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As wholesaler payment terms tighten and operating margins remain thin, are reimbursement delays and retrospective clawbacks becoming an existential threat to community pharmacy? By Saša Janković

The time lag between pharmacists dispensing medicines on behalf of the NHS and being reimbursed for that service has been a sore point for years. Community Pharmacy England (CPE) has long pushed for reform and has secured a commitment from the government to review drugs reimbursement policy. 

However, as National Pharmacy Association (NPA) chair Olivier Picard’s December letter to minister Stephen Kinnock suggests, the decision by some wholesalers to bring forward their direct debit collection dates could exacerbate the uncertainty that is already built into the system, potentially posing more of an acute threat to pharmacies than ever before. 

Picard said that what “may seem like a small administrative change” is, for many pharmacies already under immense financial strain, “yet another pressure on already-stretched cashflow”. 

Writing to the pharmacy minister on 10 December 2025, Picard warned: “This means that our members have no choice but to bridge the payment gap themselves from their own pockets. Our members, including myself, have had to resort to measures such as taking personal loans, cashing in pensions early, borrowing from family, and not taking a salary. We do this because we always put our patients first and we do not want patients to go without their vital medicines. However, this situation is unsustainable and unacceptable.”

A bigger bombshell came when the Department of Health and Social Care (DHSC) sent an advance notice in December about the new category H being introduced to part VIIIA of the drug tariff in March, as set out in the 2025/2026 funding settlement. 

Originally proposed by the DHSC in a 2019 consultation on drug reimbursement reforms, the introduction will involve changes to reimbursement price-setting arrangements for products in category C where there are multiple source products. 

These products will begin to move to Category H, from Category C, in a phased approach, but CPE says it has “objected to the introduction of the changes at this time because of the wider challenges pharmacies are facing and the risk that further changes could disrupt the already turbulent medicines supply chain”.

The January Drug Tariff published on the NHS Business Services Authority website also reflected adjustments for underlying market price movements and a margin adjustment of -£16.8m per quarter, applied across Categories M and A. CPE says it is “seeking further details” from the DHSC on how these deductions will be applied, and continues to raise concerns about “the unsustainable financial pressures on pharmacy businesses”.

When Liberal Democrat peer Paul Scriven wrote to the Department asking whether it had taken into account a landmark economic analysis highlighting the sector’s estimated funding deficit of £2bn per annum when deciding to make this clawback, health minister Baroness Gilllian Merron replied: “The economic analysis is considered as part of the wider decision on the CPCF settlement, which was agreed with Community Pharmacy England, the representative body of community pharmacies.

“The medicine margin adjustment made each quarter, including the downward adjustment of £16.8m per quarter made in January 2026, is operating within the agreed 2025-26 CPCF settlement.” Baroness Merron’s words will provide little comfort to the contractors I spoke to who face worsening month-to-month uncertainty.

A system under strain

Changes to payment terms add to the confusion for pharmacy owners, but they are part of a wider problem in how reimbursement is managed and paid.

“It feels like the complex patchwork of mechanisms and rules used to decide reimbursement are detached from the real businesses contractors run, and the real invoices they need to pay now,” says Nathan Wiltshire, group CEO of Cardiff-based independent pharmacy buying group Cambrian Alliance – which supports members across the UK. 

Says Wiltshire: “Owners are tied to a cycle of hoping the drug tariff or concessions cover their costs, without the ability to budget and plan against costs like most private businesses, and the three to six month lag in how Category M is calculated from market data is another example of misalignment – it means today’s reimbursement may be calculated on last year’s wholesaler prices.”

Ashley Cohen, managing director of Pharm-Assist (Healthcare) Ltd, says small discrepancies between invoice and payment dates, over which they have “zero control”, have big consequences for contractors’ cash flow, and contribute to the uncertainty and instability of the network. “I am aware of many contractors who are hanging on month by month, unable to invest in the business, and taking out loans or raiding savings to stay afloat,” he says. 

Citing comments from a WhatsApp group for contractors in West Yorkshire, Cohen says: “Somebody mentioned that aspirin 75mg pack size of 28 was only 12p a few weeks ago to purchase from wholesalers. Today’s price is £3.80 yet last month’s price concession was 88p. Why do we have to wait until the last day in the month to be informed what we will be reimbursed for our supply? We have a legal [contract] to supply on presentation of a prescription, yet I can’t think of another healthcare professional that provides an NHS service at a loss. If this continues contractors could be thousands of pounds out of pocket each month on this single line.”

Being what she calls “the credit facility for the NHS drugs bill” means “managing precarious cash flow scenarios month in, month out” for Reena Barai, independent community pharmacist at SG Barai Pharmacy in Sutton.

“In these days of data-driven itemisation of literally everything and instant transfer of money, why are we still getting fully paid a whole two months after we have purchased medications?” she asks, adding that the knock-on effect of this means “having to make really tough hiring and firing decisions, hold back on much needed investment, and stopping services that previously we provided to create goodwill with the NHS and patients too.” 

And the current reimbursement model doesn’t just create financial uncertainty for businesses, it has “a direct and profound effect” on the pharmacy workforce, according to Pharmacists’ Defence Association director of pharmacy Jay Badenhorst. 

“This is not simply a financial issue; it is a workforce sustainability issue,” he says. “Pharmacists, whether employed or self-employed, are the backbone of patient care, yet they are working under increasing pressure in an environment where uncertainty over funding translates into reduced staffing, heavier workloads, and growing stress.” 

Slow to change

While there is broad agreement that the reimbursement system is broken, reform has been slow. Across the sector, many agree that the main barrier to change is funding.

