Reminder: End of January payment

Reminder: End of January payment

January 22, 2019

Community pharmacy contractors are reminded that, due to changes that came into effect with the November 2018 Drug Tariff, they should be aware that their January payment from NHS Prescription Services is likely to be lower than in previous months.

The time-lag in pricing prescriptions means that pharmacy payments aren’t affected straight away. As such, reductions in Category M prices and the Single Activity Fee implemented in November do not fully work their way through the system until the end of January. The table below demonstrates how the payment timetable works.

Payment made Recovery of advance from Total of account for Advance for
End of December October October November
End of January November November December

As can be seen above, 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.

PSNC strongly advises contractors to analyse the impact on their finances. A PSNC Briefing and a cashflow calculator to support planning are available here.

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