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PJ Online | News feature: What happens next, now that the new contract framework has been agreed?

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The Pharmaceutical Journal
Vol 271 No 7276 p706
22 November 2003

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News feature

What happens next, now that the new contract framework has been agreed?

A clear majority of pharmacy contractors have voted to accept the planned framework for the new pharmacy contract in England and Wales. But their acceptance is conditional on fair funding, an acceptable contractual environment and suitable transition arrrangements. Michael Thompson and Jonathan Buisson (members of the staff of The Journal) find out what will happen next


All parties in the negotiations over the new pharmacy contract are playing their cards close to their chests

Progress is being made towards the introduction of a new community pharmacy contract in England and Wales, planned for April 2004. However, all that has been agreed so far is the framework for a three-tier contract based around essential services (dispensing, repeat dispensing, referring patients to other health professionals, clinical governance, public health roles, medicines waste disposal and sharps disposal), enhanced services (such as medicine use reviews) and additional services (examples include substance misuse services, anticoagulant services, emergency hormonal contraception service, palliative care, diabetes screening and full clinical medication review) (PJ, 19 July, p77).

Pharmacists could be forgiven for thinking that the next step is for the Pharmaceutical Services Negotiating Committee and the Department of Health, negotiating in concert with the NHS Confederation on behalf of primary care trusts, to agree funding proposals. Unfortunately, they would be wrong. Many smaller steps remain to be completed before that can happen.

One PSNC member said last week that negotiations are still at the drawing board stage. The PSNC does not know what the DoH will propose and vice versa.

So what has been achieved so far?

The PSNC has set up a number of working groups to consider separate aspects of the whole. For example, one group is developing a cost-of-service model, another is trying to identify a basis for securing fair funding, while a third is looking at options for distributing the agreed sums. Still more groups are examining other angles, as well.

Foremost among the steps that must be achieved next is agreement on a common cost basis for providing pharmacy services.

The PSNC and the DoH conducted a joint cost inquiry over the summer in an attempt to find out what the actual current cost of providing the National Health Service contract is. This is expected to take account of the hidden retained profit on drugs purchasing, which is mainly derived from getting a better deal on generics than is allowed for in the Drug Tariff. According to Sue Sharpe, chief executive of the PSNC, the PSNC and the DoH are waiting to “finalise the cost inquiry inputs”.

This is not quite how everyone sees it. “We have disagreed with each other’s evidence,” one PSNC member says. “We are both working from the same figures, but are looking at them differently. The DoH is disagreeing with quite a few of the figures.” Another member of the committee says that there is disagreement over how to apportion the costs of running a pharmacy to the services provided from it, saying: “A typical pharmacy will make 80 per cent of its turnover from NHS dispensing, but the dispensary itself may only take up 20 per cent of the space in the store.” There is also an issue as to whether sales of non-prescription medicines for self-care, about 10 per cent of turnover, should be included in the figures.

Specifying the three tiers
Another element of the new contract on which Mrs Sharpe admits more progress has been made is the development of specifications for the separate elements of the three tiers. She said: “Clearly there is an enormous amount of work to do as we finalise service specifications for the three tiers. The service specification debate with the NHS Confederation and DoH is well advanced. Funding is less well advanced. They will want to start from the current position.”

Each sides is playing its cards close to its chest and has little idea what proposals the others are developing. However, one PSNC member admitted that the PSNC is working towards a model based on an efficient independent pharmacy.

In parallel with the new contract discussions are the Government’s proposals to reform the way in which pharmacists are reimbursed for purchasing generic medicines. Initially, the Government proposed centralised reference pricing or competitive tendering arrangements for generics, which could have taken money away from pharmacies. Its more recent proposals appear to back the suggestions by the PSNC that it is competitive purchasing by community pharmacists that drives down the prices of generics and that the new contract should recognise this through a form of profit-sharing. The framework for the new contract, approved by a majority of contractors in England and Wales last week, puts “profit and purchasing plus remuneration” on the other side of the funding equation from “cost of service plus fair funding”.

However, recent proposals by the DoH to set maximum prices for four recently off-patent generics have been criticised for undermining the wider generics review and taking money away from pharmacy.

The Government is keen for PCTs to take greater responsibility for commissioning services in their areas. But one member of the PSNC is warning that devolution could be a problem for pharmacy contractors. “Every time funds have been devolved in the past, such as for out-of-hours rotas or for oxygen, they have eventually disappeared.” The members also fears that independent pharmacy contractors could lose out to multiples in any local negotiations. “Multiples will have teams going round to each PCT — if they empty the pots what will happen to the other pharmacy contractors?”

Even assuming that the DoH is willing to pump more money into the new system, it is inevitable that the basic dispensing fee will be cut from its current level of 94.6p per item. But it is not yet known how low it might go. The PSNC is working towards developing a bottom line figure below which it believes public safety will be put at risk because the fee will not allow for safe working systems, including the cost of necessary staff training.

So far as the second ballot on funding proposals is concerned, PSNC members are not willing to say when they think this might take place. But the DoH is pressing for it to take place next January.

One PSNC member said: “We haven’t said yes, but if things go swimmingly it’s possible that the vote could be in late January or early February.” But the member warned: “The DoH and NHS Confederation ideas of fair remuneration might not be the same as ours.”


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