2014/15 Funding Settlement

2014/15 Funding Settlement

2014/15 Funding Settlement

The detail of the changes in contractor funding for 2014/15 are set out below. These changes will be published in the October 2014 Drug Tariff and take effect from 1st October 2014.

2014/15 Agreement

A settlement of £2.8bn is agreed for the period 2014/15. This comprises of £2b to be delivered through fees and allowances, and £800m to be delivered through retained buying margin.

Fees & allowances 2,000
Agreed buying profit 800
Total funding 2,800

The settlement figure of £2.8bn recognises the additional margin that contractors have earned and retained in previous years (typically in the region of £250m), accounting for the apparent increases in the allowance for retained buying margin.

In order to deliver the allowed purchase margins, Category M prices will be increased by £10m per month from October 2014. This equates to an increase in average item value of around 12 pence.

Changes in Fees and Allowances

There will be no change to the fee levels of the dispensing fee, additional fees, repeat dispensing payment and EPS Allowances. From November there will be a reduction in the Practice Payment of around 17 pence per item in order to ensure that the £2bn in fees and allowances is delivered, accommodating volume increases and the inclusion of funding for the New Medicine Service. Using current predictions of prescription volumes this is expected to apply until the end of March 2015.

Overall impact of changes

The impact of these adjustments will be to reduce income available to the average contractor by £870 in the second half of 2014/15. This is calculated as follows:

£60m increase through Category M, and
£70m decrease through Practice Payments
Leads to overall £10m decrease

£10m / 11500 (number of Community Pharmacies) = £870 per pharmacy.

More information

For the full wording of the 2014/15 funding announcement, and detailed briefings on the aspects of the settlement please click the following links:

2014/15 Funding Announcement

Summary of CPCF changes

PSNC Briefing 015/14: Changes to Contractual Requirements

PSNC Briefing 016/14: Advances Services (MURs and NMS)

PSNC Briefing 017/14: Purchase Margin and Margin Reforms

PSNC Briefing 018/14: The Settlement Negotiations and the Negotiating Process – background information for contractors

PSNC Briefing 019/14: The Cost of Service Inquiry (COSI)

2014/15 Additional Payment

In recognition of the reduction in margin available to contractors in the early months of this financial year, NHS England will make an additional payment to pharmacies with their March payments – i.e. along with the final payment for the March 2015 dispensing month which is made in late May/ early June.

The payment will be calculated as an additional fee for each pharmacy, based on professional fee numbers. The fee will be 3.3 pence for each professional fee paid from April 2014 to December 2014.

More information is available here

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