Contractor Update: November 1st advance payment to rise by 15p per item

Contractor Update: November 1st advance payment to rise by 15p per item

October 23, 2017

Community pharmacy contractors will receive an increase in their November 1st advance payments of 15p per prescription item, the Department of Health (DH) has confirmed.

PSNC had been seeking urgent intervention to offer some relief for contractors, and this measure has been taken in recognition of the extraordinary cashflow challenges highlighted.

The increase has been confirmed for one month only, and full and final payment for services provided in September will be reconciled as usual at the end of November.

This means that contractors will not receive any additional funding overall, but the impact of the reduction expected to be seen in the November 1st payment, following Drug Tariff price reductions put in place from August, will be smoothed out.

PSNC Chief Executive Sue Sharpe said:

“The pharmacy minister has responded to PSNC’s request for urgent measures to offer contractors some relief and this unprecedented action will help many pharmacies to manage the cashflow crisis over the next few weeks. We are grateful for this positive response.

We remain concerned though that there will be pharmacies for which this is too little, and that it may be too late.

The impact of the imposed funding cuts is to discriminate against smaller urban pharmacies, many of which serve the most disadvantaged communities. We hope we can work with the minister and with NHS England to review policies in the light of evidence not available when they were formed in late 2015. This most recent decision gives us hope that we will be able to restore the constructive relationships that underpinned our work before 2015.”

Frequently Asked Questions

Q. Why has this measure been taken?
A.
PSNC had been seeking urgent assistance for contractors from DH and the pharmacy minister recognising the cashflow problems they are facing caused by the combination of:

Q. Why is the increase being applied to the November payment?
A.
At the beginning of October, a pharmacy would have received an advance payment for the dispensing month of August. This was an estimated payment, taking into account the pharmacy’s number of declared items for August, and the pharmacy’s average item value (AIV) from the dispensing month of July.

Because of the reductions in Category M prices in that month, the advance for August is likely to have overstated the value of August’s prescriptions. Subsequently in the November 1st payment*, the pharmacy will receive the balancing payment for August, and the advance payment will be recovered. This means that the November 1st payment is the point at which the impact on contractors will be most significant as the balance for August will be lower than the recovery of the advance.

As well as the November 1st balancing payment, contractors will receive an advance payment at the same time for declared items for September. By increasing the value of this payment by 15p per item, the impact of the expected drop in payment is smoothed out.

*The November 1st payment could in practice be received from the end of October to early November. See: https://www.nhsbsa.nhs.uk/pharmacies-gp-practices-and-appliance-contractors/dispensing-contractors-information/payment-information

Q. How will the additional 15p per item advanced payment be displayed on my Schedule of Payments?

A. A new field titled ‘Additional Advance Payment’ will appear as follows.

Q. How will it help?
A.
The aim of the increase to the November 1st advance payment (paid for declared items for September) is to smooth out the effect of the expected reduction in value of payments, to reduce the impact on cashflow. PSNC remains concerned that for some contractors the measure will be too little, and perhaps too late, and that some business will still struggle to manage the cashflow impact over the next few months.

Q. Will the cashflow issues continue long term?
A.
The funding cuts imposed by the Government will undoubtedly mean that contractors will face ongoing pressure on their finances. We do not know whether further funding cuts are planned beyond the 2017/18 financial year. The reduction in reimbursement prices made from August had a more significant impact than expected because of the increase in generic prices that followed shortly afterwards. The DH intends that reimbursement prices should catch up as they in the main reflect the market, but until this happens the cashflow issues will remain severe.

Q. Will the increase in advance payments apply beyond October?
A.
The amendment has been confirmed for the advance payment in one month only.

Q. What else is PSNC doing about the cashflow issues facing contractors?
A.
PSNC is continuing to press the DH for improvements to the systems used to measure and deliver margin to ensure fair access to funding for all contractors and to smooth delivery where possible. PSNC would also like to see the NHS making accurate payments to contractors at the end of each month, removing the need for the advance payments system. PSNC is continuing to lobby Parliamentarians and the NHS, highlighting the value of community pharmacies, the current cashflow issues, and the risks if any reduction in pharmacy services is seen.



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