Pharmacy contractors will be spared over £100 million in clawbacks for “over-delivery of fees” as part of the terms of the Pharmacy First funding arrangement, the Department of Health and Social Care (DH), NHS England (NHSE) and Community Pharmacy England (CPE) announced last week (November 16).

The new deal has allocated £112m, or 17% of the promised £645m in new funding, to write off the “over-delivery” of fees accrued over three years that would otherwise have been claimed back by the government as part of the five-year deal, CPE said in a briefing.

Read more: Launch dates announced for Pharmacy First and contraception services

In September last year, the government wrote off £100m in excess margin earned by contractors in England over the first three years of the Community Pharmacy Contractual Framework (CPCF) - this related to the annual £800m retained buying margin.

But the new write-off of an “excess of remuneration” relates to the £1,792m portion of the annual £2,592m funding through the CPCF designated for fees and remuneration, it added. 

Read more: Pharmacy First funding breakdown: Upfront, monthly and consultation fees

The new agreement reached by the DH, NHSE and CPE means that over-delivery by the sector to the tune of £76m – made up of approximately £25m in 2021/22 and £51m in 2022/23 - will not be recovered by the government, CPE said. 

Furthermore, it announced that up to £36m-worth of over-delivery projected to occur in 2023/24 will also not be clawed back.

 

"Sustainable footing”

 

Historic and future over-delivery penalties have been written off so that the new Pharmacy First service could be established “on a sustainable footing”, a joint letter to contractors from CPE, NHSE and the DH said.

According to the letter, the “large fee reductions” from the clawback on over-delivery would have “significantly” affected community pharmacies’ income and cash flow. 

However, any over-delivery in excess of £36m for the coming year will not be subject to the funding agreement and will be clawed back “by adjusting CPCF fees in the usual way”, it said.

Read more: DH and NHSE ‘rejected’ contraception service fee uplift, says CPE

According to CPE, without the write-off, pharmacy contractors would have had the single activity fee reduced by “around 10 pence per item” if the money had been reclaimed over a year.

It said that it approached the Pharmacy First negotiations wanting to “reduce risk” for pharmacy owners and “establish conditions for business growth”.

The letter added that the three bodies will “work together to agree and implement stronger mechanisms to prevent any future over-delivery on fees”.

 

“Best possible deal”

 

CPE said that this move would protect “baseline CPCF funding”, allowing “new money” to be accessed “as soon as possible rather than risk further over-delivery against Year 5 CPCF funding”.

In a briefing attended by C+D last week (November 15), the negotiator said that it “pushed back” on the government and NHSE “to get the best possible deal”, adding that the final deal was “unanimously agreed to” by its committee as the “way forward for the sector”.

Read more: ‘Huge vote of confidence’: Sector reacts to the primary care recovery plan details

It added that the agreed deal does not fix “the chronic sector underfunding” but provides contractors with an “opportunity to significantly improve their cash flow” and the sector with “hope for the future”.

The clawback mechanism has been a sore spot for pharmacy contractors. 

In August last year, then-chair of the National Pharmacy Association (NPA) Andrew Lane described the clawback mechanism as “a perverse windfall tax” that was “particularly unfair to independents” since it is applied equally across the board.

 

“Will not solve pharmacy’s financial crisis”

 

Meanwhile, the response from the sector to the Pharmacy First funding arrangement has been largely positive.

Nevertheless, NPA chair Nick Kaye warned that the new funding “will not in itself solve the financial crisis in community pharmacy”, while acknowledging that it is a “substantial investment in a key service that could be a stepping stone to more.”

The new service will launch “early next year” according to NHSE, while CPE said that a January 31 launch would be subject to the necessary IT being ready.

Read more: All the headlines: Primary care recovery plan funding details revealed

Pharmacies signing up to the new Pharmacy First common ailments service will receive a £2,000 upfront payment in addition to monthly and individual consultation payments.

But the negotiator revealed that a bid for an increase to the pharmacy contraception service fee was “rejected” by the DH and NHSE.

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