Contractor Announcement: Category M prices to increase from August

Contractor Announcement: Category M prices to increase from August

July 15, 2019

Cat M July 2019 announcement

After discussions with PSNC, Category M reimbursement prices will increase by £15 million a month from August 2019, the Department of Health and Social Care (DHSC) has confirmed.

This is to correct a predicted shortfall in the margin delivery rate for the current financial year and it will be reviewed in the autumn.

At the same time, the Single Activity Fee (SAF) will rise by 1p to £1.27 per item from August to ensure delivery of the correct amount of funding to contractors this year.

The Category M price increases will help to ensure that the overall amount of margin delivered in this financial year is the agreed annual sum of £800m.

For the past year the margin delivery rate has had to be set lower than £800m as DHSC sought to recover sums owing from the over-delivery of margin in previous years.

Although Category M prices increased in April 2019, April reimbursement levels were lower than anticipated.  This appears to have been driven by movement in the drug mix in April, which means that contractors have not seen the positive cash flow impact that would have been expected.

The margin recovery process has affected contractors’ cashflow and PSNC remains very concerned about the difficult financial position many contractors find themselves in. PSNC has highlighted this to DHSC and NHS England & Improvement and we will continue to work with them to try to smooth the delivery of margin to contractors going forwards.

The August price increases should bring at least some relief to contractors, but we will continue to monitor delivery of margin and to press for improvements to funding delivery to try to avoid similar cashflow issues recurring in the future.

Simon Dukes, PSNC Chief Executive, said:

“The past few months have been incredibly difficult for many community pharmacy contractors, and this has in part been caused by the need to keep Category M reimbursement prices low following excess margins earned in previous financial years. These August price increases are being made to try to correct margin delivery for this financial year and this should bring some relief for contractors.

PSNC is very concerned about the impact that cashflow difficulties are having on pharmacies and we have made this very clear to DHSC. We are pressing for improvements to the funding and margin distribution systems to try to avoid this sort of scenario in the future. However, within the current funding structures and with wider negotiations on funding ongoing, the Committee felt that an immediate increase in Category M reimbursement prices was the best course of action to ensure that contractors receive all the funding to which they are entitled this year.”

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