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‘Final straw’ as transitional payments to be cut to zero from February, PSNC says

The government will cut transitional payments to nothing from next month, the Pharmaceutical Services Negotiating Committee (PSNC) has said.

In a statement released today (January 23), PSNC said the Department of Health and Social Care (DH) has “decided to reduce the transitional payment to zero from February 2023” - despite the negotiator’s protest that “this could not come at worse time”.

The decision to cut the automatic monthly payment – based on how many items pharmacies dispense each month – was predicated on “the latest monitoring and analysis of funding delivery”, it added.

But PSNC said that the “unallocated” funding that made up the payment will fund a “new flat payment” due to be introduced in 2023/24.

Pharmacy negotiators said they had “refused to accept” the move because any reductions in payments at this point would be “impossible for community pharmacy contractors to manage financially”.

The NHS Business Services Authority (NHSBSA) added that “in accordance with the standard payment schedules, this change will be reflected in payments made from April 2023”.


Phased out


The transitional payment had been due to end in March 2021 after its introduction in 2019 to support the move to providing more clinical services.

But an extension for another year was agreed in 2021, followed by an announcement that the value of the transitional payments would be phased down over the second half of 2022/23. Phasing down began in October and continued in November and December, PSNC said.

Negotiators had been unable to get the government to agree to higher funding for years four and five of the five-year contract, despite rising costs putting pharmacies under pressure.

Read more: ‘Critical’ transitional payments extended by another year in 2021/22 contract

PSNC today said that community pharmacy funding needs an “urgent uplift” to help businesses cope with “soaring” inflation costs and workforce shortages.

It added that it had put a “comprehensive business case” to the government for an uplift in the last contract negotiations and would continue to argue the case that current funding levels are now inadequate to cover the cost of NHS services that pharmacies are providing.

A fully costed bid for a Pharmacy First service and an uplift to core funding were both submitted in the last round of negotiations but both “were refused”, PSNC said.

Read more: PSNC kicks off ‘proper discussions’ on Pharmacy First with DH


“The final straw”


PSNC chief executive Janet Morrison said: “The Department’s removal of the transitional payments could not come at a worse time for community pharmacy businesses who by the government’s own admission have been subjected to years of funding cuts.

“Pharmacies are on the brink of collapse and removing these payments now may be the final straw for some: we have made that absolutely clear.”

Read more: Pharmacy bodies join forces to fight for more funding as closure threat looms

She added: “While we know how constrained public funding is, this spreadsheet balancing act has real-world costs in terms of businesses, livelihoods, jobs, healthcare and community resources.

“We will keep making that case in the strongest terms: the public and NHS rely heavily on pharmacies and we are the solution to many of the health service’s current problems, but all of this will be lost if we are squeezed to the point of collapse.”


“Catastrophic” policy choice


Peter Cattee, chair of PSNC’s funding and contract subcommittee, added that the government’s refusal to move away from the five-year flat deal is a “policy choice” that is going to be “catastrophic for some pharmacies”.

“Contractors now have little control over their own businesses and we must continue to take whatever action is within our power to change Government minds and that decision before we see chaos in the network.”

C+D approached the DH for comment.

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

In September, PSNC announced the arrangements for years four and five of the contract, including that it had agreed an extension of the transitional payment with the government, with up to £70m being allocated to the sector per year.

It also announced that the government had agreed to waive £100 million in excess margin for pharmacies in England, although it did not budge on the £2.5 billion a year in funding it agreed with the negotiator as part of a multi-year deal in 2019.

At the time, it branded the funding deal “hugely disappointing”, “devastating” and “fundamentally under-resourced”.

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