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Funding for 2010/11
Pharmacy Minister Earl Howe has settled funding for community pharmacy services for 2010/11, with the agreed sum available for distribution being £2,486m. In light of the results of the Medicines Margin Survey, arrangements have also been confirmed for adjusting £140m of retained purchase margin above the overall £500m contractual target. £120m will be recovered through adjustment to Category M prices of £60m per quarter, with effect from October. The Minister has agreed that the remaining balance of £20m will be recovered over the course of 2011/12 rather than over the remainder of this financial year.
Commenting on the settlement, PSNC Chief Executive Sue Sharpe said:
“The Minister has agreed that community pharmacy funding for 2010/11 will be £2,486m. This is an encouraging settlement in challenging financial times. However contractors will no doubt feel the effects of excess margin recovery when January payments come through. We recognise the impact that Category M adjustments will have in the second half of the year, and we urge contractors to prepare for this now. It is worth noting, however, that excess margin could have been recovered over a shorter timescale, thus having an even more acute effect on contractors’ finances.
“The Cost of Service Inquiry is continuing but its final results will not be available for several weeks. Its results will also inform discussions we expect to have with the Department on reform of funding delivery in the near future; reflecting the government’s desire to reward quality and outcomes, and the need to fund sustainably the development of community pharmacy’s role.
“We continue to work productively with NHSE and the Department to drive the introduction of new services, which will as ever be subject to an agreement on funding which works for the NHS and for pharmacy. We welcome the Government’s support for this direction of travel, and the Minister’s repeated commitment to harnessing community pharmacy’s full potential”.
The details of the settlement
The results of the margins survey for 2009-10 show excess margin of £276m. This reflects the decision of the previous Govt to leave £65m on account pending examination of the reliability of the 2008-9 margins survey results, and up to £125m for one-off infrastructure costs. The 2009-10 survey results are consistent with the margin levels revealed previously, and future infrastructure costs totalling £90m have been agreed. This means £100m of surplus funding provided in 2009-10 must be recovered as part of the settlement.
After recovery of the £100m surplus funding, total funding allowed for the year is £2.486bn. The first half of the year has delivered funding in excess of the required rate, and funding delivery needs to be reduced by £140m in total for the year. The Minister has made a concession, allowing a carry-forward of £20m of this into 2011-12 to smooth the impact. Consequently there will be a reduction in reimbursement prices in October 2010 of £60m per quarter, with a further reduction of £10m per quarter from April 2011-12 to deal with the under recovery this implies. The carry forward of £20m into 2011-12 will be recovered through fees and allowances.
The results of the joint Department of Health/ PSNC Cost of Service Inquiry will not be known for several weeks, but the Minister has agreed to allocate a reserve totalling £250m as part of the settlement, a proportion of which is subject to a risk share in the event that the results of the Cost of Service Inquiry show the sum required to provide fair funding to be less than the underlying £2.586bn allowed for the year.
The Department of Health has issued a briefing note on the settlement.
Posted 8 September 2010