Responding to the “extraordinary cashflow challenges” highlighted to the government by the negotiator, Steve Brine has agreed to the “urgent measure” for November alone, the Pharmaceutical Services Negotiating Committee said this afternoon (October 23).
“The increase has been confirmed for one month only, and full and final payment for services provided in September will be reconciled as usual at the end of November,” PSNC said.
“This means contractors will not receive any additional funding overall, but the impact of the expected reduction, to be seen in the November 1 payment – following drug tariff price reductions put in place from August – will be smoothed out.”
PSNC chief executive Sue Sharpe said: "The pharmacy minister has responded to PSNC's request for urgent measures to offer contractors some relief, and this unprecedented action will help many pharmacies to manage the cashflow crisis over the next few weeks.
“We are grateful for this positive response.”
However, PSNC “remains concerned that there will be pharmacies for which this is too little, and that it may be too late”, she stressed.
Ms Sharpe added that Mr Brine’s latest decision gives PSNC “hope” that it “will be able to restore the constructive relationships that underpinned” its work negotiating pharmacy funding with the government “before 2015”.
The payment increase explained
Why is the increase being applied?
At the beginning of October, a pharmacy would have received an advance payment for the dispensing month of August. This was an estimated payment, taking into account the pharmacy’s number of declared items for August, and the pharmacy’s average item value from the dispensing month of July.
Because of the reductions in category M prices in that month, the advance for August is likely to have overstated the value of August’s prescriptions. Subsequently in the November 1 payment, the pharmacy will receive the balancing payment for August, and the advance payment will be recovered. This means that the November 1 payment is the point at which the impact on contractors will be most significant as the balance for August will be lower than the recovery of the advance.
How will it help?
The aim of the increase to the November 1 advance payment – paid for declared items for September – is to smooth out the effect of the expected reduction in value of payments, and reduce the impact on cashflow.
Will the cashflow issues continue for the long-term?
The pharmacy funding cuts imposed by the government will undoubtedly mean that contractors will face ongoing pressure on their finances. PSNC does not know whether further funding cuts are planned beyond the 2017-18 financial year. The reduction in reimbursement prices made from August had a more significant impact than expected because of the increase in generic prices that followed shortly afterwards.
The DH intends that reimbursement prices should catch up as they – in the main – reflect the market, but until this happens the cashflow issues will remain severe.
Source: PSNC website