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REVEALED: Funding plans could increase multiples' dominance

The DH recognises its cuts could lead to larger pharmacy businesses dominating the sector, it says in negotiation papers with PSNC

The government has admitted that its planned changes to the sector's funding could "increase the dominance" of larger pharmacy businesses.

This information appears in a set of papers published by the Pharmaceutical Services Negotiating Committee (PSNC), which give more details about the government’s plan to introduce a £170 million pharmacy funding cut later this year.

The Department of Health’s (DH) source papers were originally shared with PSNC on a confidential basis in February to inform initial discussions about the cuts, the negotiator said last week (April 22).

The papers are now “historic”, but provide “useful context” for pharmacists ahead of a stakeholder event on the cuts consultation being held today (April 28), it added.

Here’s C+D's pick of what we learned from the documents.

1. The DH recognises large chains could dominate the sector after the cuts

Although the government predicts that up to a quarter of English pharmacies could close due to the cuts, it is proposing a pharmacy access scheme to ensure “geographically important” pharmacies are not forced to shut their doors.

Several aspects of the scheme need “further analysis and consideration”, the DH admitted. This includes the risk that pharmacies that qualify for continued government funding could be sold at a “premium” to larger pharmacy businesses, “increasing their dominance of the sector”.

The DH says it cannot predict which pharmacies will qualify for the scheme, but a national formula will be developed to help choose them, taking factors such as local population age and mortality ratios into account.


2. It thinks current pharmacy funding encourages “clustering”…

According to the DH, several pharmacies can be found along a single high street or “clustered” around GP surgeries, because establishment payments encourage pharmacy businesses to dispense “relatively low” volumes of prescriptions.

The DH argues that contractors can maximise their funding by owning several low-volume pharmacies – which are each paid an establishment payment – as opposed to one pharmacy dispensing many prescriptions.


3. …and offers no incentive to provide a quality service

The DH believes that establishment and practice payments “arguably” create no incentive for pharmacists to improve the service they offer patients, other than how quickly they dispense prescriptions.

The current funding model may also create a “conflict of interest” with pharmacists’ professional responsibilities, because the payments encourage prescriptions to be dispensed, regardless of whether the patient needs them, it added.

To combat this, and to encourage “efficient” pharmacies, the DH will scrap establishment payments – as well as practice payments, and funding for the electronic prescription service (EPS), repeat dispensing and dispensing fees – to be replaced with a new single activity fee paid for each item dispensed.


4. Year one of the pharmacy integration fund will develop the sector’s infrastructure

The DH is proposing pumping £100m into the sector by 2020-21, as part of a pharmacy integration fund to “drive the transformation” of community pharmacy.

Some £20m of this sum is to be spent in 2016-17 on areas including: developing commissioning guidance to support local commissioning of services; commissioning workforce development for the whole pharmacy team; and establishing medicines optimisation within the pharmacy contract’s terms of service.


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