Pharmacy funding

Pharmacy funding

2016/17 & 2017/18 Funding

On 20th October 2016 the Government imposed a two-year funding package on community pharmacy, with a £113 million reduction in funding in 2016/17. 

This will take total funding to £2.687 billion for 2016/17. This is a reduction of 4% compared with 2015/16, but it will mean that contractors will see their funding for December 2016 to March 2017 fall by an average of 12% compared with 2015/16 levels. This will be followed by a reduction in 2017/18 to £2.592 billion for the financial year, which will see funding levels from April 2017 drop by around 7.5% compared with 2015/16 levels. See more information here.

Pharmacy funding under the national framework is distributed in two ways: i) fees and allowances, and ii) retained buying margin.

Fees and allowances

‘Fees and allowances’ refers to the payment pharmacies receive for the provision of pharmaceutical services, also commonly referred to as ‘Remuneration’. All fees and allowances are recharged to NHS England. These consist of the ‘global sum’ elements covering Item Fees, Establishment Payments, the Repeat Dispensing Annual Payment, Transitional Payments and Additional Fees. They also include Practice Payments including a contribution for provision of auxiliary aids for people eligible under the Disability Discrimination Act 1995 (DDA)/ Equality Act 2010, payments for the Advanced Services and IT payments.

National fees and allowances payments can be further categorised in two ways, i) payment for Essential Services, and ii) payment for Advanced Services. Essential Services are services which all community pharmacy contractors must provide, Advanced Services may be provided if the contractor chooses to provide them.

For information on the fees and allowances pharmacies are paid under the terms of the national contract please click the following links.

Fees for Essential Services

Fees for Advanced Services

Retained buying margin

‘Retained buying margin’ is the profit community pharmacies are allowed to retain through the cost effective purchasing of prescription items. The national arrangements allow for £800m to be delivered to community pharmacies annually in retained buying margin. The government use Category M in the Drug Tariff to calibrate the amount of margin available in the market.

For information on Category M please click here.

Margins Survey

Part of the agreement is that pharmacy margin levels will be monitored and adjusted with the aim of delivery a specific level of margin to community pharmacy each year. This section contains information on how the Margins Survey is conducted.

Cost of Service Inquiry

The 2010 COSI commissioned by DH and PwC was intended to form the evidence base for negotiations for future funding. This section contains information on the COSI.

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