6. WORKFORCE
6.1.9 What was the funding provision for the
pharmacy contract in 2008-09 and how was this arrived at?
(Q78)
Answer
1. The total funding for the community pharmacy
contractual framework for 2008-09, covering essential and advanced
services, increased from £1.947 billion to £2.213 billion.
2. A number of elements contributed to this
increase:
— Annual uplift formula: application of
the annual uplift formula, including allowance for significant
increases in regulatory burden, stock loss and underpayments gave
rise to an increase of £128 million.
— Transition support: during negotiations,
the Pharmaceutical Services Negotiations Committee (PSNC) robustly
represented pharmacy contractors' concerns that, with the removal
of significant levels of excess medicines margin over a number
of years the cost of services under the contractual framework
were now underfunded.
The Department was keen to maintain stability in
the transition to implement the White Paper, Pharmacy in England:
Building on strengths—delivering the future, and encourage
investment in quality, clinical services.
The Department and PSNC therefore agreed that a full
cost of service inquiry should be undertaken to inform the future
funding base for the contractual framework, with the expectation,
as set out in the White Paper, that future funding arrangements
will reward those that invest in the delivery of high-quality
services. In the meantime, funding for the contractual framework
was increased by £150 million, net of reductions to
medicine margins, to support the transition.
The cost of service inquiry will be conducted over
the coming months.
— Medicine margin: an invoice inquiry of
the medicines purchase profits available to the independent pharmacy
sector was undertaken. This showed a medicine margin of £130 million
per year over and above the baseline of £500 million
medicine margin allowed for within the contractual framework.
As £65 million extra medicine margin was paid to pharmacies
from 1 April 2008 to 30 September 2008, category
M generic medicine prices were reduced by a further £65 million
from 1 October 2008 to 31 March 2009.
— PCT funds: the Practice Payment increased
from 34.5 pence per item to 101.1 pence per item from
1 October 2008. Overall, together with fees and allowances
for medicines use reviews (MURs) and the electronic prescription
service, this gave rise to a net increase in costs to PCTs of
£202 million in 2008-09 to be funded from PCT baseline
allocations. This comprises an increase in fees and allowances
of £267 million and half-year savings from lower generic
medicines reimbursement prices of £65 million. In past
years, increases in the contractual framework sum have been subsidised
by savings made from higher levels of excess medicine margin.
— Advanced service—medicine use reviews:
from 1 October 2008, the fee for each MUR undertaken was
increased from £27 to £28. The ceiling on the number
of MURs that a pharmacy can undertake in a financial year remained
the same.
— Thresholds: the new arrangements for
the community pharmacy contractual framework included an annual
revision of the volume threshold level. For 2008-09, it was agreed
to adjust the volume threshold by +3 per cent. The entitlement
for the Establishment Payment was increased from 2,120 to
2,180 items per month, which was also reflected in changes
to the prescription volume thresholds for the higher Practice
Payments.
— Pre-registration trainee grant: the pre-registration
trainee grant, which is funded centrally, increased on 1 October
2008 from £16,440 to £18,440.
3. The funding sources for the community
pharmacy contractual framework since its introduction in April
2005 are set out in table 78.
Table 78
FUNDING SOURCES FOR THE COMMUNITY PHARMACY
CONTRACTUAL FRAMEWORK
£ million
|
| Source | 2005-06
| 2006-07 | 2007-08
| 2008-09 |
|
| Global Sum |
| |
| |
| (DH central budget)" | 966
| 991 | 1,017
| 1,049 |
| PCT funds | 300
| 270 | 230
| 599 |
| Medicine purchase margin retained by pharmacy contractors (1)
| 500 | 500
| 500 | 500
|
| Additional margin retained by contractors (1)
| 0 | 150
| 200 | 65
|
| Total | 1,766
| 1,911 | 1,947
| 2,213 |
|
| Source: |
Medicines, Pharmacy and Industry, DH
|
| Footnote: |
| 1. Medicine purchase margin and additional margin are funded from PCT drugs budgets.
|
|
