‘No evidence’ that Pharmacy Earlier Payment Scheme saved NHS expected £100m a year
“No evidence” has been found to suggest that the Pharmacy Earlier Payment Scheme (PEPS) realised predicted savings of £100 million a year to the NHS, a National Audit Office (NAO) report has found.
The scheme offered supply chain finance to the sector by allowing pharmacies to be paid for prescriptions dispensed “earlier than the NHS timescales”, after which they would be charged a fee or interest charge from now-collapsed financial services company Greensill Capital, according to the NAO report published today (October 29).
The Department of Health and Social Care (DH) introduced PEPS in 2013 as it believed that it could help contractors “secure earlier settlement discounts from their wholesalers, which would be reflected in the medicine margin survey and thereby deliver savings to the NHS”, the NAO wrote.
Advised by Lex Greensill – a government advisor for supply chain finance in the Cabinet Office between 2012 and 2015 and the founder of Greensill Capital – the DH “assumed” that the scheme could save the NHS £100m.
However, the NAO said that it “has found no evidence that these predicted savings were realised” and that the DH is “unable to quantify the savings from the early payment scheme to pharmacies”.
Why did PEPS not work?
The DH expected that up to 80% of pharmacies in England would join the scheme by 2022/23, but only 14% (1,615) had done so when Greensill Capital and Taulia – a US-based fintech firm – took over PEPS in 2018.
The number of pharmacies signed up to the scheme remained “broadly flat” until an amendment of PEPS in July 2020 – which allowed pharmacies to get their loans at the beginning of the month, prior to dispensing. This increased participation, with 2,170 pharmacies in the scheme by April 2021.
After Greensill collapsed in March 2021, the NHS Business Services Authority (NHS BSA) had to step in to make direct payments to pharmacies, “processing total monthly payments of £144 million”, the NAO wrote.
“The DH told the NAO that if it had not intervened, a significant number of pharmacies could have faced financial difficulties.
“Due to low participation in the scheme and low interest rates, the cost to the taxpayer of taking over the amended payment schedule was minimal,” according to the report.
The contract with Taulia was closed by NHS BSA in June. However, all contractors will be able to access their payments 20 days earlier compared with the current NHS timetable when new arrangements are introduced from next month, the Pharmaceutical Services Negotiating Committee announced in August.
Why was PEPS introduced?
Prescriptions are normally reimbursed by the NHS BSA “up to two months in arrears”.
However, pharmacies signed up to PEPS were paid one month earlier than normal through loans provided initially by Citibank until 2018, after which the payments came from Greensill Capital, according to the report.
The scheme was expected to improve cashflow for community pharmacy contractors, on top of generating savings for the NHS, the DH said at the time.