Generic medicine reimbursement: adjustment to prices

While NHS England is responsible for commissioning pharmaceutical services and determining the amount paid to pharmacy contractors for those services under the Community Pharmacy Contractual Framework (CPCF), the Secretary of State remains responsible for determining the NHS reimbursement prices for the products dispensed.

Payment for services within the CPCF is delivered through a combination of fees and allowances, and the medicine margin. The Department of Health and Social Care (DHSC), with the Pharmaceutical Services Negotiating Committee (PSNC) and NHS England, assesses the medicine margin achieved by pharmacy contractors (through a medicines margin survey) and adjust reimbursement arrangements, as necessary.

Previous year adjustments to the CPCF from 2018/19 onwards

2018/19: November 2018 to March 2019 adjustment

As announced by DHSC, the funding agreement reached between NHS England and PSNC for the CPCF in 2018/19 was £2.592 billion, with £1.792 billion being delivered through fees and allowances, and £0.800 billion delivered through the medicines margin.

With effective from 1 November 2018, an agreement was reached between DHSC and PSNC which resulted in a reduction in Category M reimbursement prices by £10 million per month. This was due to:

• the results of the 2015/16 and 2016/17 medicine margin survey and
• provisional results of the 2017/18 medicine margin survey

which indicated an over-delivery on the £800 million per year medicine margin commitment for these financial years.

At the time, it was highlighted that this recovery would be made over the final 5 months of the current financial year, resulting in community pharmacy medicines costs being £50 million less (i.e. £10 million per month * 5 months) than would otherwise be the case.

Whilst this reduction in Category M prices would assist in helping mitigate any cost pressures arising from price concessions in the short term, it was emphasised that this was to be a temporary measure only. To this effect, the £10m per month Category M adjustment was restored with effect from 1 April 2019.

2019/20: August 2019 to March 2020 adjustment

For 2019/20, it was agreed that the previous year’s funding agreement be rolled forward for a 6-month interim period whilst negotiations between PSNC, DHSC and NHSE&I about the future CPCF global sum continued. As such, the medicines margin remains at £0.800 billion.

However, discussions with DHSC drew attention to an under-delivery in the medicines margin in 2018/19, and also highlighted the likelihood of a significant under-delivery for and by the end of the financial year 2019/20.

To address this, it was agreed that – with effect from August 2019 – the medicines margin would increase by £15 million per month to the financial year end, an increase of £120 million in total (i.e. £15 million per month * 8 months).

2020/21: June 2019 adjustment

As per the previous year, the 2020/21 CPCF is £2.592 billion, split between £1.792 billion delivered through fees and allowances, and £0.800 billion delivered through the medicines margin.

Continued discussion with DHSC, initial margin survey data on 2019/20 and consideration of the delivery of the margin in 2021/21 have resulted in an agreement to increase the medicines margin by £15 million per month from 1 June 2020.

The medicine margin position will continue to be monitored as the financial year 2020/21 progresses, and so this position is subject to a revisiting of the arrangements when further data on a likely outturn position for the previous year and updated projections for the current year become available.

The changes above will also apply to dispensing doctors.