How discount deduction works

How discount deduction works


REF: Drug Tariff Part II and V

When pharmacy contractors are reimbursed for the cost of medicines and appliances dispensed, a deduction is made to their payments, known as ‘discount deduction’. This is an assumed amount of discount received to avoid the additional workload of pharmacies being required to calculate and declare exact levels of discount received on each individual item dispensed.

The level of discount varies depending on the value of products dispensed by a pharmacy in a given month. Currently the average level of discount is approximately 8%. It is possible to work out from the deduction scale in Part V of the Drug Tariff what the deduction rate will be for a given value of standard discount rate products dispensed (the value of zero discount rated products dispensed is not considered when calculating the discount rate).

Click on a heading below to reveal more information.

Eligibility for DND list

The ‘DND’ (‘Discount Not Deducted’), in Part II of the Drug Tariff, contains products which are exempt from the discount deduction scale and is updated monthly by the Department of Health and Social Care. Items included under the group headings are not listed in the Drug Tariff individually. In order to be included on the list a product must come under one of the following groups:

Schedule 2 or 3 Controlled Drug

HazChem: Product covered by the Chemical (Hazard Information and Packaging for Supply) Regulations 2002. More information on the CHIP Regulations can be found on the Health and Safety Executive Website. Examples of Hazardous Chemicals that will be included on the new list are Lemon Spirit and Lavender BPC which both may be used in the preparation of extemporaneously dispensed products.

Cytotoxic or cytostatic item: Listed in section 8.2 of the BNF

Cold-chain storage item: The products SPC (available here) must state that the product must be stored at 2 – 8°C prior to dispensing. Products which require cold-chain storage after re-constitution in the pharmacy are not eligible for the list.

Unlicensed Specials: which aren’t listed in Part VIIIB of the Drug Tariff

The three criteria: products where all three of the following criteria apply
– the manufacturer, AAH and Alliance do not offer a discount
– fewer than 500,000 items per year are dispensed
– average net ingredient cost (NIC) per item is more than £50

The Net Ingredient Cost (NIC) per item is the average NIC per prescription dispensed and not the list price of the product. As the NIC is based on the quantity of the product dispensed, it is independent of product pack size. For new products, the Department of Health and Social Care will give consideration to whether the product may, in time, meet the criteria.


The process for making products exempt from discount deduction is now automatic and so the DND endorsement will be ignored upon processing.

DND requests

To make a request for a product to be considered for the list, please contact the PSNC Dispensing and Supply Team. We will investigate whether the product meets the new criteria and make an application to the Department of Health and Social Care for the product to be listed as appropriate.

Additional information

Information on dispensing volume and NIC can be found in the Prescription Cost Analysis (PCA).

Contractors can check the DND status of items using the NHS Dictionary of Medicines & Devices.


Click on a question below to reveal the answer.

Q. Can I endorse ‘DND' to claim exemption from discount deduction for unlicensed medicines?

The DND endorsement is no longer in use as the exemption from discount deduction is now automatic. Any DND endorsement will be ignored upon processing.

All unlicensed medicines not listed in Part VIIIB where the product has been sourced from a supplier holding a MHRA specials or importers licence are automatically eligible to be exempt from the discount deduction scale. Please see the unlicensed specials and imports page for further information.

Q. Are appliances eligible to be added to the list?

Made to Measure Elastic Hosiery and Trusses could formerly be found in Zero Discount List A but these products were removed from the Scheme in September 2006. The Department of Health and Social Care have refused to add appliances to the list for some time and have confirmed that appliances will not be eligible for entry into the list of ‘drugs for which discount is not deducted.’

The Department of Health and Social Care are currently reviewing the arrangements for the supply of appliances to primary care. A copy of the PSNC response to this consultation can be downloaded below.

2005 Consultation: DHSC Proposals on the Reimbursement of Appliances (PDF)

2005 Consultation: PSNC Response (PDF)

In the response, PSNC highlighted the fact that an NHS pharmacy contractor is not contractually obliged to supply appliances that would not normally be supplied in the course of their business. Therefore if a contractor was faced with a loss through dispensing the item, they may choose not to dispense it.

