Medicines reimbursement prices

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 £2.592bn, with £1.792 billion being delivered through fees and allowances, and £0.800 billion delivered through the medicines margin.

With effective from 1st 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 £50m less (i.e. £10m 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, recent discussions with DHSC have drawn 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 has been agreed that – with effect from August 2019 – the medicines margin will be increased by £15m per month to the financial year end, an increase of £120m in total (i.e. £15m per month * 8 months).

This agreement is subject to a revisiting of the arrangement in October / November 2019 when the final outturn position for the 2018/19 medicines margin should be available (along with a further update on 2019/20 projections).

Please note that the changes mentioned above will also affect dispensing doctors.