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Reimbursement Arrangements for Medicines

The price used to reimburse a pharmacy contractor for the cost of a medicine dispensed depends on whether the prescribed product is listed in Part VIII of the Drug Tariff.

Category A

Category C

Category C items are based on the list price for a particular brand or manufacturer’s product. The Drug Tariff is annotated with an indication of which product forms the basis for the reimbursement price. Where this is absent, it means that there is more than one product with a list price matching the reimbursement price. Broken bulk and out of pocket expenses may be claimed if necessary for items in Category C.

If the price is based on a generic product, the reimbursement price is changed according to the generic price change mechanism. If the price is based on a proprietary product, the reimbursement price is changed according to the proprietary price change mechanism.

Category M

Category M products are readily available generic drugs. The reimbursement price for these products is calculated by the Department of Health based on information submitted by manufacturers on volumes and prices of products sold plus information from the NHSBSA PPD on dispensing volumes.

Category M is the principal price adjustment mechanism to ensure delivery of the purchase profit income promised as part of the new pharmacy contract. The prices are adjusted every three months in light of information from manufacturers and negotiations with PSNC. The Category M prices are published on the PSNC website two weeks before the start of a new quarter.

One problem that can arise is products not being available to purchase at the Category M reimbursement price. The Department of Health sets Category M prices at levels substantially above the prices notified by manufacturers. But when the Category M reimbursement price for a particular product falls, it may take time, and sustained pressure from pharmacies, for wholesale prices to respond. During this period, it is essential that contractors exert maximum pressure on wholesalers.

There have been a number of examples where manufacturers prices were below the Drug Tariff price but a product could not be obtained at the Drug Tariff price from a number of wholesalers.

Broken bulk may be claimed where appropriate but not out of pocket expenses. More detailed information on the Category M pricing system including downloadable reimbursement price lists is available in the National Contract Funding Section of the website.

Category E

Category E products are those that can be extemporaneously dispensed with the reimbursement price based on the costs of the ingredients required to dispense the product.

As with all products in Part VIII of the Drug Tariff, when the product is prescribed generically, payment will be based on the agreed Part VIII price, therefore, it is important for pharmacy staff to familiarise themselves with products in Category E as the set Drug Tariff price is unlikely to cover the costs of obtaining the product from a specials manufacturer.

Broken bulk can be claimed on the ingredients used to prepare a Category E product. Out of pocket expenses can also be claimed both on the ingredients themselves, as long as the ingredients are not listed in Category A or M of Part VIII of the Drug Tariff, and on the finished product, for example if the contractor does decide to obtain the item from a specials manufacturer.

Products in Category E automatically attract the relevant extemporaneous dispensing additional fee.

The formulas for extemporaneously dispensing the current Category E products are as follows:

Ammonium Chloride Mixture
(Reference: British Pharmacopoeia 2007)
Syn: Ammonium Chloride Oral Solution
Ammonium Chloride 100g
Liquorice Liquid Extract 100ml
Ammonia Solution Aromatic 50ml
Water to 1000ml
Notes: Should be recently prepared

Ginger Syrup
(Reference: British Pharmaceutical Codex 1973)
Ginger Tincture Strong 50ml
Syrup to 1000ml

Hydrogen Peroxide 1.5 % Ear Drops
(Reference: British Pharmaceutical Codex 1973)
Hydrogen Peroxide Solution (6%/20 vol) 250ml
Water to 1000ml

Phenol Liquifed
(Reference: British Pharmacopoeia 2007)
Phenol (crystals) 800g
Purified Water Sufficient to produce 1000ml

Podophyllin Paint
(Reference: British Pharmaceutical Codex 1954)
Podophyllum Resin 250g
Liquid Paraffin to 1000ml

Proflavine 0.1% Solution
(Reference: Martindale: The Extra Pharmacopoeia 27th edition)
Syn: Proflavine Lotion
Proflavine Hemisulphate (Powder) 1g
Distilled Water to 1000ml

Salicylic Acid 2% Lotion(Reference: Martindale: The Extra Pharmacopoeia 28th edition)
Salicylic Acid 20g
Castor Oil 10ml
Industrial Methylated Spirit 95% to 1000ml
Notes: Store in airtight containers. Flammable: keep away from an open flame.

