The Drug Tariff Category M pricelist for January 2024 has been published by DHSC on the NHS Business Services Authority (NHSBSA) website.
Based on our analysis of the Category M price list for January 2024, Community Pharmacy England estimates:
There will be an overall reduction to reimbursement of approximately £35m per quarter on like-for-like Category M lines.
The effect of new entrants to Category M will be a reduction to reimbursement of approximately £3m per quarter.
Therefore the overall impact of the new Category M list will be a reimbursement reduction of approximately £38m per quarter, equivalent to a reduction in AIV of around -14p per item.
This indicative modelling uses the latest pharmacy dispensing volumes available to Community Pharmacy England as a proxy for the expected dispensing volumes in quarter Jan-Mar 24. The actual impact of the changes in the quarter will be subject to variation based on actual volumes observed.
Results from the Margin Survey of Independent Community Pharmacies up to Q1 2023/24 had indicated that there remained an over delivery of margin, and therefore in the normal course of business a reduction in the Drug Tariff would be expected. However, in discussions with the Department of Health and Social Care (DHSC), Community Pharmacy England had lobbied for no reduction in the January Drug Tariff. As well as stressing the unsustainable financial pressures already being experienced by English pharmacy businesses, making further reductions impossible to absorb, we argued that the timing of this reduction, coinciding as it does with the launch of the new Pharmacy First Service, could hamper the successful launch and uptake of this critical service.
The matter was ultimately referred to Ministers, who determined that a reduced margin adjustment would be applied to the January Drug Tariff, in the region of -£9m per quarter.
In addition to margin adjustments which are the subject of discussion between DHSC and Community Pharmacy England, the Category M Drug Tariff methodology also reflects movements in the underlying market (i.e. movements in buying prices of medicines). These are systematic and not subject to negotiation.
The reference period used by DHSC for setting the January Drug Tariff is the Jul 2023 – Sep 2023 period. An estimated overall change in like-for-like medicines of -£35m per quarter indicates that according to market data gathered by DHSC, prices reduced in the region of -£26m per quarter in the reference period (i.e. £35m minus the intended £9m margin adjustment), and this price movement is reflected in the January Category M pricelist. Of particular note are the further reductions in Apixaban prices, which are in line with reports given to Community Pharmacy England by Pharmacy owners.
Mike Dent, Community Pharmacy England Director of Pharmacy Funding, said:
“The reductions to the January Drug Tariff come at an awful time and we continue to warn Government and NHS that prolonging the current financial squeeze on pharmacies will be catastrophic for yet more businesses and their patients. In January, pharmacy owners will rightly be engrossed in trying to ensure the successful launch of the NHS’s new flagship Pharmacy First Service: it makes no sense to hit their businesses once again by significant reductions to reimbursement income and we argued that this must not happen.
“The current reimbursement system is fundamentally flawed as it has failed to keep pace with the massive growth in prescription volumes that we have seen over the last decade and more. Margins have been spread thinner and thinner as the envelope has not grown in alignment with the amount of work being done by pharmacies. It is now impossible to ensure the continuity of safe dispensing while remaining within NHS reimbursement targets and we will keep warning Government of the consequences of this.
“Continual squeezing of pharmacy reimbursement will only further exacerbate the extreme levels of market disruption that have been evident over the last two years. More pharmacy businesses will be pushed to the brink, and we will undoubtedly see a continuation of the pattern of closures of pharmacies, many in areas of deprivation and social hardship, where patients need our support the most.
We implore the DHSC and NHS to engage with us about the unsustainable pressure being faced by pharmacy businesses, as well as a desperately needed revision to the pharmacy reimbursement system. This week we have coordinated a letter to the new pharmacy Minister from numerous MPs supporting this ask, and we will continue to work to make it happen.”