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

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

3. 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

4. Funding total - imposition
2016/17
£2.687bn
Annual = 4% reduction in funding (cf. 2015/16 – £2.8bn)
Last 4 months (Dec 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)

5. 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

6. 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!

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

8. 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

9. 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

10. 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) /17 estimated remuneration
2017/18 top up = (2015/16 remuneration * 0.97) /18 estimated remuneration

11. PhAS – What does it mean for me?
Estimated remuneration assumes constant items and % 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

12. 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

13. Planning for the future

14. Effect on income: Essential Services

15. 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)

16. 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

17. Effect on cash-flow Big Impact Month Funding cut £113m
Reduction in Establishment Payment by 20%
Introduction of Single Activity 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 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

18. Useful resources PSNC’s website
Hub Page –
PSNC’s response to the imposition
FAQs
Indicative income tables
Income calculator
Cash-flow model

19. PSNC website: indicative income calculator
Quality Payment
Indicative Income

20. 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

21. 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

22. Questions
psnc.org.uk/pharmacychanges