The Pharmaceutical Journal
Vol 279 No 7464 p152
11 August 2007

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Why the new contractual framework is a requiem for independent pharmacy

By David Kent

I have been a pharmacist long enough to see many changes in our profession but none has been so bad for independent pharmacy as the new pharmacy contractual framework.

In the short term, most contractors are earning more, perhaps significantly more, but we should not be so short sighted as to ignore the future. We are being drowned in a deluge of paperwork most of which has no apparent value to the NHS, to the profession or, most significantly, to patients. Increased remuneration must not be viewed in isolation from the extra work necessary to secure it.

Likewise, it must not be taken in isolation from the present and future implications of Category M and the recently published Office of Fair Trading report into the future clampdowns on pharmaceutical company profits and prices and the probable further deregulation of pharmacy premises. We are already seeing the crackdown on discounts by the pharmaceutical industry, thinly disguised as improvements in the supply chain.

Community pharmacy is also, and more significantly for those affected, under attack from within. Regrettably, those at whom the attack is aimed seem largely oblivious to it and to the bleakness of their future. In under a year approximately 600 pharmacies will each lose a further £18,000 a year in remuneration.

They have already been denied the increases gained by their more fortunate colleagues and in truth the difference in remuneration between those just under the current 2,060 item per month (ipm) barrier and those just above it for receipt of the establishment fee will soon be around £23,000, made up of the £5,000 current loss together with the £18,000 loss due next April.

On 1 April 2008, the £5.9m currently applied to maintaining the current position of these lower dispensing volume pharmacies, in the form of the protected payment, will be withdrawn from them and gifted to their larger, more prosperous colleagues. What justification is there for this? And it will not end there: it is the published intention of the PSNC to increase the yearly base prescription item number from which the establishment fee is paid.

Currently this is 3 per cent (but it could be changed). What this means is that on 1 April, the establishment fee funding barrier is likely to be 2,185 ipm. So much for the PSNC stating that new contractual framework moves pharmacy away from remuneration based on dispensing volume. The current framework is more of a numbers chase than any previous remuneration model has been.

It has been announced that the transitional payment is being reduced because pharmacies are earning too much. What then will happen to the £5.9m withdrawn from the low dispensing volume contractors? If the logic of the reduction of transitional payment is followed, the £5.9m will also eventually be removed — removed from those who need it, given to those who do not, then finally removed from them and lost to the profession. This is the economics of the mad house.

Why has the PSNC put this remuneration policy in place and what purpose does it serve? The Department of Health has stated openly that the pharmacy remuneration model is in the hands of the profession, which effectively means the PSNC. So why is it then taking this line which penalises the weak — no, threatens their eradication — for the benefit of the strong?

How many members of PSNC represent smaller independent pharmacies? All the regional representatives will say that they do, but look at these members business interests. To represent is not the same as to be affected by a remuneration model they they put in place. Only a handful has what could truly be called small businesses and none of them has just a single pharmacy below the funding barrier.

No one is owed a living by this profession and no pharmacist should dispute this; on the other hand no one likes to have their living removed by their peers. Independent proprietor pharmacists, unlike GPs and dentists, are not superannuated and look to the equity in their businesses to supplement their pension arrangements. The policy of the PSNC to remove funding from these smaller pharmacies significantly depresses their value and thus jeopardises the comfortable retirement their owners deserve.

The PSNC’s removal of a significant degree of funding from pharmacies dispensing what it say is a number of prescription items which renders little or no service to patients must be put into perspective. At 2,060 ipm, a pharmacy dispenses for around 40 NHS patients a day, and advises an unknown, but considerable number of patients with non-NHS related health queries.

Compare this with the 25 or so patients a GP sees with little or no other patient contact. Who suggests that smaller GP practices should have their remuneration reduced? It is just the opposite: GP negotiators ensure that they are supported and the Quality and Outcomes Framework results in single-handed GP practices achieving significantly greater payment per GP than those in group practices.

GPs and dentists have contracts — legally binding documents laying out the obligations and rewards for both parties to the agreement. The GP contract is universal and the dental contract individual. But we have just a “contractual framework”. This provides none of the protection of a contract and allows the DoH to vary our arrangements at will, if necessary without the agreement of the PSNC.

This may explain the PSNC’s reticence to make a stand against the ever increasing control and documentation of our efforts. It also may explain why the DoH has so little interest in how the PSNC distributes available funds and how it uses the industrial muscle of its members to disadvantage smaller contractors to the benefit of the larger.

We must not fall into the trap of believing that our prescription numbers make us immune to the PSNC policy of attrition: at just 3 per cent compound inflation to the lower limit for receipt of the establishment fee it is only a few years before that figure is in excess of 2,500 ipm.

Also, we must not think that we are immune to the movement of a GP surgery, which in itself could be disastrous to our income but could also lead to a drop to below the level of establishment fee eligibility. Ask yourself, could you survive a bottom line drop in income of over £23,000?

Let me remind you of what Sue Sharpe, PSNC chief executive, told The Pharmaceutical Journal three years ago when the new contractual framework was first put to the profession. She stressed that models of funding distribution would be developed on equitable principles. “What we are seeking to do is to ensure we support pharmacies both large and small,” she said (PJ, 4 September 2004, p308).

Make no mistake. The extra money brought into pharmacy in the new contractual framework is commendable; the way it the money is distributed and the paperwork attached to the framework are not. For independents, the future is bleak for all but the largest. The PSNC must review its policy now before it is too late.

STATEMENT Mr Kent is secretary of Camden and Islington Local Pharmaceutical Committee. The views expressed in this article are his own and are not necessarily representative of any organisation with which he is connected.