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Everything you need to know about the pharmacy cuts

Your guide to how the funding drop could affect you in December and beyond

December 17, 2015, is a date burned into the memories of many of England’s community pharmacists. Seemingly out of the blue, the government announced that it would slash the global sum of pharmacy funding for the sector by 6%.

Ten months, one record-breaking anti-cuts petition and a change of pharmacy minister later, the Department of Health (DH) unveiled its final funding plans for the next two years: the equivalent to a whopping 12% cut to funding between December 2016 and March 2017, with a further 7.4% funding drop (on current levels) the following financial year.

To say that the announcement last month was met unenthusiastically by the sector would be an understatement. The National Pharmacy Association pledged that its battle against the cuts was “far from over”, the Royal Pharmaceutical Society expressed “dismay”, while the Pharmaceutical Services Negotiating Committee (PSNC) showed its distaste for the proposals by unanimously voting against them.

So how exactly will pharmacy funding in England change, and how will this affect your business? Read on to find out:

Click on the bullet points below to jump to different parts of C+D’s bite-size guide to the funding changes:

Why does the government want to cut community pharmacy funding?

In its impact statement on the pharmacy cuts, published on October 19, the DH stressed that pharmacy “needs to make its contribution” to £22 billion in NHS savings. It aims for the cuts to save the health service money, while ensuring the health of patients is not “jeopardised”, it said.

The government also suggested that “intervention is needed” to improve community pharmacy’s funding system. It reiterated its negative perception of “clusters” – a term it has used in the past to describe several pharmacies grouped in the same area, usually on a high street or near a GP practice.

In its initial cuts announcement last year, the DH criticised clusters for producing inefficient pharmacies with low prescription volumes, and it has held to this view. The DH still believes the large numbers of clusters suggest that current funding levels do not strike the right balance between easy patient access and good use of NHS funds (see below for more information).

The government also said that any funds it manages to save by slashing the pharmacy budget will be reallocated within the NHS.


How does the government intend to make the cuts?

The DH proposes to make more than £200 million in savings over 16 months by reducing community pharmacy funding by £113m between December and March 2016, and cutting it by a further £95m in 2017‑18, at which time it will consult on future funding.

It will also replace separate payouts for dispensing, practice payments, and the electronic prescription service (EPS), with a single activity fee. This is expected to be £1.13 per item in December. Other payments – such as those for unlicensed medicines, appliances and controlled drugs – will remain “as separate fees”.

The DH also intends to gradually phase out establishment payments, reducing them by 6.7% from December. For the top establishment fee of £2,092 per month, this will mean a drop of £419 to £1,673 per month. The DH then proposes to cut the fee by 40% (on current levels) from April 2017, and cease it completely by the end of 2019‑20.

To protect pharmacies in areas where they are critical to maintaining patient access, the government has announced a Pharmacy Access Scheme. This payment – available to just 1,356 pharmacies that meet criteria, such as being a mile or more from another pharmacy – will bring them back up to current levels of funding, minus an initial 1% “efficiency saving”.

These pharmacies will each receive an average of £2,900 per month between December 2016 and March 2017, and £1,500 per month between April 2017 and March 2018. The DH will consider whether or not to provide further funding beyond this date. A full list of the pharmacies that qualify for the scheme can be found here.

All pharmacies in England will also potentially be able to pick up some money from a Quality Payments Scheme – a points-based system linked to certain requirements, such as healthy living pharmacy accreditation (see below).


What other options did it consider?

The DH considered taking a do-nothing approach, in which it would have maintained current funding levels. It rejected this option because it predicted this would “perpetuate an inefficient level of spending on community pharmacy”.

It also considered a variation on the option it eventually chose: cutting funding at the same level announced last year, introducing a single activity fee and phasing out establishment payments – but without an access scheme to protect the most-needed pharmacies.

How much funding will I lose?

On average, pharmacies across England will experience an overall NHS funding cut of 4% in 2016‑17 (or 12% when condensed across the four months up to March 2017) and 7.4% (on current levels) in 2017‑18.

The 10% of pharmacies who do qualify for the access scheme will still be expected to make savings, but at a lower level. Their funding will drop by 1% in the first year of the cuts, falling to 3% (on current levels) the following year.

“For community pharmacies that do not qualify for the Pharmacy Access Scheme, this reduction is equivalent to 4.6%… in 2016-17 and 8.3% in 2017-18,” the DH said.

Accountant Umesh Modi calculates that, on average, each pharmacy in England will lose £9,800 in profits between December 2016 and March 2017, and a further £18,000 in 2017‑18. This equates to a total loss of around £27,800 over two years, he predicts.

How many pharmacies will close?

Earlier this year, former pharmacy minister Alistair Burt predicted that between 1,000 and 3,000 English pharmacies could close as a result of the proposed cuts.

Mr Burt has since walked back his unsubstantiated prediction, and the DH has not estimated how many pharmacies could close as a result of its final funding plans. Its impact assessment makes a number of calculations based on a best-case scenario – in which no pharmacies close – and a worst-case scenario, in which 1,000 are forced to shut their doors.

While it says that closures are “not the government’s intention”, it concedes that “we cannot know for certain how the market will react, and we recognise the potential for some pharmacies to close as a result of the changes”.

