2009/10 Funding Settlement

2009/10 Funding Settlement

The detail of the changes in contractor funding for 2009/10 are set out below. These changes were published in the October 2009 Drug Tariff and took effect from 1st October 2009.

These changes applied to England and Wales.

2009/10 Funding Agreement

Total contractor funding increased to £2,318m.

Funding for the National Contract is distributed through a variety of fees and allowances along with an element of guaranteed purchase profit. The arrangements for 2009/10 are summarised below:

Fees & allowances 1,760
Agreed buying profit 500
Excess buying profit earned in first half of 2008/09* 40
Pre-registration training 18
Total funding 2,318

*Using the results of the joint PSNC/DH survey into retained buying profit, it has been estimated that there was an excess of £40m purchase profit earned against target levels in the first half of 2009/10. This figure was used in considering funding levels for the second half of the year but was provisional pending the outcome of the 2009/10 retained buying profit survey.

An excess of £270m purchase margin was identified. It was agreed that £125m of excess purchase profit would be retained by community pharmacy for the provision of one-off infrastructure costs, including preparing for EPS Release 2, Information Governance, and business continuity planning, to sustain the effective delivery of community pharmacy services. An additional £65m of excess purchase profit remained on account. The remaining £80m was treated as excess.

Changes in Fees and Allowances

There was no change to the fee levels of the dispensing fee, additional fees, repeat dispensing payment, transitional payment and EPS Allowances. The arrangements for the following fees and allowances changed with effect from 1st October 2009:

i) Establishment Payments

From October 2009 the level of the Establishment Payment remained unchanged however there was an increase in the payment thresholds of 3%.

2,240 – 2,529 items p/m £23,278 per annum (1/12th per month)
2,530 – 2,809 items p/m £24,190 per annum (1/12th per month)
2,810 + items p/m £25,100 per annum (1/12th per month)

ii) Practice Payments

From October 2009 the threshold to receive the Practice Payment, other than a contribution for provision of auxiliary aids for people eligible under the Disability Discrimination Act, rose by 3% to 2240 items per month.

For contractors dispensing over 2240 items per month, the Practice Payment for the top level remained at 70.9p per item.

Up to 1,099 items p/m £300 for Oct 09 to Mar 10
1,100 – 1,599 items p/m £3,600 for Oct 09 to Mar 10
1,600 – 2,239 items p/m £5,040 for Oct 09 to Mar 10
2,240 + items p/m 70.9p per item for Oct 09 to Mar 10

Settlement elements

i) Formula uplift

The formula uplift recognised volume growth at marginal cost, general and staff cost inflation, and an efficiency discount imposed by the DH. This generated an increase in core funding of £87m. This was comparable with previous years.

ii) Regulatory burden

The regulatory burden component compensated contractors for the costs of increased activity arising from changes in regulations. The increase for 2009/10 included funding for:

Costs associated with CIP;

Changes to CD regulations;

EPS system upgrade costs;

NPSA Alerts on anti-cancer and opioid;

Quota shortages;

ICO model publication scheme.

The regulatory burden component of the annual uplift formula added £15m to core funding. Uplifts of £25.5, £17m and £9m have been agreed in the previous three years.

iii) Retained buying profit

The joint 2008/09 survey into retained buying profits was completed, providing information on the actual buying profit available in 2008/09.

The survey showed that actual purchase profit levels were exceeding the target level and as a consequence, pending the results of the margins survey for 2009/10, Category M prices were reduced by 20m per quarter which equates to approximately 9p per item. This change was intended to ensure that in the second half of this financial year, only the agreed levels of purchase profit income were delivered to contractors.

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