PSNC strongly believes that where discount is not available when purchasing an appliance, to ensure patient access and care, the product should be exempt from discount deduction.

Q. Are borderline substances eligible to be added to the list?

Borderline substances are no longer automatically added to the list, and will need to fall under one of the above groups.

Q. If a product is in the list by brand name but the product has been prescribed generically, will the prescription item be exempt from discount deduction?

This depends on whether the product is listed generically in Part VIII of the Drug Tariff or not. If the product is not listed generically in Part VIII of the Drug Tariff, then the prescription will be priced based on the endorsed brand/manufacturer, therefore if that branded product is listed in the list of ‘Drugs for which Discount is not Deducted,’ the item will be exempt from discount deduction. For example, Revatio 20mg tablets are included in the list as this product meets the ‘three criteria’. The generic description for this product (Sildenafil 20mg tablets) is not included in Part VIII of the Drug Tariff, therefore prescriptions for this product will be priced based on the branded product endorsed. As Revatio is included in the list, a prescription for Sildenafil 20mg tablets would therefore also be exempt from discount deduction.

If the prescribed generic product is listed in Part VIII of the Drug Tariff generically, the product will be priced based on the Part VIII listing regardless of what brand has been dispensed. In this scenario, the generic name must also be listed in Part VIII of the Drug Tariff for a generic prescription for the item to be exempt from discount deduction. For example Seroquel 100mg tablets meets the ‘3 criteria’ so is included in the list. As this product’s generic description (Quetiapine 100mg tablets) can be found in Part VIII of the Drug Tariff, the generic description is also included in the list to ensure prescriptions for this product, whether prescribed generically or by brand name will be exempt from discount deduction.

Please note that there may be occasions where a particular branded product meets the criteria but the generic equivalent of the product does not. In this case, the generic description would not be included in the list.

Q. How was the criteria for products to be included in the list developed?

The Department of Health and Social Care published the proposed criteria in their consultation on this issue. The criteria is intended to reflect those classes of product that require special handling by wholesalers and therefore which have additional supply chain costs. Click on the links below to view the Department of Health and Social Care consultation on this issue and the PSNC Response:

Proposals to simplify the reimbursement arrangements for NHS dispensing contractors: A consultation (PDF)

PSNC Response to Drug Tariff Simplification Consultation (PDF)

DHSC Summary of Responses to the DT Consultation (PDF)

Q. Can I refuse to dispense a medicine that I do not receive discount in obtaining and which is not on the DND List?

Pharmacy contractors, through their Terms of Service, are obliged to dispensed all medicines ordered with reasonable promptness, regardless of whether discount is received when obtaining a product (The National Health Service (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013, schedule 4).

Pharmacy contractors may decide to only order certain items from their wholesaler when a prescription is presented. In the case of commonly prescribed medicines, contractors will need to balance any decision not to hold stock against any inconvenience to the patient which may lead to that patient considering complaining or using another pharmacy for all of their pharmaceutical needs.

Q. Why is the Becodisks 400mcg Refill pack on the list when the Becodisks 200mcg Refill Pack was removed from the list?

Products are assessed individually. Becodisks 400mcg meets the ‘three criteria’ whereas becodisks 200mcg has an average NIC of less than £50.

Q. Methotrexate Tablets 10mg are considered cytotoxic but I can't see them listed in the new list. Are they exempt from discount deduction?

Yes, all cytotoxic and cytostatic items listed in Section 8.1 of the BNF are exempt from discount deduction, regardless of whether the prescription has been written by brand or generic name. These products aren’t listed individually in the list but can be found under the group heading ‘cytotoxic or cytostatic items’.

Q. Do these changes also affect Dispensing Doctors?

No, Dispensing Doctors have a separate discount deduction scale from pharmacy contractors which can be found in Annex G of the GMS Statement of Financial Entitlements. Dispensing doctors do not benefit from the Zero Discount Concession, that is where discount is deducted from a practice, it is deducted for all products regardless of whether discount was received in purchasing the product or not.

Q. Do the DND arrangements apply to Wales?


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