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The Pharmaceutical Journal Vol 267 No 7175 p739
24 November 2001

News feature

How the Department makes contractors run even harder — just to stand still

The latest remuneration settlement for National Health Service pharmacy contractors in England and Wales means that pharmacies will again have to increase their workload just to maintain their current level of income from NHS pharmaceutical services. Andrew Haynes looks at the background to the latest disappointment for pharmacy contractors

In a double blow for pharmacy contractors in England and Wales, the Department of Health is exacting a severe cut in the professional fee per prescription item over the next five months to claw back an overpayment and is also imposing a global sum for 2001–02 that does not reflect the projected increase in prescription volume.

The professional fee has been decimated (in that word's true sense of lopping off 10 per cent) for the remainder of 2001–02. But how can a cut of such a size have become necessary? According to the chief executive of the Pharmaceutical Services Negotiating Committee, Sue Sharpe, the main reason is the Department's failure to forecast prescription volume for 2000–01 with any semblance of accuracy. It based the global sum for that year on a projected 3 per cent volume increase. In the event, the increase was 4.7 per cent, and the extra prescriptions attracted a fee overpayment of £8.1m.

A second reason for the size of the cut is a need to catch up on an overpayment in the first part of 2001–02. Because the global sum is being increased by only 3.7 per cent, despite a projected prescription volume increase of 6 per cent, it has to be divided among a greater number of prescriptions, further depressing the fee per item.

To make matters worse for contractors, the Department has let the matter of the 2000–01 overpayment ride for more than six months during its progress towards fixing the global sum for the current year, even though the burden of the clawback could have been eased by the earlier imposition of a lower cut over a longer period.

Once the "overpayment" has been recovered, the professional fee will rise again. But Mrs Sharpe warns that contractors cannot expect the increase to give them any joy. Fees have been subject to a process of attrition for years, she says, pointing to a Parliamentary written answer on 24 October, which showed that, at 1990–91 prices, the average total payment per item steadily declined from £1.42 in 1991–92 to £1.05 in 2000–01. This year's figure will be 99p.

The Department justifies the "attrition" by arguing that contractors cannot be suffering badly because the number of pharmacies remains stable. But, says Mrs Sharpe, it fails to acknowledge that making pharmacists run harder just to stand still could jeopardise the safety and quality of pharmaceutical services.

(In any case, the argument about pharmacy numbers may not hold up for much longer, because there are signs that a decline is beginning. Government statistics for England and Wales show that small increases in contractor pharmacy numbers over the first seven years of the 1990s were wiped out in the last three years of the decade.)

The problems faced by the PSNC in attempting to bring about a fair settlement for contractors are well illustrated in an account it has prepared of the process leading to the remuneration imposition for 2001–02 (see Panel). Mrs Sharpe describes it as a sorry tale, demonstrating how the Department has paid no heed to pharmacies' costs and pressures but has again imposed arbitrarily an inadequate "settlement".

A major priority now is to secure a shift in attitude and a fairer system of remuneration, says Mrs Sharpe, although it will not be easy. One crumb of comfort is the announcement in September that discussions on a new contract will begin in September 2002. Mrs Sharpe hopes that this signals a commitment to move towards a better contract by 2003.

What can contractors do to make the difficulty of their position known? Mrs Sharpe is reluctant to see them taking any action that might harm patients, but she does suggest that pharmacists should tell their members of Parliament about the way they are being treated. After all, it will be MPs' constituents who suffer if the attrition process compromises the safety and quality of pharmaceutical services.

Background to the settlement: a sorry tale

The PSNC wrote to the Department of Health in March setting out its claim for a 7.5 per cent increase and the reasoning for that claim. No response was received until September, when an offer of 3.5 per cent was made. Although there were some indications of significant volume increases for 2001–02, the Department did not tell the PSNC of its projection of an overall increase of 6 per cent. It was by then known that the prescription volume increase in 2000–01 was substantially above the 3 per cent projection on which payments that year had been based. The Department's letter rejected PSNC arguments relating to increases in staff costs and workforce problems and referred to the fact that pharmacy numbers remained stable. It expressed the view that there should be no "formulaic link" between numbers of prescriptions dispensed and the global sum.

At a meeting on 21 September, the PSNC sought agreement that the 2000–01 overspend should be written off. It was invited to make a written claim. The PSNC asked for an estimate of the volume increases for 2001–02, and the causes of the recent growth. It was given an estimate of 6 per cent growth, with implementation of the National Service Framework for Coronary Heart Disease suggested as a contributor to growth. (Prescription Pricing Authority figures subsequently showed that 14 million of the 24 million additional items dispensed in 2000–01 were for CHD.) The PSNC raised the effect of moves to 28-day prescribing, advocated by the Department and health authorities. In the course of the meeting the DoH increased its offer to 3.7 per cent, stating unequivocally that this was a final offer.

On 3 October the PSNC submitted a claim for a write-off of the £8.lm overspend. It argued that the volume increase was in no way caused or influenced by contractors, that contractors had coped with the costs and workload resulting from the increases to date, and that the "fallow" year had added to manpower pressures. All these had occurred at a time when contractors were being exhorted to invest in future roles and services. It also sought to explore means of mitigating the effect on contractors of the volume increases in both years.

At a meeting on 31 October, Department officials announced that the overspend would be reclaimed in full, and that "in the absence of any new arguments of substance" they were minded to impose a 3.7 per cent increase in the global sum. This was confirmed in a letter, which said that the Department had given "careful and thorough thought" to the PSNC's arguments, including those about prescription volume and labour costs, but saw no reason to depart from the "normal rules" of the global sum system. The PSNC replied that, as it had not been allowed to put its arguments fully, they could not have been given any real consideration. In its view, the process demonstrated a summary dismissal of its grounds and its efforts to work co-operatively with the Department. The committee sought an urgent meeting with Hazel Blears (Parliamentary Under-Secretary of State for Health).

The meeting with the Minister took place on 13 November. Giving a summary of the case for special funding to help contractors deal with the volume increases, the PSNC emphasised the massive demotivating signal to contractors inherent in a dispensing fee reduction of 10p per item. The Minister said that she understood the pressures facing pharmacy contractors and she acknowledged that the strong rise in prescription volumes was dramatically to the disadvantage of pharmacy contractors. She made it clear that there would be no additional money.