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£48m cut to Category M

Contractors told to start planning now

May 16th 2016

Tagged: DM Zone news Pharmacy owners' news England

By Ailsa Colquhoun

The Department of Health (DH) has announced reductions to Category M prices which will apply to prescriptions between June and September 2016, after which they will be reviewed.

According to PSNC, the changes represent a reduction to generic medicine reimbursement prices (Category M) for June to September 2016 worth £12 mllion per month, equivalent to £48m for the four-month period. For dispensing practices, which account for around 7 per cent of dispensing volume, this will equate to a monthly cut of £840,000 for the period, or a total £3.36m drop in reimbursement.

The reductions are being made by DH in response to the preliminary findings of the 2015/16 medicines margin survey. The intention is to reclaim excess margin that it believes was delivered to contractors in 2015/16 above the agreed allowed £800m. PSNC accepts that margin levels were high during the period, but has not agreed to the reduction.

DH stated in a letter to PSNC that it felt the data was robust enough to support at least a £12m per month reduction. DH said it would reconsider the position for October onwards in consultation with PSNC, once finalised 2015/16 medicine margin survey results are available. DH projections suggest that the October Drug Tariff is unlikely to see a significant recovery.

The June Drug Tariff will be amended to reflect the new prices.

PSNC warns: “Earnings from the first half of this financial year will be adversely affected by the Category M price reductions,” and for pharmacy owners adds: “but [they] will still be significantly above those expected for the second half. Combined with the determination to remove £170m from community pharmacy in October, this financial year will be very difficult for the sector.”

All contractors are advised to make whatever provisions they can for the funding reductions.