The Pharmaceutical Services Negotiating Committee (PSNC) and the Department of Health and Social Care (DHSC) have agreed changes to discount deduction to community pharmacy payments.

PSNC said the new discount deduction arrangements will see the current single scale split into three groups: one each for generic medicines, branded medicines and appliances, each with separate fixed deduction rates. These are:

  • Appliances – products listed in Part IX of the drug tariff, such as dressings or incontinence appliances – will be deducted at 9.85 per cent.
  • Generic medicines – products listed in part VIIIA of the drug tariff in Categories A and M – will be deducted at 17.52 per cent.
  • Branded medicines – any other product – will be deducted at 5 per cent. The 5 per cent rate will also apply to Category A and M medicines which have been granted a concessionary price in that month.

Currently, pharmacies with lower monthly reimbursement receive a lower rate of deduction and pharmacies with higher monthly reimbursement receive a higher rate.

However, under the new arrangements, this sloping scale has been removed – meaning that every pharmacy will have the same rates of deduction applied to their reimbursement for the three different areas, regardless of the total value of that reimbursement.

In a briefing document, the PSNC said that contractors should expect some changes in margin as a result, but argued the overall rate will be fairer across the sector.

It said: ‘The new system was calibrated such that the overall amount of deduction applied to pharmacy payments would be the same as the existing system, on the national scale. However, at the individual pharmacy level, many pharmacies will experience a change in the amount of deduction they experience. This is by design.

‘A problem with the existing single deduction scale is that it effectively treats all reimbursement the same, not recognising that a pharmacy’s ‘dispensing mix’ of branded and generic medicines has a significant impact on the amount of discount they actually receive.

‘As the new system splits medicines into groups, the dispensing mix of each pharmacy will now directly impact how much deduction they experience, resulting in a fairer level of deduction for all pharmacies.’

The changes were first proposed in response to the 2019 DHSC consultation on reimbursement reforms, in recognition of the fact that brands do not typically attract the same level of discounts as generics, and that subsequently many brands were dispensed at a loss.

The discount deduction system will transition to these new arrangements between October 2022 and January 2024, using a variable weighting which is outlined on the PSNC website.

Commenting on the changes, Fin McCaul, PSNC member and independent community pharmacy contractor, said: ‘The discount deduction scale has been a point of contention for contractors for many years, and PSNC has long been pushing to remedy this. The incoming changes are designed to both improve equity of access to margin and manage the distortions presented by branded medicines, which just don’t have the same level of discount available as generics.’

‘Analysis undertaken by DHSC and PSNC has determined that these changes will achieve fairer access to medicine margin across the community pharmacy sector,’ he added.

This comes after the PSNC chief executive last week called for ‘more action' and funding from the Government to address factors piling pressure on community pharmacists.