Page 34 - P4403.59-V50_Numark Magazine April 24

UNDERSTANDING

CATEGORY M:

How did we get to where we are?

Part one

Numark members have really felt the impact of further reductions to Category
M announced in January. This is leading to many members asking the questions
of the current tariff and how it is calculated.

We invited experts from Community Pharmacy England to explain how it all
works and the underlying tools they use to ensure the network are receiving the
£800 million in retained margin.
Read more in part one of a two part guide to Category M...

How margin fits within pharmacy funding.
Broadly there are two main streams of funding delivered to pharmacies. These
are:
a. Fees/remuneration for pharmaceutical services (which
includes payment of fees for dispensing)
b. Retained buying margin
Retained buying margin is the difference between the price that a pharmacy
pays for a medicine (after supplier discounts) and the price that the NHS
reimburses for the medicine (after discount deduction). As of 2023/24, the
annual contract sum for the pharmacy sector is £2,592m. Of this sum, £1,792m is
intended to be delivered to pharmacy through fees/remuneration, and £800m is
intended to be delivered through retained buying margin.

Before the introduction of a new contract in 2005, retained buying margin was
not a measured or protected income stream for pharmacy. In the early 2000’s
the Government was considering measures to restrict margin in the medicine
supply chain. Options included central procurement of medicines, or paying
pharmacies only what they paid to purchase medicines.

There was widespread pushback against the Government. CPE (then PSNC)
argued that margin income was needed by pharmacies. Ultimately new
arrangements were enacted in 2005, which officially recognised pharmacy
margin, and therefore protected it as an income stream for pharmacies.
However, this protection came with the provison that the margin must be
measured, and would be subject to calibration through the Drug Tariff.

Retained buying margin is not pure profit for
pharmacies, it is part of the core contractual funding
required for the running of pharmacy businesses.

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