Community pharmacy funding announcement: funding of £2.592bn agreed for 2018/19

Community pharmacy funding announcement: funding of £2.592bn agreed for 2018/19

October 22, 2018

Announcement summary

Contractor information

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.

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

Alongside this, Category M prices will reduce by £10m per month from November 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.

The price reductions follow the pause in margin recovery which PSNC agreed over the summer to help ease cash flow for contractors, and they reintroduce the recovery at a lower monthly rate (£10m monthly reductions, rather than £15m monthly) than it had been previously.

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.

PSNC Chief Executive Simon Dukes said:

“We know that many community pharmacy contractors will be disappointed to hear that there is no more money available for pharmacies this year, and accepting this funding offer was a difficult decision for PSNC to make. But we were very mindful of the proposals we had seen previously to reduce funding by £33m this year, and in that context, along with the backdrop of uncertainty in the wider economic climate, we knew that pharmacy was not going to get a better offer from HM Government.

Since starting at PSNC in May, I have been struck by how hard community pharmacies are working on behalf of the NHS and patients, and we will continue to work with the other pharmacy organisations to ensure that HM Government sees the value that pharmacies are delivering. We must not underestimate the scale of the challenges ahead and we must make our case using evidence, through strategic influencing and by demonstrating that we are a sector innovating and embracing change and new technologies to deliver the outcomes that HM Government wants. If we can do all of this, then I do believe we will be able to create positive opportunities for community pharmacies.

Being able to reach a negotiated settlement for 2018/19 moves us forward in this process and away from the adversarial position that has halted progress over the past two years. We hope that HM Government will see this agreement as a signal of our willingness to work with them in the future, and we have stressed our desire to start negotiations on 2019/20 with them as early as possible.”

PSNC Funding Webinar

PSNC is keen to share as much information about the funding settlement as we can and, to give community pharmacy contractors the opportunity to ask questions about it, we will be holding a funding webinar on Tuesday 30th October at 7pm*.

The webinar will be presented by Mike Dent, PSNC Director of Pharmacy Funding, and Simon Dukes, PSNC Chief Executive. Click here for further details and sign up information.

*Please note that this webinar will now replace the FMD webinar previously scheduled for this time. The FMD webinar will now be held on Wednesday 7th November at 7pm. If you have signed up for this webinar you will be automatically notified of the change, or you can sign up here.

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

PSNC Committee Member Statements

PSNC Vice Chair and Regional Representative Bharat Patel said:

“PSNC agreed to this funding settlement in the one part with a heavy heart, because all our businesses are struggling at the moment, but in the other part with optimism, as although we are in the very early stages of rebuilding our relationship with HM Government, we hope we are starting to move towards more constructive dialogue about the future of pharmacy services.

I know that the contractors and LPCs who I represent will, rightly, ask me why we have not got any more money, particularly when community pharmacy collectively has made strong arguments and put forward a number of evidenced proposals for service development over the past two years. But the financial constraints on health and all public services are very severe indeed, and we are only just emerging from a period in which constructive dialogue about the future of community pharmacy had just not been possible.

Looking to the future, HM Government, as our payer, must have the final say in what it wants us to deliver, and our best strategy for success will be to work with Government, not to try to change what we cannot change, but to find ways to meet their objectives that are as beneficial for community pharmacies and their patients as possible. This is exactly what PSNC intends to do.”

PSNC Funding and Contract Subcommittee Chair Peter Cattee said: 

“PSNC’s Funding and Contract Subcommittee considered the available analysis on margins and funding delivery rates very carefully ahead of the wider PSNC discussion on the funding offer. We know the impact that flat funding has on businesses, and we are particularly concerned that the reductions to Category M prices will once again hit cash flow hard, so only very reluctantly accepted that part of the funding package.

We felt that spreading the margin recovery over five months would minimise the impact on cash flow as much as possible, and we were also only prepared to agree to the recovery of £50m of historical excess margin, pending agreement on the final results of the latest margin surveys.

I believe the retained margin system no longer works in the way that we want it to, and this is something PSNC is exploring in great detail as part of work to explore alternative funding models. Solutions are difficult, but although any new models will bring change and challenge for contractors, they should also bring opportunities for those willing to embrace new ways of working and delivering services.”

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