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The Pharmaceutical Journal
How should community pharmacists be paid under the new contract?
In this article, Darrin Baines and Catherine Hale examine how primary care trusts in England could reimburse local pharmacies in order to help meet the Government's evolving agenda for pharmacy and the NHS
Previously in The Journal 1 we discussed the economics of the new pharmacy contract. We suggested that the proposals currently under discussion will alter the economic arrangements facing community pharmacists. For instance, we reported that the “dispensing fee” for distributing the national “global sum” will be abolished and pharmacy monies will be channelled through local, primary care trust “unified budgets”. Although PCTs will be able to purchase essential, advanced and enhanced services using monies from their unified budgets, it is not clear what mechanisms trusts will use to reimburse pharmacy providers. In theory, budgets, incentives, costing models, resource allocation formulae, outcome guarantees, health-related groups and activity-based management could all be used to distribute pharmaceutical funds.
Old problems, new principles
According to the Department of Health, the current arrangements for remunerating pharmacists are problematic because they:
· Emphasise workload rather than quality and accessibility of services
Against this background, the Government wishes to develop a new, patient-focused contract that directs payments towards quality, not dispensing volumes2. In developing a new remuneration framework, the DoH outlined the following targets that should govern the commissioning of pharmacy services:
· Easy access to services, supported increased choice and competition
In economic terms, this list is highly ambitious, as the Nobel prize-winning economist Tinbergen found that for each policy target, governments must have at least one policy instrument, and policy instruments must be effective for achieving policy targets. In this context, Tinbergen’s work implies that the new pharmacy contract should contain effective policy instruments that directly deliver the Government’s access, skill-mix, flexibility, quality and skills targets.3
· Provide clear minimum standards for community pharmacy
As this list suggests, the Government intends to use a mixture of rewards, standards and policy as instruments to meet its policy objectives.
In terms of provision, the new contract is structured around the three, hierarchal categories of essential, advanced and enhanced services. At the lowest level, essential services are non-negotiable tasks that all contractors must perform, which include dispensing, signposting, clinical governance and the like. Although it seems appropriate for modern pharmacy, from the perspective of economics and law, the chosen list of essential services is interesting since it defines the obligations pharmacists must fulfil for their core income.
Although details are vague, funding for essential services may be based upon information collected during the Pharmaceutical Services Negotiating Committee/DoH “cost of service” inquiry, which surveyed 470 contractors at the end of June 2003. In the survey, current staff, property and overhead costs were measured, which implies that these variables will form the basis of any subsequent funding formula. Although accountants regularly separate company spending into capital and current categories, economic theory suggests that costing models should not be used to allocate resources within the NHS.
· PCTs use “hard budgets” instead of cost formulae to limit pharmacy spending7
By following these recommendations, PCTs could divert money away from dispensing towards the delivery of the national targets for pharmacy. For instance, activity based management could be used to increase funding for providers who plan to meet the Chief Pharmaceutical Officer’s 10 key roles.
In the second category, the new contract lists advanced services, such as medicines use reviews and prescription intervention services. Under the proposed arrangements, these services will require accreditation of the pharmacist providing the service or specific requirements to be met with regard to the pharmacy premises, or both. Although the logic for promoting such services is clear, in economic terms four main issues arise.
1.Cash-limited, hard budgets allocated on the basis of patient needs
With the first policy instrument of hard budgets, the policy objective of needs-based, spending control would be secured; with the second suggestion, efficiency would be promoted. However, the third proposal may be the most interesting, if strategic health authorities use an “incubator” system to fund innovation in the ways medicines are managed.11 In such a system, pharmacists could bid for special project monies to innovate or integrate their services under the supervision of mentors and experts in the field of pharmacy entrepreneurship. With this scheme in place, the new contract would move away from an emphasis on giving pharmacists more things to do and begin to deliver the targets outlined in the Vision document.
The highest level of the new contract focuses on a wide range of enhanced services, including those for minor ailments, diabetes, substance misuse, coronary heart disease and an innumerable list of others. In theory, pharmacists will offer these services, and PCTs will commission them on the basis of local needs.
1.PCTs have a duty to avoid duplication in service provision12
In response, we suggest that few PCTs will make the provision of these activities a high priority, unless they have been identified as such in their three-year plans. If these services are required, the issue of duplication arises, which suggests they should be delivered in general practice premises, not local pharmacies. To add to this line of argument, current regulations and funding arrangements give PCTs the ability to buy these services from pharmacists now, without waiting for the arrival of a new contract. Therefore, this category is not actually needed, since it simply adds extra bureaucracy to service commissioning.
During the first stage of contract negotiations, attention was focused on developing a framework for the new contract. If the metaphor of building a house is used, during the initial phase the negotiators acted as architects designing their contract plans. As the plans were approved by pharmacy contractors in October 2003, both sides are now negotiating an appropriate budget for the scheme. Once this second stage has been completed, the hard work of building the dream begins.
1. Baines D, Hale C. Pharmacy economics: are proposals for a national contract already redundant? The Pharmaceutical Journal 2004;273:89–90.
Citation: The Pharmaceutical Journal URI: 20012394
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