Angry reaction across the board to latest Category M price changes
Individual contractors, multiples and wholesalers alike have reacted
angrily to the announcement that substantial
reductions have been made to Category M prices in the October 2007 Drug Tariff.
Noel Baumber, an independent community pharmacist from Grantham, Lincolnshire,
and a member of the Independent Pharmacy Federation, told The Journal: “Contractors
will be worried by the effect on cash flow, which will build up over
the next quarter when they should be saving up to pay their tax bill
at the end of January 2008.”
According to his calculations, an average contractor dispensing around
6,000 items per month can expect a reduction in cash flow in the order
of £18,000 over six months (depending on the mix of targeted generics
and the proportion of brands prescribed locally).
Mr Baumber believes that, as well as being hit by the reduction in practice
payments and Drug Tariff price changes, contractors could also suffer
from the continuing rise in world prices for generics. “This could
make trading difficult as [prices] begin to exceed the
depressed reimbursement prices and contractors are obliged to fund the
difference,” he explained.
The irony, he said, is that contractors are encouraged to make purchase
profits to overcome the discount deduction scale as part of the new contract
structure. “Once again the averaging system will reclaim purchase
profits from contractors without reference to who actually made those
gains. Putting one fifth of the burden on to practice payments changes
the distribution pattern of recovery.”
The Company Chemists’ Association warned that the move creates
unacceptable financial instability for its members and could threaten
patient care.
“In the absence of any concomitant increase in income from commissioned
services, the expediency with which the Government has pursued reimbursement
is compromising the coherence of the overall contract package,” said
the CCA.
It added: “Emphasis on a single element of the package … creates
unacceptable financial instability for our members, who are still waiting
to provide the clinical services that they signed up for.”
CCA members are also concerned that the repeated focus on a small number
of frequently prescribed medicines is distorting the category and jeopardising
the continuity of medicines supply. The CCA is calling on all parties
to remain vigilant to ensure that patients are not deprived of the medicines
they need as an unintended consequence of this most recent action.
Steve Dunn, group managing director of AAH Pharmaceuticals, believes
that the cut in generics reimbursement is a clear sign of a lack of commitment
from the Government to community pharmacy.
Mr Dunn said that, since attempts to introduce patient services in England
and Wales have failed to match expectation, pharmacists are now facing
the worst of both worlds — cuts in retained purchase profit that
may undermine the traditional funding model, and little evidence of Government
commitment to make the new model of patient service provision a reality.
Rowlands Pharmacy has also spoken out against the changes. Paul
Smith,
chief executive, said: “These drastic changes to Category M prices
go way beyond expectation. This highlights the unpredictability of the
new arrangements and makes proper financial planning and investment virtually
impossible.”
He added that it places a serious question mark over whether Category
M is the appropriate mechanism for modulating the market and suggested
that it may become financially unviable to manufacture some of the products
listed within the category.
Mark Griffiths, chairman of buying group Cambrian Alliance, said that
the last-minute news was particularly severe for independents following
other recent income losses, such as those imposed through changes to
the oxygen service and Pfizer’s direct-to-pharmacy distribution
model.
He believes that the real challenge facing independents is how to look
after purchase profit at a time when they are being urged to focus on
service provision.
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