Ministers have imposed a higher discount deduction rate of 20 per cent for generic medicines from April 1 “following pressure from NHS England,” the PSNC announced last night.

The negotiator said it had rejected the rate increase from 17.52 to 20 per cent, which it claimed had been “imposed based on a very limited period of analysis” and would create problems for contractors.

But the Department of Health and Social care pushed through the changes due to NHSE’s concerns that since new arrangements were agreed last year discount deduction “has varied slightly from anticipated levels, and… resulted in a short-term impact on central NHS cashflow,” said PSNC pharmacy funding director Mike Dent.

Mr Dent described the move as a “kneejerk reaction to a system working as designed,” adding that contractors “will now be forced to bear the impacts of short-term policy making by central NHS and Government”. 

Discount deduction is taken from out of pharmacies’ reimbursement for dispensing NHS prescriptions in order to save them the work of calculating it themselves.

Since the rate hike were revealed last night, pharmacy contractors have expressed concerns about the impact on their cash flow, with one describing the news as an “utter joke”. 

Mr Dent said the new system – which separates out discounts for branded medicines, generics and appliances and was introduced in October – was “designed to deliver a fairer distribution of margin across the community pharmacy sector, and to take into account the impacts of dispensing mix on pharmacy contractors”.

Criticising the decision to impose the rate hike, he said it was to be expected “that there may be some variation in the quantum of overall discount deduction, due to the unpredictable nature of NHS prescribing policies”. 

He also said: “PSNC has been informed that while the generic discount rate will increase, the transition from old system to new system will continue as per the previously outlined timeline but subject to review.

“The impacts on discount deduction will be assessed again in a quarter’s time, which of course adds to contractors’ uncertainty.”

The April Drug Tariff will also see all concession lines classed as Group Items for Discount Not Deducted, as agreed between the PSNC and DHSC.