Salicylic Acid 3% /Sulphur 3% Ointment
(Reference: Martindale: The Extra Pharmacopoeia 28th edition)
Syn: Salicylic Acid and Sulphur Ointment BPC 1973
Hydrous Ointment (Oily Cream) 940g
Salicylic Acid Powder 30g
Sulphur Precipitated Powder 30g
Notes: Store in containers which prevent evaporation

Sodium Chloride 0.9% Solution
(Reference: British Pharmacopoeia 2007)
Syn: Normal Saline
Sodium Chloride 9g
Purified Water to 1000ml

No Cheaper Stock Obtainable

Occasionally there are shortages of the products listed in Part VIII of the Drug Tariff, for example, if there are manufacturing problems or a change in demand, leaving pharmacy contractors faced with dispensing an equivalent product that is only available at above the set Drug Tariff price.

NCSO (No Cheaper Stock Obtainable) is a concession which is only granted by the Department of Health where there is a recognised stock shortage and there is a licensed equivalent product available. The concession is not granted where the product is still available in the market at or below the Drug Tariff price, for example where one key wholesaler still has stock.

If this status is granted, pharmacy contractors will be reimbursed based on their endorsement rather than the fixed Drug Tariff Price but it is essential that contractors endorse the prescription with the initials ‘NCSO’ and full details of the product dispensed (e.g. manufacturer, brand name or price if it is an uncommon item and pack size). The endorsement must also be signed and dated. If any of this information is missing, payment will be based on the Drug Tariff price rather than the endorsed product.

Once the NCSO Concession has been granted, it only applies for that particular month. If at the beginning of the following month the situation is not resolved, a new application is made.

To report a stock shortage, please contact the PSNC Information Team who will investigate the extent of the stock shortage and approach the Department of Health to apply for the NCSO Concession if appropriate (Contact: 01296 432823 or email shortages@psnc.org.uk).

Information on products that have been granted the NCSO Concession can be found on the Stock Shortages section of this website.

Generic Medicines not listed in Part VIII

Where a prescription has been written generically but the item is not listed in Part VIII of the Drug Tariff, reimbursement will be based on the manufacturer or supplier’s list price for the endorsed product. Reimbursement prices will change according to the generic or proprietary price change mechanism depending on whether the dispensed product is a generic or proprietary medicine .

Medicines Prescribed by Brand Name

Where a prescription has been prescribed by brand name, reimbursement will be based on the list price for the prescribed product. Reimbursement prices will change according to the proprietary price change mechanism.

Branded medicines are priced according to the PPRS. The PPRS is structured to provide safe and effective medicines for the NHS at reasonable prices, promote a strong and profitable pharmaceutical industry capable of sustained research and development expenditure that leads to future availability of new and improved medicines, and encourages the efficient and competitive development and supply of medicines to pharmaceutical markets in the UK and abroad.

In essence, the PPRS operates by restricting each company's profit to a target Return on Capital employed (ROC), after taking into account allowances for expenses including research, marketing and administration. However no profits are guaranteed and there are tight restrictions on the circumstances in which medicine prices can be increased.

In February 2007 the OFT recommended that the Pharmaceutical Price Regulation Scheme (PPRS) should be reformed, to deliver better value for money from NHS drug spend and to focus business investment on drugs that have the greatest benefits for patients. The Department of Health are currently reviewing the OFT’s recommendations but this is expected to lead to substantial change in the way that the PPRS Scheme is organised.

On 2nd May 2007 following a consultation with the Association of the British Pharmaceutical Industry, it was agreed that 40 members of the Pharmaceutical Price Regulation Scheme (PPRS) would be invited to supply additional information on the sales of branded medicines under the 2005 PPRS, i.e., on a voluntary basis. Those members not prepared to agree to supply the information voluntarily will be subject to Regulations requiring the supply of more detailed information on the sales of their branded medicines. More information regarding the PPRS is available from the Department of Health website.

Medicines Prescribed by Both Generic and Brand Name

In cases where both the generic name and a product’s brand name or manufacturer have been prescribed, the NHSBSA would interpret that as an order for a proprietary product and the contractor would be reimbursed according to the normal Drug Tariff rules, that is based on the manufacturer’s list price. This would be irrespective of what the pharmacist has endorsed.

