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Contractors face unexplained 20% drop in payments

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PSNC: A decline in generics pricing could be contributing to the reduced pharmacy payments

The Pharmaceutical Services Negotiating Committee (PSNC) is investigating an unexplained 20% drop in government payments to some pharmacies, C+D has learned.

PSNC director of pharmacy funding Mike Dent has today (June 2) responded to concerns from contractors who are facing a “larger than expected” fall in payments.

The negotiator predicted last year that contractors in England would see their funding fall by an average of 12% between December 2016 and March 2017 as a result of government cuts. But Mr Dent told C+D today that PSNC "is aware of concerns" from contractors reporting a drop in payments "closer to 20%".

The impact of the funding cuts on individual contractors “largely” depends on their dispensing volume, whether they qualify for the Pharmacy Access Scheme, and how much funding they recoup in quality payments, Mr Dent said.

PSNC explanation

“However, there is another issue – that we are spending a lot of time looking into – and that is the decline in drug cost (NIC) per item from January,” he added. “It appears to be driven by a decline in non-category M generics.”

Mr Dent explained that the “small decline” in category M reimbursement prices in January's drug tariff – “driven by manufacturers’ selling out prices from July to September 2016” – does not fully explain the significant drop in payments.

PSNC is in the process of conducting a prescription cost analysis for March’s data to “isolate the cause more precisely”, Mr Dent added.

Route of concerns

Luvjit Kandula, chief officer of Leicestershire and Rutland local pharmaceutical committee (LPC), raised the issue with PSNC this morning, after receiving “quite a lot of feedback from contractors” who are experiencing “close to 20%” funding cuts, rather than the predicted 12%.

“There are more than a few contractors experiencing a significant drop, but it is not yet clear whether this is an anomaly, or whether it is a national concern,” she told C+D this morning.

“From an LPC point of view, the concern is of sustainability: can contractors actually predict what is coming and manage those changes to the best of their ability?”

While some contractors are “worried” now, the full extent of the issue will not become clear until July, when the next payment is due from the NHS Business Services Authority, Ms Kandula warned.

“PSNC got this wrong”

Hitesh Patel, chief executive officer of City and Hackney LPC, said he is “absolutely finding that contractors are losing 20% on their income since December 2016”.

“I fear that there has been a serious miscalculation in the way PSNC has worked out the cuts.”

“A lot of LPC secretaries are talking about it. PSNC told us a 12% cut would be inflicted on us, but the reality is it is 8% more than PSNC predicted,” he stressed.

Responding to PSNC’s plans to investigate whether generics pricing is affecting how much contractors receive, Mr Patel said: “Working out these prescription statistics is a huge amount of work, so hats off to PSNC. But they have got this wrong.”

Mr Dent said PSNC would keep LPCs informed of the investigation's progress.

7 Comments
Question: 
How is your pharmacy coping with the funding cuts?

ComPharm Pharmacist, Superintendent Pharmacist

That 2000 pharmacy closure is now very real. DoH made sure of this! 

Sue Per, Locum pharmacist

Look out for Fire sale of Pharmacies at rock borrom prices or reverse premiums and also pigs fly, if this is true, or a mere blip......... or a correction of substantial overpayments enjoyed by the contractors through huge purchase profits of yesteryer. Watch the market place for real effect of cut backs rather than the sensational journalism of the C & D editorial.

JOHN MUNDAY, Locum pharmacist

Good businesses trade successfully on the basis that, as far as they can predict, they can anticipate fluctuations in cashflow. They gear their borrowing to cover the leaner times and plan capital expenses accordingly to what they predict they can afford. So where does this leave everyone? Knee deep in something smelly I think. A 20% cut could easily kill a small vulnerable business and leave medium/large ones wondering what on earth is happening. Could we see some pulling out of the UK NHS market even? This is catastrophic! I don't blame PSNC as the Pharmacy model is hugely complex. I suspect they quoted an average where some will fair better than others. If you don't deliver all the services then you won't get the income hence maybe a bigger cut than average. The only thing you can blame is a Government who fall over themselves to help huge corporations pay billions less in tax (Corporation tax cut proposals) and pay for it by ripping the guts out of the vulnerable organisations who support the ordinary Joe on the street. What a nightmare!

nader Siabi, Community pharmacist

I am not surprised at all. My average item value dropped from £10.60 in Nov to £8.70 Dec and in Jan and to £8.9 in Feb to £9.19 in March. In effect we have seen a drop of £1.50-£2 per item. We were expecting the average to fall by £0.80 pence per item but experiencing twice as much. Perhaps computers have adopted a diffrent algorithm than what PSNC was anticipating.   

S Morein, Pharmacy Area manager/ Operations Manager

What you fail to mention is whether your purchase prices have fallen and whether you were making profits substantially in excess of the agreed levels. Maybe what you are suggesting is just a reverting back to something more consistent with the profits as nationally agreed rather than the vast excess profits so many contractors receive.

Ben Merriman, Community pharmacist

Mr(s) Morein, we've been expecting you..!  Reimbursement are adjusted via category M with prices agreed every three months.  These reductions have nothing to with category M as this sort of money wasn't taken out of category M in April 2017's prices.  Please try again.

Seal Patel, Community pharmacist

Somebody tell Sue Sharpe she still has to work till she quits end of the year, she'll most likely drag out any investigation till end of the year so the next person in charge can deal with it...

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