November Drug Tariff changes – timescale of impact on contractors

November Drug Tariff changes – timescale of impact on contractors

November 28, 2018

Community pharmacy contractors should be aware of when their payments will be impacted by the reductions in Category M prices and the Single Activity Fee implemented in the November Drug Tariff.

At the end of December, a pharmacy would receive an advance payment for the dispensing month of November. This is an estimated payment, taking into account the pharmacy’s number of declared items for November, and the pharmacy’s average item value (AIV) from dispensing month of October. Because AIV will have dropped in November in line with the reductions in Category M prices and the Single Activity Fee in that month, the advance for November is likely to overstate the value of November’s prescriptions.

Subsequently at the end of January, the pharmacy will receive the balancing payment for November, and the advance payment will be recovered. This means that the end of January payment is the point at which the impact on contractors will be most significant as the balance for November will be lower than the recovery of the advance.

A worked example is illustrated below for an average volume pharmacy, whose AIV is reduced by 15p per item from dispensing month of November:

Below is a table illustrating payment timelines for upcoming months:

Payments made end of month Recovery of advance from Total of account for Advance for
November September September October
December October October November
January November November December
February December December January

PSNC strongly advises contractors to analyse the impact on their finances. The resources below may be useful for contractors:

PSNC Briefing 055/18: How the 2018/19 funding settlement will affect your payments – information for contractors

This briefing summarises the changes to funding delivery and outlines what those changes mean for your income for 2018/19.

Cashflow calculator

This tool can help contractors to calculate the impact of the Category M price and Single Activity Fee reductions on their pharmacy’s cashflow.

Further information can be found at:

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