Community pharmacies in England coping with the effects on their businesses of funding cuts, now face a further blow following the announcement of the latest reduction in Category M reimbursement prices. The impact on pharmacies is likely to be "severe", PSNC has said.

Category M reimbursement prices will be reduced from August by £15 million per month for a 12-month period, PSNC has said. The reductions correct overpayments of retained margin for both 2015/16 and 2016/17.

"Both Department of Health (DH) and PSNC margins analysis, which are based on data from the independent sector, identify substantial excess margin for the two periods. Whilst the exact sum for 2016/17 will not be settled for another few weeks, PSNC accepted the adjustments proposed.

"The £15m per month reduction will represent a drop of around 17-18 pence per item in average item value from current Drug Tariff prices, although the impact on any individual pharmacy may differ from this according to its dispensing mix."

Sue Sharpe, PSNC chief executive, said:

“PSNC considered the proposal from the DH very carefully in light of the available Margins Survey analysis, eventually agreeing it unanimously. Spreading the recovery of the excess margin over twelve months is helpful, but, as the DH has acknowledged, the impact on community pharmacy will be severe in light of the funding cuts imposed last year which have already hit contractors’ income.

PSNC scrutinises the DH’s assessments of margin delivery very closely to ensure that the agreed margin is delivered each year. We also monitor price adjustments to ensure they are implemented correctly. Over many years we have seen that price volatility operates to preclude any real possibility of delivery of the exact agreed sum of margin in year. We also remain concerned about fair access to margin and local manipulation of the market. DH has recognised these issues and agreed to work with PSNC to try to resolve them.”

Peter Cattee, chair of PSNC’s Funding and Contract Subcommittee and CEO of PCT Healthcare, said:

“It is always difficult when the Margins Survey shows that contractors have received more than the allowed margin in any given year. This has particularly been the case in a year in which our businesses have come under a huge amount of pressure as funding has been squeezed. PSNC debated this matter for some time and we felt that the priority was to spread the recovery over as long a period as possible. After much discussion, the Committee agreed unanimously that this proposal from the DH was the best option.”