Right on the money
19 Jun 2019
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“It’s no secret that community pharmacists are feeling the squeeze financially,” says Harpreet Chana, NPA Digital Programme Director. “The message is coming through loud and clear that the payment our members get from the NHS is not even enough to cover their wholesale bills. Something is going wrong somewhere.”
The complexity in the system takes a significant share of the blame, with funding for drugs reimbursement coming via CCGs, remuneration for fees, allowances and advanced services via NHS England, and the retained buying margin, whilst it is delivered through reimbursement, is overseen by the Department of Health and Social Care. Then there are separate sums for flu (from the NHS vaccinations budget) and NUMSAS (the pharmacy integration fund).
“Everyone thinks they understand the global sum, but even seasoned professionals have to double check which pots money comes from and how that drives prescribing behaviour,” says Harpreet. “From previous roles as Head of Pricing and then Head of Funding Strategy at the PSNC, I know first-hand how many contractors don’t understand how they got paid, what they should be monitoring month-on-month and how best to monitor it. If anything, the situation seems to have deteriorated.”
This is why the NPA has launched an initiative to improve members’ understanding of the global sum and the factors that adversely affect cash flow and the bottom line.
March saw the launch of the first in a series of eight webinars on funding in community pharmacy. Harpreet is running these sessions alongside Garry Myers, an NPA member who also sits on the PSNC sub-committee that negotiates the community pharmacy contract directly with the Department of Health and Social Care and the NHS. When it comes to the challenges, Harpreet doesn’t hold back: “There are problems with cash flow; there are problems with shortages and there are problems with margin. We are trying to help and educate the member base: how funding works and what practical things they can do to try to limit the impact of prescribing changes that happen locally.”
While all the information is already “out there”, it’s about reinterpreting and repackaging it, while giving practical examples, so it makes sense to people rather than being theoretical, says Harpreet. This is crucial she says, because: “Not only do some members not understand it, but CCGs don’t understand it and their medicines management teams don’t understand it. So you’ve got people making decisions at a local level around budgets and they don’t understand how our funding works.”
A particular bugbear for Harpreet is around margin. “People don’t always understand that community pharmacy is allowed retained buying margin as an incentive, yet it often seems to be almost a dirty word. We’re allowed to make it in recognition of the fact that we’ve driven down generic prices in this country to among the cheapest in Europe, if not the world.”
This is backed up by statistics from the British Generics Manufacturers Association that show the increase of generic prescriptions, combined with a reduction in the net ingredient costs, means overall savings of billions to the to the NHS medicines bill.
“Pharmacy has absolutely played its part in that, but a lot of people don’t realise we’re incentivised in that way. Currently, procurement is a key part of being a pharmacist. If you want to survive, you have to procure effectively. You need someone in your business dedicated to it, so that you’re not just picking the same product that comes up on your PMR system because someone selected it three years ago for a patient and you just hit ‘repeat’.
“I’ve done it myself,” admits Harpreet. “I’d go to my PMR system and re-order whatever product was in the patient’s record. But that product actually might be really expensive and I could have ordered 10 packs of it because I didn’t know any better at the time.”
One of the frustrations with the current system is that success in driving down costs can backfire when generic manufacturers face reduced profits. This might seem a desirable outcome, but as Harpreet says: “If you’ve got one product and three manufacturers are supplying it, what happens if one comes out and says: ‘you know what, the factory price is £1 but we can do it for 80p’? Sometimes the other two will withdraw from the market, as they can’t compete. Then the remaining generics manufacturer has a monopoly and can charge what it likes. There are no price controls over generics and because Category M prices take a few months to take effect in the drug tariff, community pharmacists could be losing pounds on every pack they dispense. That’s a harsh reality of the current system.”
The effects of the price-change mechanisms on cashflow and the bottom line are a concern for many. For example, if a price changes after the 8th of the month, it doesn’t take effect from a reimbursement perspective until the following month. It’s not unheard of for a price to rise by several pounds per pack. So, for example, if a pharmacist dispensed 100 packs, they could be hundreds of pounds out of pocket because the price change won’t take effect until the following month and if they don’t monitor price increases it won’t be picked up.
To help inform and educate on such issues, Harpreet urges all NPA members to watch the webinars. “They’re relatively short – only 30 minutes in length, with some time for questions at the end, and they were done that way purposefully as the lunchtime learning series.”
The differing topics also mean that people can pick and choose which webinars they want to watch. The NPA is also producing a series of short videos and some graphics on key principles to complement the webinars. As Harpreet says: “If you’ve got people locally making prescribing decisions but who don’t fully understand community pharmacy funding, rather than sending them a 40-minute webinar, you can simply forward them a link to the video and graphic that explains why what they’re doing isn’t saving them money. Then, if they want to know more, they have the option of watching the 45-minute webinars. We want to try and improve the understanding of the community pharmacy contract and funding across healthcare to help improve things for members and to help them understand why they’re not making margin and how they can change things within their business.”
The NPA’s webinar series on funding
March – Do you understand the Global Sum? Community pharmacy funding overview
April – Why am I not making enough margin? Understanding margin delivery
May – Understanding shortages and how to maximise procurement
June – Running a successful pharmacy business – hear it from the financial experts
July – How could funding models change?
September – Revenue protection and generation
October – Endorsing and best practice
November – Understanding Scottish community pharmacy funding
For more information on NPA webinars and resources, and to access previous webinars, visit npa.co.uk/FundingWebinars