2010/11 Funding Settlement

2010/11 Funding Settlement

The detail of the changes in contractor funding for 2010/11 are set out below. These changes were published in the October 2010 Drug Tariff and took effect from 1st October 2010.

These changes applied to England and Wales.

2010/11 Funding Agreement

Total contractor funding increased to £2,486m.

Fees & allowances 1,986
Agreed buying profit 500
Total funding 2,486

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 2010:

i) Establishment Payments

From October 2010 the level of the Establishment Payment remained unchanged however there was an increase in the payment thresholds of 3%.

2,300 – 2,599 items p/m £23,278 per annum (1/12th per month)
2,600 – 2,889 items p/m £24,190 per annum (1/12th per month)
2,890 + items p/m £25,100 per annum (1/12th per month)

ii) Practice Payments

From October 2010 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 2300 items per month.

For contractors dispensing over 2300 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 10 to Mar 11
1,100 – 1,599 items p/m £3,600 for Oct 10 to Mar 11
1,600 – 2,239 items p/m £5,040 for Oct 10 to Mar 11
2,300 + items p/m 70.9p per item for Oct 10 to Mar 11

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 £22m. This was lower than previous years due to low inflation.

ii) Regulatory burden

The regulatory burden component compensated contractors for the costs of increased activity arising from changes in regulations. The increase for 2010/11 included funding for:

NPSA Guidance on Lithium and use of NHS Number;

Quota shortages – an incremental amount made available;

The regulatory burden component of the annual uplift formula has added £18m to core funding. Uplifts of £15m, £25.5m, £17m and £9m have been agreed in the previous four years.

The final figures include a recovery of an overpayment on fees of £4m in the previous year.

iii) Retained buying profit

The joint 2009/10 survey into retained buying profits was completed, providing information on the actual buying profit available in 2009/10.

The results of the margins survey for 2009-10 showed excess margin of £276m. This reflected the decision of the previous Government to leave £65m on account pending examination of the reliability of the 2008-9 margins survey results, and up to £125m for future infrastructure costs. The 2009-10 survey results were consistent with the margin levels revealed previously.

iv) Recovery of funding paid in 2009/10

Future infrastructure costs totalling £90m were agreed resulting in a recovery of £35m. The £65m left on account was also recovered by the Government.

Funding delivery

After recovery of the £100m surplus funding, total funding allowed for the year was £2.486bn. The first half of the year delivered funding in excess of the required rate, and funding delivery needed to be reduced by £140m in the second half of the year. The Minister made a concession, allowing a carry-forward of £20m of this into 2011-12 to smooth the impact. Consequently there was a reduction in reimbursement prices in October 2010 of £60m per quarter, with a further reduction of £10m per quarter from April 2011-12 to deal with the under recovery this implied. The carry forward of £20m into 2011-12 was recovered through fees and allowances.

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