Retained margin £120m less than it was a decade ago

The community pharmacy retained margin is worth £120 million less in real terms than it was a decade ago, new data has revealed.

Figures published as part of a parliamentary written answer show that the real-terms value of the community pharmacy retained margin fell from £1.02 billion in 2015/16 to £900 million in 2025/26.

But the Company Chemists’ Association (CCA) warned that the £120 million gap was likely an underestimate because it did not account for the increasing dispensing workload and additional operational costs pharmacies have had to absorb since 2015/16.

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It highlighted NHS Business Services Authority (NHSBSA) figures showing that since 2015/16, the number of NHS medicines dispensed by community pharmacies has increased by 16%.

This means that pharmacies are doing ‘significantly more’ work with proportionally less funding, the CCA said.

Malcom Harrison, CCA chief executive, branded it a ‘shocking finding’ after a previous parliamentary question had revealed community pharmacy funding had fallen £800m in a decade.

He added: ‘Investing in retained margin, together with Drug Tariff pricing, is essential to ensuring the UK can maintain lower prices for tax payers, compete in the global marketplace, and to repair the resilience of our medicines supply chain.

‘Without investment in both tariff pricing and margin it will be patients who ultimately lose out.’

He said he hoped the government delivered on its commitment to stabilise community pharmacy by providing the additional funding it ‘urgently’ needs.

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The retained margin – the profit pharmacies can earn from buying medicines at a lower price than the Drug Tariff – was capped at £900 million as part of the 2025/26 community pharmacy contract, a £50 million uplift from 2024/25.

The new figures were revealed in response to a question from Helen Morgan, Liberal Democrat MP for North Shropshire, about how much funding the Department of Health and Social Care (DHSC) provided to community pharmacies through retained margin in real terms, accounting for inflation each year.

In his written response to Ms Morgan, health minister Stephen Kinnock said an additional £193 million in funding had been provided in 2025/26 via writing off over-delivery, while in 2022/23 the write-off of over delivery had delivered an extra £50 million for the sector.

The Department of Health and Social Care (DHSC), along with Community Pharmacy England (CPE), assess the medicines margin retained through a quarterly ‘medicines margin survey’, he added.

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Mr Kinnock said: ‘Where the medicine margin survey shows under or over delivery against the funding provided, then adjustments are made to reimbursement prices to bring it line with the allowed medicine margin.’

Negotiations over the community pharmacy contract for the upcoming financial year are now under way, and CPE said it would push for the ‘best possible deal’ for the sector’.