In late 2003, the RPSGB Legal Department issued the following legal and ethical guidance for 3 different scenarios:

1) A brand being prescribed, but the generic name also being included in the prescription-:

It would be our view that except in an emergency, the brand should be supplied unless the prescriber has confirmed otherwise. Where the prescribers intentions are ambiguous the pharmacist should make further checks as to which product should be supplied.

2) A branded generic being prescribed-:

Again except in an emergency or on the approval of the prescriber, the pharmacist should supply the brand that has been ordered on the prescription.

3) A brand being prescribed, and another brand with the same product licence number being supplied-:

There is unlikely to be any offences under the Medicines Act 1968, provided the products have identical specifications and the item is not mislabelled. In respect of the Code of Ethics, except in an emergency, pharmacists should not substitute a specifically named product for another product without the approval of the patient, or carer and the prescriber. However, if both products have the same marketing authorisation it may be difficult to argue that the pharmacist has supplied a medicinal product which is not of the nature and quality required by the prescriber.

Diluents for Dry Powder Injections

If a prescription is received for a dry injection which does not specify a diluent and no endorsement has been made to indicate that a diluent has been dispensed, the NHS Business Services Authority Prescription Pricing Division will not automatically reimburse the contractor for a diluent.

For payment to be made accurately, details of the diluent dispensed must be clearly stated on the prescription by the prescriber or clearly endorsed on the prescription by pharmacy staff as an 'Additional Item'. Endorse the prescription 'AI', along with full details of the diluent dispensed.

Substitution Substituting Sugar Free Medicines

The Code of Ethics states that 'Except in an emergency, pharmacists must not substitute any other product for a specifically named product without the approval of the patient or carer and the prescriber' and under the NHS Terms of Service, a chemist is required to supply the drugs ordered with reasonable promptness.

The RPSGB have confirmed that when a prescriber does not specify 'sugar free' and a pharmacist supplies a sugar free medicine then this would not be in breach of the Code of Ethics.

However if a sugar free formulation has been prescribed, then the pharmacist should supply this, other than in exceptional circumstances. The exception to this would be when a Schedule 2 and 3 Controlled Drug has been prescribed, as the Code of Ethics Service Specification 19 (Services to Drug Misusers) states that a pharmacist must not deviate from the instructions given on the prescription and sugar free/colour-free preparation must not be dispensed unless specifically prescribed.

Pharmacists should endorse the prescription appropriately. The pharmacy will be reimbursed based on the prescribed product with the normal reimbursement rules applied.

Frequently Asked Questions

I have received a prescription for '5ml Neosporin Eye Drops, use once daily in both eyes.' Will I be paid for dispensing two bottles?

No, the NHS Business Services Authority Prescription Pricing Division will only reimburse you for the quantity ordered (in this case one bottle (5ml)). If you believe that in the interests of the patient, two bottles should be supplied, the prescriber should be asked to amend the prescription accordingly.

I have received an FP10 Prescription for Tubigrip Elasticated Tubular Bandage with no size stated. I had to measure the patient to determine the correct size, therefore can I claim the Measured and Fitted additional fee?

No, the additional fee for measuring and fitting appliances only applies to elastic hosiery and trusses which require measurement. Detailed information on additional fees that can be claimed can be found in Part IIIA of the Drug Tariff.

I have received a prescription for ‘28 Testosterone 40mg Capsules'. What will I be paid for?

Organon Laboratories have confirmed that the 28 and 56 pack sizes of Restandol Testocaps (Testosterone 40mg Capsules) have been discontinued and replaced with a 30 and 60 pack respectively.

Both the 28 and 56 pack sizes of Restandol capsules required cold chain storage and were listed in the ‘Drugs for which Discount is not Deducted' List. The 30 and 60 capsule pack sizes of Restandol Testocaps do not require refrigeration therefore the Department of Health have removed Testosterone 40mg capsules from the ‘Drugs for which Discount is not Deducted' List with effect 1^st May. Part VIII of the May Drug Tariff has also been updated to reflect the new pack sizes.

Reimbursement for this prescription will be based on the contractor's endorsement of pack size and the relevant fixed Drug Tariff price. As neither the 30 nor 60 pack sizes are classed as special containers, it is not possible to round the dispensed quantity to the nearest pack. The prescribed quantity should be dispensed. Broken Bulk may be claimed.

For guidance on the basis of reimbursement for a particular product, please contact the PSNC Information Team (01296 432823).