CPCF funding arrangements 2018/19

CPCF funding arrangements 2018/19

On 22nd October 2018 it was announced that community pharmacy funding levels will be maintained for 2018/19, with total funding set to £2.592bn. This will be split, as previously, to deliver £1.792bn in fees and allowances and £800m in medicine margin.

Fees & allowances 1,792
Retained buying margin 800
Total funding 2,592

Changes to Fees and Allowances

In order to deliver the £1.792bn in fees and allowances, the Single Activity Fee will be set to £1.26 from the November 2018 Drug Tariff, but this will remain under review throughout the rest of the year.

For further information about the SAF see our Dispensing and Supply Factsheet: Understanding the Single Activity Fee

Changes to reimbursement prices to recover excess margin

Category M prices will reduce by £10m per month from November 2018 for the next five months (until March 2019). This is to repay excess margin earned by pharmacies in previous years, in particular 2015/16 for which the results of the margin survey show that there was a significant over-delivery of margin.

Decision to accept funding for 2018/19

After rigorous analysis of funding and margin delivery rates and a very difficult debate at the October PSNC meeting, PSNC unanimously agreed to accept the funding offer from DHSC on the grounds that:

  • Community pharmacy is in the very early stages of rebuilding a constructive working relationship with HM Government, its only payer, and needs to demonstrate its desire to move away from the adversarial relationship that has halted progress for the past two years.
  • Previous plans revealed through the Judicial Review process had been to reduce community pharmacy funding by £33m this year.
  • In the context of widespread austerity and immense financial pressures on the health service, and pending substantial discussions on the long term future of community pharmacy, maintaining funding levels was felt to be the priority and the best likely offer.
  • The agreed levels of margin recovery have been set to repay a conservative estimate of excess margin and has been spread over the longest period possible to avoid greater shocks to the market.

In accepting the offer, PSNC expressed to HM Government its deep concerns about the financial pressures facing community pharmacy contractors and the fact that they would increasingly be unable to reinvest, given pressures from rising staff costs and business rates.

PSNC stressed the need for its goodwill in accepting this funding offer to be recognised in future negotiations, and also called for progress to be made in amending the current margin delivery system to smooth adjustments, and to remove the inequity in delivery caused by the proliferation of branded generics, as recognised by DHSC.

PSNC has expressed its desire to begin negotiations on community pharmacy funding for 2019/20 and beyond as soon as possible, and our intention remains to work towards a multi-year settlement that will give more certainty for contractors about future funding. This will necessarily involve substantive discussions with HM Government about its ambitions for community pharmacy in the long term and PSNC is keen to explore ideas about the development of pharmacies’ role in line with the emerging NHS long term plan which we have sought to influence working together with the other pharmacy organisations.

Further Information and FAQs

To help community pharmacy contractors and others to understand the impact that this funding settlement will have on their businesses and the background to its agreement we have produced a number of briefings and resources:

PSNC Briefing 055/18: How the 2018/19 funding settlement will affect your payments – information for contractors

PSNC Briefing 056/18: Background information on community pharmacy funding and the 2018/19 funding settlement

PSNC Briefing 057/18: Funding 2018/19 – Frequently Asked Questions

Cashflow Calculator

The Cashflow Calculator below, which includes Indicative Income Tables, has been developed to help contractors estimate the impact of the recent funding reductions on their payments.  The tool includes the reduction in Category M reimbursement prices from November 2018, and the reduction in the Single Activity Fee (SAF) also from November 2018.

Cashflow Calculator and Indicative Income Tables (Microsoft Excel)

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