors are currently faced with. However, he said he believed that the deal was probably the ‘best likely offer’ available.

Earlier this month, Mr Dukes stressed on the fact that PSNC is looking to rebuild a constructive working relationship with the Government following ‘two years without major negotiations’.

On the bright side, PSNC said that the deal is an improvement given the chance that the Government could have cut funding by a further £33m, as announced during the judicial review process. In addition, the decline in reimbursement prices will be £5m lower than what it had previously been between August 2017 and August 2018, from £15m to £10m.

Mr Dukes said: ‘Being able to reach a negotiated settlement for 2018/19 moves us forward in this process and away from the adversarial position that has halted progress over the past two years.

‘We hope that the Government will see this agreement as a signal of our willingness to work with them in the future, and we have stressed our desire to start negotiations on 2019/20 with them as early as possible.’

 

How do the changes in category M prices translate to my business?

 

The £10m decline in category M prices will repay the excess margin earned by pharmacists over the past few years, particularly in 2015/16, when PSNC identified a ‘significant over-delivery of margin’. This means that pharmacists might see an 11-12 pence drop per item, depending on their dispensing mix, every month from November 2018 to March 2019.

PSNC director of pharmacy funding Mike Dent said that the negotiator is still in the process of analysing the results of the 2017/18 margin survey, which were first expected to be published in August but later delayed due to fluctuations in prices over the past six months and the numerous price concessions given by the DHSC.

According to PSNC, pharmacists earned an extra £200m more than the agreed margin in 2015/16 and nearly £100 more in 2016/17 .

PSNC said: ‘Although some of this has been recovered by the DHSC through previous category M price reductions, indications are that without further action now there would still be up to £100m excess owing by the end of 2018/19.’

Mr Dent added that the adjustments the DHSC has been making have ‘never been enough to pay what’s owed’.

‘We’ve been earning at too fast a rate, so once the adjustments have been made it’s slowing down how much we’ve been earning but not necessarily all of them being available to repay what was owed in the past,’ he said.

 

How will the reduction in the SAF affect me?

 

The SAF was reduced to avoid an over-delivery of funding this year. Mr Dent warned that contractors will be faced with a ‘dip in their cashflow’ by the end of January, when they will be overpaid. This, he explained, is because the NHS Business Service Authority (NHSBSA) will calculate advance payment for November scripts, which will be sent in early December, based on the October’s average value item (AIV).

Mr Dent said: ‘Each time category M changes, you’ve got a delayed reaction. At the end of December/early January, the NHSBSA will pay in advance against those November scripts 100% in advance, based on the number of items declared on the November submission document.

‘At the end of January/early February, when the NHSBSA takes that advance back for November and pay the actual amount, contractors will have been overpaid so there will be a dip in their cashflow.’

Contractors can calculate the estimated income for dispensing prescription items with PSNC’s cashflow indicator.

 

What happens next?

 

While accepting the funding offer, PSNC highlighted ‘deep concerns’ about the financial pressures the sector currently works in. It said that it has not started the negotiations with the DHSC on the next pharmacy funding agreement.

Ultimately, PSNC’s goal is to get a multi-year funding settlement, setting out ‘how the role of community pharmacies should develop to enable them to do more for patients and the NHS’ and allowing contractors to ‘plan more effectively’.

PSNC said: ‘We hope very much to begin substantial discussions with the Government on the future of community pharmacy soon and to work together with them to move the sector towards a future with new funding models that allow pharmacies to focus on services rather than dispensing volumes.

‘The scale of the challenges must not be underestimated and community pharmacy will need to make its case using evidence, through strategic influencing and by demonstrating that it is a sector innovating and embracing change and new technologies to deliver the outcomes that the Government wants.

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