DHSC to scrap transitional payments from February

The Department of Health and Social Care (DHSC) has decided to reduce the Transitional Payment to zero from February 2023, without agreement from the Pharmaceutical Services Negotiating Committee, PSNC has announced.

PSNC said that its negotiating team ‘refused to accept this on the grounds that any reductions in payments at this point will be impossible for community pharmacy contractors to manage financially’.

Transitional payments were introduced at the start of the five-year Community Pharmacy Contractual Framework (CPCF) settlement in 2019/20, to support the transition of community pharmacy to providing more clinical services.

The payments are made from any ‘unallocated funding’ within the CPCF funding envelope – i.e. that which is left over from the flat £2.592 billion allocated to the sector each year after contractors have been remunerated for contractual services and dispensing activity.

Transitional Payments were due to reduce over time and were originally intended to be in place for two years, but were extended, with PSNC expecting them to remain in place until the end of the five-year CPCF agreement in March 2024.

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In October, PSNC said that it expected contractors to be paid 15% of the April-September 2022 payment, or £2.5m, between Jan – Mar 2023 and the same during Apr 2023 – Mar 2024.

However, it announced today that DHSC has decided to reduce the payments to zero.

The change will be reflected in the February 2023 Drug Tariff and in payments made from April 2023, the NHS Business Services Authority said on its website. 

PSNC said that the change was ‘deemed necessary by the DHSC’ because the pot of ‘unallocated funding’ had been reduced due to more of the CPCF funding being spent on the new services introduced in the latest agreement, which have experienced an ‘accelerated’ uptake.

It also said that a new flat payment will be introduced in 2023/24 and funded from the unallocated CPCF funding.

Janet Morrison, PSNC chief executive, said that the removal of the transitional payments ‘could not come at a worse time for community pharmacy businesses who by the Government’s own admission have been subjected to years of funding cuts.’

She added: ‘Pharmacies are on the brink of collapse and removing these payments now may be the final straw for some: we have made that absolutely clear.

‘While we know how constrained public funding is, this spreadsheet balancing act has real world costs in terms of businesses, livelihoods, jobs, healthcare and community resources.

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‘We will keep making that case in the strongest terms: the public and NHS rely heavily on pharmacies and we are the solution to many of the health service’s current problems, but all of this will be lost if we are squeezed to the point of collapse. The #saveourpharmacies campaign which we and the other national pharmacy bodies have launched will be critical in reinforcing all of this.’

Peter Cattee, chair of PSNC’s funding and contract subcommittee and a negotiating team member, said:

‘The Government’s refusal to move away from the five-year deal given our current situation – one that is not of our making nor could have been foreseen as inflation and cost of living crisis bite, and our workforce is decimated, largely by NHS decisions – is a policy choice that is going to be catastrophic for some pharmacies and ultimately for patients.

‘Contractors now have little control over their own businesses and we must continue to take whatever action is within our power to change Government minds and that decision before we see chaos in the network.’

Earlier this month, a parliamentary written answer from health minister Will Quince set out the real-terms value of the flat funding deal, accounting for inflation using the November 2022 gross domestic product deflator.

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For instance, £2.592bn in nominal funding was worth £2.498bn in terms of inflationary costs in 2017/18, but just £2.154bn in real-terms funding in 2022/23.

The Company Chemists’ Association said that inflationary pressures meant that community pharmacy funding was short by £67,000 per pharmacy each year.

DHSC has been approached for comment.