Community Pharmacy England has slammed a decision by the Department of Health to clawback £9 million a month from contractors, starting in August, after it made an error in calculating Category M prices in July.

Additionally, the extra reimbursement delivered in July will be taken back via further Drug Tariff price reductions between October 2024 to March 2025.

Chief executive Janet Morrison said: “We have reiterated our firm stance that this is not an acceptable resolution to the situation. The margin system is not working as it needs to, and we have been calling for a review of medicines margin.”

DHSC did consult with CPE about how to address its error. CPE’s position was that DHSC should not seek any mid-quarter correction in Category M prices, arguing that the impacts of the July reimbursement increase would be picked up and accounted for by the margin survey in due course.

Based on its erroneous calculations, the DHSC increased Category M reimbursement in July by approximately £21 million per quarter. The DHSC says its corrected figures show that there should have been a reduction of £6m per quarter. 

The erroneous increase in July would have resulted in £27m overall extra reimbursement over the July quarter – or £9m per month.

“CPE has been very clear that downward adjustments are unaffordable and will further put the viability of the sector at risk. This decision has been imposed despite our serious risk warnings and strong opposition. We have written to the Minister to make this clear,” the negotiator said.

“Community pharmacy businesses are in a perilous state due to the entrenched underfunding of the contractual framework. CPE’s firm position remains that the margin element of the CPCF, along with the overall funding quantum, needs urgent uplift as it is insufficient to reflect the ever-increasing volume of dispensing and services provided by the sector.”

CCA echoes CPE criticism

Company Chemist Association chief executive, Malcolm Harrison, has echoed CPE’s criticism and also called for a review of the margin retention system.

“At a time when finances for community pharmacy are exceptionally tight, further clawbacks will only serve to place additional strain on pharmacies’ cashflow. The cycle of adjustments and clawbacks demonstrates the need to urgently review the system of retained margin,” he said.

“The level of retained margin available to pharmacies for procuring medicines for the NHS has not been increased since 2014, despite a decade of increases to both the volume and cost of prescribed medicines”.

The National Pharmacy Association was even more outspoken in its condemnation. Chair Nick Kaye said: “It’s outrageous that pharmacy finances can be tossed about in this careless way by the Department of Health.

“When financial margins are already very tight, a clawback of this amount could worsen cashflow problems for independent pharmacies and risks further cutbacks and closures.

“This infuriating announcement goes to show why the NPA has already called a second day of protests, in September, calling for fair funding.

“The new Government must urgently address our sector’s overall funding crisis and reform this up-down payment system, which toys with the finances of a critical healthcare service.” 

Updated 15:34