Introduction of Category H will bring more uncertainty warn pharmacy leaders

Pharmacy leaders have warned that a new drug tariff category runs the risk of added supply chain uncertainty and complications.

Category H, for branded drugs with more than one supplier, will be introduced to Part VIIIA of the Drug Tariff in March 2026 by the Department of Health and Social Care (DHSC).

Community Pharmacy England (CPE) objected to the introduction of Category H due to the wider challenges pharmacies are currently facing and the risk that further changes could add more uncertainty and supply chain instability to an ‘already fragile’ system.

Director of pharmacy funding at CPE, Mike Dent, said: ‘CPE has been warning for some time that the current retained margin is not fit for purpose, and we don’t believe that the new Category H will help to address some of the more fundamental issues with margin distribution caused by branded generics.

‘Tinkering around at the edges isn’t going to help pharmacies or their patients. We look forward to having more constructive discussions about tackling the issues around medicines pricing and supply with DHSC in the upcoming funding negotiations.’

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Henry Gregg, chief executive of the National Pharmacy Association (NPA) said: ‘This is yet more evidence that the contract between pharmacies and the government is fundamentally broken and in desperate need of reform.

‘This change appears to add further layers of complication to an already unfair system that is not fit for purpose and acts as a barrier to much needed reform of our healthcare system.’

He criticised the system for being ‘opaque and complex’ with many pharmacies dispensing at a loss due to prescribing trends or financial clawbacks outside of their control.

‘The government must urgently commit to reforming this contract, as they have already done with GPs and dentists, or risk undermining their own ambition to move care into communities,’ he added.

In 2019, DHSC publicly consulted on a range of community pharmacy drug reimbursement reforms. One of the proposals was to change how reimbursement prices are set for Category C drugs with multiple suppliers.

The outcome of DHSC’s consultation showed that only 40% of the 283 respondents agreed with the Category C proposals.

What is Category H?

Category H is a subset of Category C, which includes drugs not readily available as a generic.

Currently, the product reimbursement price listed in Category C is based on a specific product – often because it is the only brand available. However, some products have more than one supplier, and these will be moved into Category H.

DHSC’s view is that the reimbursement prices for these products are not always reflective of their actual purchase prices, which can have a distortive effect on the distribution of medicine margin

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Products moving into Category H in March

DHSC says it will consider all drugs with multiple suppliers in Category C for movement to Category H.

According to CPE, over 100 drugs in Category C appear to meet DHSC’s criteria for entry to Category H.

DHSC will begin by moving only 11 products to Category H from March 2026:

• Cinchocaine 5mg / Hydrocortisone 5mg suppositories
• Doxazosin 4mg modified-release tablets
• Etodolac 600mg modified-release tablets
• Isosorbide mononitrate 25mg modified-release capsules
• Nicotine 4mg medicated chewing gum sugar free
• Omeprazole 10mg dispersible gastro-resistant tablets
• Omeprazole 20mg dispersible gastro-resistant tablets
• Omeprazole 40mg dispersible gastro-resistant tablets
• Pseudoephedrine hydrochloride 60mg tablets
• Ursodeoxycholic acid 500mg tablets
• Verapamil 120mg modified-release tablets

Price setting for Category H

The price of Category H drugs will be calculated using information from suppliers obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018.

These regulations require manufacturers and wholesalers to provide sales and volume information associated with products purchased for NHS use.

Drug Tariff prices for Category H drugs will be updated quarterly in March, June, September and December.

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Due to the time taken to gather the data and calculate reimbursement prices, DHSC will be using lagged data to set Category H reimbursement prices.

Currently, reimbursement prices for Category C products are updated monthly depending on changes to the NHS list prices of the reference products and following the current price change timetable.

Pharmacy owners can sign up for a Category H webinar on Monday 16 February at 7.30pm. where CPE’s funding and Drug Tariff experts will explain the details and answer questions.