Gareth Jones, director of external and corporate affairs at the NPA, traces this partly to the age of the contract itself. “The pharmacy contract was developed in 2005, but since then pharmacy has changed beyond recognition with a growing clinical role sitting alongside medicines supply, yet the reimbursement framework has not evolved at the same pace.”

Indeed, Luvjit Kandula, director of pharmacy transformation and chief officer at Community Pharmacy Manchester, says “the entire reimbursement model needs an urgent review” to address the £2 billion funding deficit outlined in the Independent Economic Review, supply chain fragility, and rising acquisition costs.

“Rising medicines prices and supply chain instability are resulting in wholesalers tightening credit terms, and pharmacies are increasingly dispensing at a loss while reimbursement prices don’t match rising acquisition costs,” she says.

“Pharmacies often don’t know what they will be paid for the medicines they dispense when there are shortages, which creates a challenge to plan finances and operate effectively, plus pharmacies have to pay wholesalers much earlier and may have to wait six to 10 weeks between buying stock to ‘bridge the payment gap’ and receiving NHS payment.

"This means an issue in one part of the system impacts the supply chain compounded by the funding and reimbursement model that hasn’t adapted to the realities of today’s market.” 

Cohen says he is “utterly frustrated” that reform is taking so long. “We as a sector stand able to support a reformed contract (to include a more transparent drug reimbursement),” he says. “We have proved through Covid and Pharmacy First that we are ready willing and able to step up to a more clinical role, and to help support the direction of travel yet we are still being reimbursed by an archaic out-of-date system that does not even cover drug costs.

"It’s so important that all of those with a voice continue to explain that the government’s own independent analysis has acknowledged the gap in funding for our sector. 

“While we do not expect another massive uplift this year, we do need around 10 per cent to simply keep the gap the same. Anything less than this will widen the economic evaluations gap and keep pushing the amount higher.”

Past examples

Could a way forward involve looking at mechanisms that have worked in the past?

For Martin Bennett, chair of Wicker Pharmacy in Sheffield, the journey to understand the NHS payment system and the Drug Tariff began in the 1970s after he completed a pharmacy degree at Bradford University.

“At that time Resale Price Maintenance on medicines ensured prices charged by wholesalers were more or less the same,” he explains. “They competed on service levels and, in general, offered generous credit terms of 60 days or more, which was necessary because the time taken to manually price prescriptions meant that payments could not be made until two to three months after the items had been dispensed, so the extended credit from wholesalers funded the gap in payment from the NHS. 

“Then, in the 70s, UniChem came up with a membership scheme that encouraged early payment and, in effect, provided a discount for early payment. Other wholesalers provided similar incentives and the NHS rubbed its hands and said ‘thanks - your contract is for us to pay you the cost of medicines – so we’ll claim back that discount’.

“The net effect was that the discount went to the government and the extended credit arrangement disappeared, but we still had a means of deciding the overall fair funding for pharmacy based on the ‘Cost Plus’ contract. The cost element was calculated by determining the cost to provide the service via a time-and-motion study on a range of pharmacies to represent the overall mix and a detailed examination of that sample’s accounts.

"This meant that increases in costs for providing a pharmacy service were automatically included and taken into account, and worked well, providing a stable pharmacy service from the 1960s to 1990, when the Cost Plus contract was unilaterally discontinued by the government. 

“Since then it’s been horse trading with no facts to go on as to whether we are underpaid (which we are) or overpaid (if only!). In recent years the government has promoted earlier payment schemes to avoid the whole of the sector collapsing, but that has just hidden the fact that most pharmacies are currently struggling to pay wholesalers on time despite these earlier payments, because it costs more to provide the service than we are being paid.”

Fairer reforms

So what would a better system look like? Bennett says: “While Cost Plus was not perfect, if linked with a revised Pharmacy Quality Scheme it would reward contractors that invested in their pharmacies – training staff, improving premises, automation etc – and undertook the tasks the government want pharmacies to deliver. It could also ensure the public received good value for money and that contractors received a fair return on their investment.”

Jones believes, at its core, a fairer reimbursement system would be faster, simpler and more predictable. “In other health systems, people are paid much faster than we still are in the UK,” he says. “With modern electronic systems already in place, there’s no reason why we shouldn’t be able to be paid within five days of actually dispensing an item.”

He is also a proponent of ending retrospective clawback altogether. “Clawbacks shouldn’t exist,” he says. “I’m not aware of anywhere else where a customer can go back 12 or 18 months later and say ‘I feel like I overpaid, therefore I’m taking some money back’. And any reformed system must also recognise the distinct economics of dispensing and services. We can’t have one subsidising the other.”

Wiltshire says speeding up the way Category M prices are calculated could help bring reimbursement far closer to live market prices and ensure fewer generics have to be dispensed over-tariff, which could allow pharmacies to have an idea of their medicine ‘budget’ more aligned with realities. “Of course, funding needs to be increased to allow pharmacies to function properly and have the breathing space to support the 10 Year NHS plan of returning more care to patients to their communities,” he says.

Badenhorst says a fairer system would not only address reimbursement mechanics but also “actively safeguard” the viability and wellbeing of the workforce. “That means designing policies that ensure pharmacists can work in conditions that are safe, sustainable and supportive of professional development,” he says.

“Without action, patients will face reduced access to essential care, and we risk pharmacists leaving the profession, undermining the very foundation of safe pharmaceutical care.”

Ultimately, Jones say reimbursement reform is a prerequisite for stability, not a concession. “Ideally you want a system that is fair to contractors,” he says. “It should be transparent; it should be predictable; it should support stability.”

Without that stability, Jones warns, ambitions for expanding pharmacy’s role in the NHS risk being undermined before they can be realised.