Community pharmacy in 2016/17 and beyond – final package Mike Dent Director of Pharmacy Funding psnc.org.uk/fundingchanges #pharmacychanges @PSNCNews

Key topics Imposition of total funding and distribution Planning for the future Reimbursement changes Judicial Review

Funding total - imposition 2016/17 £2.687bn £113m reduction cf. 2015/16 – £2.8bn Cuts imposed from Dec 2016 DT at c£28m a month Original plan was for £170m reduction from Oct 2016 DT Delay due to lobbying / change of Minister ‘saved’ £57m

Funding total - imposition 2016/17 £2.687bn Annual = 4% reduction in funding (cf. 2015/16 – £2.8bn) Last 4 months (Dec 2016 - Mar 2017) = 12% reduction cf. Nov 2016 NB: 2015/16 excess margin recovery from Jun 2016 – Mar 2017 of £12m/month (£120m over 10 months)

Funding total - imposition 2017/18 £2.592bn £95m reduction cf. 2016/17 = a further 3.4% reduction £208m reduction cf. 2015/16 = a total 7.4% reduction Spread over 12 months Beyond 2018 – Subject to future consultation £120m margin recovery should end

Funding distribution - imposition Single Activity Fee (SAF) ITEM FEE– 90p/item PRACTICE PAYMENT– max 52.2p/item REPEAT DISPENSING FEE- £1500/year EPS PAYMENT - £200/month 1 Single Activity Fee = £1.13? Balancing figure to distribute funding EPS release 2 set up fee to cease from end March 2017 90 pharmacies haven’t claimed set up fee yet!

How was the SAF derived? Funding breakdown Years 1 and 2

Establishment Payment (EP) Establishment Payment removal: changed phasing 20% reduction from December 2016 40% reduction from April 2017 Payments to cease by end 2019/20 Revised figures are as follows: 2016/17 2017/18

Quality Payment (QP) Revised budget of £75m (maximum £6,400/year) Implementation from December 2016 Two review points: 1. April 2017 2. November 2017 Payment comes out of the funding settlement for 2017/18 Reconciliation payment late in 2017/18 to take account of any underspend See PSNC website and webinar for more information

Pharmacy Access Scheme (PhAS) Designed to protect patient access DH model changed over time Last minute amendment for ‘deprived areas’ 1,356 pharmacies 1%/3% efficiencies Quality payment taken into consideration Payments are contractor specific and are calculated as follows: 2016/17 top up = (2015/16 remuneration * 0.99) - 2016/17 estimated remuneration 2017/18 top up = (2015/16 remuneration * 0.97) - 2017/18 estimated remuneration

PhAS – What does it mean for me? Estimated remuneration assumes constant items and 100% quality payment Payments are fixed for each period Comes out of total funding settlement 2016/17 - c£15m (average c£2,900 per month) 2017/18 - c£25m (average c£1,500 per month) See PSNC website and webinar for more information

Outstanding questions There are a number of detailed points that will need to be clarified with the Department of Health: VAT Top up payments Items that attract more than one fee Threshold levels

Planning for the future

Effect on income: Essential Services

Effect on income: impact of Quality Payment Includes margin but no advanced service fees or PhAS payment NB: maximum quality payment is £6,400/year (£533 a month)

Effect on cash-flow declared item figures x average item value (AIV) Advance payments Calculated as: declared item figures x average item value (AIV) for the month for previous month 100% of advance payment paid 2 months following dispensing date i.e. December 2016 prescriptions will have an advance paid by 1st Feb 2017 Advance is recovered and balance settled 3 months following dispensing i.e. December 16 advance payment will be recovered with a balancing payment made by 1st March 2017

Effect on cash-flow Big Impact Month Funding cut £113m Reduction in Establishment Payment by 20% Introduction of Single Activity Fee @ rate of £1.13 per item Introduction of Pharmacy Access Scheme Ongoing margin recovery of £12m pcm Funding cut £95m Further reduction in Establishment Payment by 40% Slight increase in Single Activity Fee @ rate of £1.24 per item Reduction in average Pharmacy Access Scheme Introduction of Quality Payments Margin recovery of £12m pcm ends – hits cash flow in July along with QP 1st Dec 16 Jan 17 1st Feb 17 1st Mar 17 1st Apr 17 May 17 Jun 17 1st Jul 17 Aug 17 Dec 16 advance payment Nov 16 balancing payment Jan 17 advance payment Dec 16 balancing payment Oct 16 advance payment Sept 16 balancing payment Big Impact Month For eligible pharmacies the first Quality Payment will be made in July 2017 Note: this payment is only made twice a year with April and Novembers balancing payments No changes to payments for contractors apart from usual fluctuations in AIV. Dec 16 advance payment will be inflated as based on November’s AIV Jan 17 advance payment will be lower as the AIV calculation will take into consideration the reduction in fees. Dec 16 balance payment will be less than the value of the advance payment Try the PSNC’s Cashflow & Indicative Income Calculator to see how these changes will impact your pharmacy by visiting psnc.org.uk/fundingchanges and clicking on the ‘Impact on contractor income’ dropdown. 17

Useful resources PSNC’s website Hub Page – www.psnc.org.uk/fundingchanges PSNC’s response to the imposition FAQs Indicative income tables Income calculator Cash-flow model

PSNC website: indicative income calculator Quality Payment Indicative Income

Further reimbursement changes Drug Tariff changes outstanding from 2014/15 settlement Non-Part VIII Proposal to use dm+d prices more routinely for pricing DH to review and investigate identified issues with dm+d Category A Proposal to widen the current basket of suppliers for price setting Potential to use additional data for price concession lines Discount deduction scales Amending scales and recharging back to CCGs Wider consultation may be needed

Reimbursement changes continued… Part of 2016/17 settlement: Specials Widening the number of manufacturers’ data used to set reimbursement prices  Introduce unlicensed oral solid dosage forms into the Drug Tariff Changes to Margin Survey Ongoing methodology work regarding the capture of margins on Category C and non-part VIII products Category C price setting may change Category M DH considering amending Category M pricing Wider consultation may be needed

Questions psnc.org.uk/pharmacychanges