A series of drug reimbursement reforms agreed between the Pharmaceutical Services Negotiating Committee (PSNC) and the government will see the gradual introduction of a new discount deduction system later this year.

It will do away with the “one set value” for all items dispensed, instead offering separate deduction amounts for branded medicines, generics, and appliances.

Read more: DH to bring in new ‘fairer’ discount scale to reduce dispensing at a loss

However, BGMA chief executive Mark Samuels told C+D that the drugs reimbursement reforms are “only half complete”, leaving the NHS at risk of mounting drug costs.

The problem lies with integrated care board (ICB) budgets, he explained, as "when the reforms were proposed, it was understood that any changes to the deduction system would flow back to what ICBs would be charged". 

"A failure to implement that means that pharmacies receive a lower discount for dispensing brands over unbranded products but this change does not impact how medicines spend is reallocated to ICBs," he said.

 

ICBs must revise prescribing budgets

 

PSNC deemed the current drug reimbursement system “disadvantageous” for pharmacies that dispense a higher volume of branded medicines, which typically do not attract the same level of discount as generics and can result in contractors dispensing at a loss.

The new “split discount” means that from next month, pharmacies will face a higher discount on reimbursement prices for generic products, at 17.52%, and a lower one for branded medicines, at 5%, Mr Samuels explained.

Ultimately, this will ensure that “those in areas of higher-than-average brand prescribing do not lose out on their share of pharmacy margin”, he said.

Read more: Manufacturers lament DH’s decision to raise sales tax on branded medicines

However,  GPs and ICBs need to revise their budgets to encapsulate these “adjusted” reimbursement prices, which will have them “paying proportionally more” if they want to prescribe more branded medicines, he said.

If prescribers do not rethink their budgets, NHSE&I will end up spending more money on “brand prescribing and branded medicines”, Mr Samuels warned. 

That kind of spending would “put even more pressure on what is now a fundamentally broken…model”, and “lead to branded generic and biosimilar market withdrawals, less competition and ultimately a higher NHS drugs bill”, he stressed.

By not implementing this part of the reforms, NHSE&I will be "inadvertently" promoting branded drugs over their unbranded counterparts because pharmacies will start to receive proportionally more than they used to for dispensing a brand, although ICB budgets do not have to account for this, Mr Samuels added.

PSNC's director of pharmacy funding, Mike Dent,  told C+D that the regulator believes that NHSE&I "should update its apportionment mechanisms for discount deduction, so that individual ICBs bear the full cost of their prescribing policy decisions".

"Currently, discount deduction apportionment is ‘fair shared’", he explained. "So when detrimental policies such as branded generic prescribing are enacted, the consequences are spread across all ICBs, not just the ones implementing the policies."

He noted that PSNC and the Department of Health and Social Care will continue to pursue these changes with NHSE&I.

 

New system to hit wholesalers and manufacturers?

 

Speaking to C+D earlier this month, co-founder of the wholeslaer Sigma, Bharat Shah, claimed that the new deduction system will put more pressure on wholesalers and manufacturers to offer higher discounts to pharmacists. 

“Because pharmacists will argue, ‘Look, I’m going to get 17% off and I need to make another 17% as my margin in dispensing, so I need a 40% discount,’” he explained.

Mr Shah predicted that that “manufacturers will make less margin [so] the government will just claw back extra margin” in what he described as a “vicious circle”.

He added that “nobody has taken account” of the inflationary pressures experienced by wholesalers, who face a period of uncertainty “in pricing, in logistics and in energy costs”.

“Our costs have gone up and we’ve got to pass these costs to our customers.”

“We have to work on this scenario with all stakeholders working in unity,” Mr Shah said.

Last week (September 14), PSNC countered Mr Shah’s claim that contractors could face losses during the transition period to the new discount deduction system and following its implementation.

Read more: New deduction scheme will not lose the average contractor money, says PSNC