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£100m in excess margin written off as DH stands firm on flat funding deal

The government has waived £100 million in excess margin for pharmacies in England, although it has not budged on the £2.5 billion a year in funding it agreed with PSNC as part of a multi-year deal in 2019.

In a move the Pharmaceutical Services Negotiating Committee (PSNC) lauded as “critical for contractors”, the “hard-won” agreement to write-off excess margin means that Drug Tariff prices will be higher than usual in the new year, when winter pressures are expected to exacerbate financial woes.

However, the negotiator was unable to get the government to agree to higher funding for years 4 and 5 of the five-year contract, it announced this morning (September 22).

Had this deal been rejected, the sector would have had to pay back £100m in excess margin earned by contractors over the first three years of the deal, which was “not an option” due to the many pressures they are currently facing.

Read more: 'We cannot subsidise NHS medicines bill': PSNC ramps up pressure on government

The deal marks the culmination of months of “tense” negotiations between PSNC, the Department of Health and Social Care (DH) and NHS England and NHS Improvement (NHSE&I).

The negotiator has been “frustrated” by the government’s reluctance to move away from the five-year deal, “despite the overwhelming evidence of the current economic pressures”, it said.

PSNC pointed out that it agreed to the multi-year deal before the COVID-19 pandemic and current financial crisis and claimed that at the time it was “threatened with further funding cuts” if an agreement could not be made.

Read more: Not fair: Public backs calls for increased pharmacy funding as pressures intensify

Its committee “overwhelmingly” voted in favour of the deal put forward for 2022/23 and 2023/24 so contractors would not have to pay back excess margin and to “maintain an open and constructive dialogue with the new government”.

However, PSNC said it was doing “urgent work” on getting more financial support and “other help” for contractors, which should come from outside of the funding deal.

It comes after a political shake up following a slew of ministerial resignations over the summer that has seen the introduction of a new prime minister, Liz Truss, and a new health secretary, Thérèse Coffey.


Further details


PSNC’s latest agreement with the government also includes an extension of the transitional payment – an automatic monthly payment based on how many items pharmacies dispense each month – with up to £70m being allocated to the sector per year.

The DH has also committed to reviewing the price concessions system, which the negotiator hit out at earlier this week for forcing pharmacies to “subsidise the NHS medicines bill”, PSNC announced.

The deal heralds the launch of a new pharmacy contraception service, “modest expansions to existing services”, and a Pharmacy Quality Scheme in both years.

Read more: Pharmacy bodies plea to protect ‘exhausted and starved-of-funding’ sector

NHSE&I has committed to an “independent economic review” of pharmacy businesses, which it hopes will “demonstrate the scope and scale of the unsustainable pressures on the sector”, PSNC added.

PSNC CEO Janet Morrison said the negotiator is “pleased to have improved on the original offer from the NHS and government as much as we did… given [the] resolute refusal to move beyond the five-year deal, which they clearly view as set in stone”.

She conceded that the agreement would not address all of the “serious challenges” contractors are facing and pledged that work was “continuing apace” to address this.


This is a breaking news story. More to follow…


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