Page 6 - P4304.1-V110 PSUK Mag June 2025

The margin measurement process

As part of the official recognition of margin as a legitimate income stream, a
‘Margin Survey’ process was developed in collaboration between CPE and the
Department of Health and Social Care. The concept was that the margin retained by
pharmacies and dispensing doctors would be measured directly at pharmacy level,
using pharmacy data.
To achieve this, the Margin Survey was designed and it was agreed by all parties
that only purchase data from Independent contractors (defined as groups of 1-5
pharmacies) would be used. The Margin Survey gathers purchase data for a sample
of drugs from a sample of independent contractors, which is then used to estimate
the margin earned at a national level.

Margin Survey

process

At every stage of the process CPE
performs in depth checks of data validity,
calculations and results. The results from
each survey period are lagged by around
six months. When results become available,
they are used to inform the price setting
for the next Category M list (e.g. margin
measured for the Apr-Jun period would
impact the next Jan-Mar Cat M list).

What is Category M?

We know that profit from drugs purchasing is monitored with the aim of a set figure
(£900m) being delivered annually. And we also know that this is managed and
maintained through the Drug Tariff each quarter. But how and where is it adjusted?
The answer is through Category M in the tariff.

Category M was introduced into the Drug Tariff in April 2005 and is the mechanism
used to set the reimbursement prices of over 600 medicines.

It broadly contains the most common / high usage generically available medicines
and is the principal price adjustment mechanism to ensure delivery of the retained
margin guaranteed as part of the contractual framework.

DHSC use their legislative powers to gather information from suppliers on volumes
and prices of products sold, plus information from the Pricing Authority on
dispensing volumes, to set prices each quarter.

As covered earlier, the margin survey of Independent pharmacies captures data on
margins earned, including the actual impact of Category M reimbursement changes,
and the outturns from the survey then inform the setting of the next Category M
price list.

6 PS Magazine | Purchase Profit

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