The five-year fixed funding contract came to an end on 31 March 2024 and all contractors eagerly awaited news of the new contract as pharmacy finances were becoming more and more stretched. Most pharmacists we spoke to were not optimistic of the outcome of the negotiations, however the result will be welcomed.
Why was the five-year fixed contract so bad for pharmacy?
The five-year fixed contract provided certainty for pharmacy owners, but it also required pharmacies to change what they were doing. The environment in which the contract was set was one that was looking to reduce the number of items dispensed using pharmacist in surgeries and through better medicine adherence. There was also a switch of funding from dispensing to services which pharmacies started to do so in the last 18 months of the contract.
The contract was also designed to promote the centralisation of the dispensing, the use of automation to drive efficiency and ultimately reduce the number of pharmacies required.
So, what happened:
- The number of items dispensed did not carry on decreasing but instead grew by 3-4% per annum (apart from the year in which Covid-19 started).
- No funding was provided in the five-year contract to enable/fund the transition to more automation or centralisation, which ultimately restricted what pharmacies could do.
- Covid -19 period enabled pharmacies to show that they can make a significant contribution during times of emergency, however this also distracted pharmacies from starting the change to meet the new contract.
- The economic environment due to Covid-19 meant that locum, staff cost and costs in general significantly increased due to inflation.
- The increase in inflation also led to a large increase in interest rates, which also significantly impacted on pharmacies with debt.
New contract
The new contract has taken a significant time to negotiate, which was in part due to the change in political environment but was also due to the significant change that was required to the funding contract.
Key points to the new contract
We have summarised the key parts of the new contract below:
- Core funding has increased from £2,592m to £3,073m.
- No back dated payment for 2024/25 contract year.
- Single activity fee has increased from £1.27 to £1.46 (an increase of 19p).
- Retained medicine margin has increased from £800m to £900m.
- NMS fees have been split into two parts intervention and follow up consultation.
- NMS cannot be performed by external third parties.
- Price paid per Hypertension Case Finding Services has reduced from £15 to £10. This is now included in the Pharmacy First funding.
- Fees for Ambulatory Blood Pressure Monitoring (ABPM) has increased from £45 to £50.85.
- Ability to change core opening hours of the pharmacies.
- Pharmacy first funding to be continued for another year under a revised funding agreement.
- Pharmacy quality scheme (PQS) payment of £3,066.
We will cover the key points above in more detail below:
Increase in the overall contract!
The overall contract has increased from £2,592m to £3,073m, which is an overall increase of 18.55%. The increase in funding is higher than this, as the fees of £30m used to provide Pharmacy Contraception Service and Hypertension Case-Finding Service (Blood Pressure Checks) have now been reallocated from the core funding to the Pharmacy First funding envelope, which means that further core funding is available for other services. This means the contract has been uplifted to 19.7%.
A large proportion of the increase has gone into the single activity fee, which increased by 19p to £1.46, which will help most pharmacies to pay for the increase in staff costs that the sector has seen over the past 6 years. Although the increase will not cover the overall increase in national living wage, employers’ national insurance over the past 6 years and therefore pharmacies will still need to find efficiencies around staff or locum costs.
The increase in retained margin to £900m is also welcomed as the number of items dispensed has consistently grown over the past 6 years meaning reducing the amount that could be paid per item and therefore reducing what pharmacies are paid for dispensing. If the amount placed in the retained margin grew at an average of 3% per annum in line with the growth in items, the retained margin amount would be £955m. Therefore, the uplift is significantly behind what would be expected based on average uplift in items dispensed.
No Back dated payment
Many contractors were expecting a back dated payments for 2024/25 contract year, but this did not materialise. This is because £235m has been over earnt in previous years, which would have been a surprise for most given the financial position of many pharmacies. £42m of this amount will be clawed back in current year and therefore will impact the retained margin payments. Overall there needs to be more clarity around the amount that pharmacy contractors have over earnt and this may come in the future with a new reimbursement system.
NMS income
NMS income payments have grown significantly over the past 5 years following the removal of MURS, with most of the growth coming in the last 2-3 years as pharmacies started to switch to performing this service.
The change in splitting the fee between the intervention and follow up may help some pharmacies to make a claim where could not have previously, although I am not expecting this to significantly increase the fees earnt from this service, as many pharmacies do try to ensure the service is completed.
The bigger surprise was the removal of third parties from performing NMS. Many smaller contractors started to rely on this to deliver this service and will now have to look at other ways to perform the service. Groups who centralise this service, however, can continue using centralised staff.
Blood Pressure Checks and ABPM
Very few pharmacies were performing the ABPM services and therefore an increase in the fee to £50.85 and the requirement to fulfil one per month as part of the Pharmacy First monthly payment will hopefully encourage more pharmacies to complete the service.
A reduction in the blood pressure checks fees from £15 to £10 per consultation reflects the ability of suitably trained pharmacy staff other than pharmacist to be able to perform the service, following the change in VAT rates applicable to non-pharmacist staff. The reduction could also be to balance out the funding contract. The funding for this service is now included within the Pharmacy First funding which is outside the main contract and therefore effectively increases in the core funding by £30m.
Change in core opening hours
Changes to regulations will enable owners to change the core hours of the pharmacy easier. This will enable pharmacies to potentially close the pharmacy at times when the demand from patients is at its lowest during the week. Where a reduction in hours can be made, this should help with the increasing staff costs seen over the past few years and going forward. However, before a reduction in hours is undertaken consideration should be given to the pharmacy needs assessment and patient access in the local area.
Pharmacy Quality scheme
The reintroduction of the Pharmacy Quality Scheme will enable owners to receive a total payment of £3,066 and with the gateway criteria being simplified I can see many contractors choosing to complete this.
Pharmacy First
The Pharmacy First scheme has been extended for another year with funding of £215m. Many contractors have struggled to deliver this service and meet the minimum requirements for the monthly payment of £1,000. This has been reflected in the new funding structure with a fixed payment based on the number of consultations performed as shown below:
Number of consultations performed per month Fixed monthly payment
20-29 £500
30 plus £1,000
This should enable owners to meet the monthly requirement easier and therefore earn the monthly fixed fee along with the consultation fee. The consultation fee has increased from £15 to £17 apart from Urgent Medicine Supply fee which remains at £15.
Summary
Overall, the increase in funding contract may have been better than most people thought with people expecting a small increase following poor funding deals previously, however given the increase costs over the past 6 years some wanted more. Therefore, this feels like a good start to bringing the funding more in line with what was needed for the sector, but it still has some way to go to cover the significant increase in costs to the sector.
Now it is important for pharmacy owners to review the contract closely and ensure that they adapt to the new contract.
If you have any questions or require clarity on the new funding contract, get in touch with our Pharmacy team today.