The DH also recognises that independent pharmacies and smaller chains are at “higher risk of closure” than the multiples. However, it points out that larger companies could take the opportunity to cut their losses and close pharmacies with lower footfall.

But it’s not all bad news, the DH argues: any closures would have an “immediate positive impact” on an area’s remaining pharmacies.

Whether patients will see it that way is another matter.

I work for a distance-selling pharmacy. Will I be affected?

This is currently unclear. The DH says it will “explore new terms of service” for distance-selling pharmacies, because it recognises that they offer a different service. It will then consult with PSNC about these plans.

What is the Pharmacy Integration Fund?

The integration fund is a pot of money the DH has set aside to develop clinical pharmacy in a wider range of settings. NHS England is responsible for allocating money from the fund.

The money will be used to help fund pharmacists in care homes and GP practices. It will also help pay for a direct referral pathway from NHS 111 to community pharmacies, and has been linked to NHS England’s plans to expand urgent repeat prescription services and pilot urgent minor ailments in pharmacies from December 2016 until April 2018 (see here).

My pharmacy is not in England. Could the cuts affect me?

Not for the time being. The Northern Irish and Scottish community pharmacy contracts are unrelated to England’s. In fact, Scotland slightly increased its pharmacy funding for 2016-17.

Although the Welsh community pharmacy contract has been linked to England’s since 2005, last month Welsh cabinet secretary for health, wellbeing and sport Vaughan Gething assured pharmacists that there are no plans to cut the country’s pharmacy budget. However, maintaining current levels of funding in Wales will be dependent on pharmacists meeting certain criteria, such as providing more clinical services, he stressed.

Why am I not eligible for the Pharmacy Access Scheme?

The Pharmacy Access Scheme will protect pharmacies which are situated a mile or more from another pharmacy by road from the “full effect” of the cuts.

However, it excludes the top 25% best-performing businesses according to dispensing volume – currently any dispensing at least 109,012 scripts per year – even if they fall within the scheme’s remit. This is because the DH considers these pharmacies are likely to remain commercially viable, even with reduced funding.

If a pharmacy subsequently reaches this dispensing level, they will not lose their top-up funding, the DH stressed.

The government also said it will introduce a review mechanism so it can consider whether other pharmacies with “extenuating circumstances” should be added to the list.

Do I qualify for the scheme’s “extenuating circumstances”?

The DH will introduce a process to review pharmacies that did not initially qualify for the Pharmacy Access Scheme, but are affected by factors that could limit patient access.

For example, a semipermanent road block could result in two pharmacies being more than a mile by road from one another, making them both eligible for the scheme.

The DH will also take into account any inaccuracies it made in calculating which pharmacies qualified for the access scheme, as well as pharmacies in particularly deprived areas that almost qualified for it. The latter group will cover pharmacies in the 20% most deprived areas of England, which are situated 0.8 miles from another pharmacy.

However, these pharmacies will also have to demonstrate that they are “critical” to patient access to pharmacy services, it stressed.

What can I do to mitigate the cuts?

As previously mentioned, the DH will introduce a Quality Payments Scheme, giving pharmacies the chance to earn back their share of a total pot of £75m.

To qualify, pharmacies must provide at least one specified advanced service, have an up-to-date NHS Choices entry and use EPS. Staff must also have the ability to “send and receive NHS mail”.

How much money a pharmacy can earn from the scheme depends on the number of “points”, each worth £64, it scores (see table, below).

Points are earned for carrying out different activities, such as regularly accessing summary care records, training staff to become Dementia Friends and writing a patient safety report.

The number of points earned for each activity depends on “the difficulty of achieving them and the benefits to patients”. Each pharmacy can earn a maximum of 100 points.

Pharmacies will be reviewed in April 2017 and again in November 2017 to determine how many points they qualify for. The DH says it will issue further guidance on this scheme by December 1.

How you can earn points through the Quality Payments Scheme



Writing a report analysing near misses, patient safety and shared learning


80% of your pharmacy staff have achieved level 2 safeguarding status for children and vulnerable adults in the last two years


Publish the last 12 months of patient experience surveys on your NHS Choices page


Achieve healthy living pharmacy level 1 accreditation


Prove you regularly access the summary care record


Keep your NHS 111 directory of services up to date



Refer certain asthma patients to an appropriate healthcare professional for review


80% of your patient-facing staff are trained as Dementia Friends


Total points


What other effects could cuts have?

The DH “considers [it] highly unlikely” that patients will not be able to receive their medication as a result of its plans. However, it does foresee some other effects:

●          Patients living far away from pharmacies could make good use of distance-selling alternatives, although it argues this is “unlikely”

●          It recognises that pharmacies may have to stop offering services, such as free home delivery

●          They may also “play a less tangible role in promoting welfare and social cohesion in local communities”

●          If 1,000 pharmacies close, there would be an increase of 3,152 tonnes of carbon emissions from patients, assuming 64% of journeys are made by car, the DH calculates. 

The government’s hardline position on “clusters”

Evidence suggests that deprived areas tend to have more clusters of pharmacies, so the DH’s impact assessment considered whether these areas would be disproportionately affected by its funding changes.

It found that it is “not necessarily the case” that clusters in deprived areas are meeting greater health needs. Instead, it suggested the correlation may be explained by the fact that deprived neighbourhoods tend to be in urban areas, so pharmacies in these areas are likely to benefit from higher footfall.


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