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Drug tariff update - How to stay profitable

Cuts due to Category M drug prices will affect dispensing practices' profits, writes Dr Lisa Silver.

From this month, the average item price for Category M drugs drops by 9.4p. This will certainly affect your dispensing profitability.

The reimbursement price of Category M drugs is being lowered as a result of the DoH's annual Medicines Margins survey, which assesses the margin achieved by pharmacy contractors; this year's survey showed that a significant excess margin had been achieved, beyond the £500 million profit allowed on Category M drugs. Reduced reimbursement therefore represents claw back by the DoH.

Interestingly, the DoH has agreed to make substantial provisions to pharmacy for a number of one-off costs: for example, preparing for the Electronic Prescription Service; information governance; and business continuity planning.

These provisions are not available to dispensing practices.

Rural practices
Any loss in profits could hit practices hard, particularly those in rural locations. So concerned is the Dispensing Doctors' Association (DDA) about the viability of rural dispensing that it has mounted a national campaign to make ministers aware that many medicines are now being dispensed at a loss.

Dispensing keeps a large number of rural practices afloat financially. At best, there are likely to be cuts in services; at worse, rural surgeries may close. It is vital for all dispensing practices be involved in lobbying their MPs and prospective parliamentary candidates.

One of the problems with Category M is that there has been no inflationary uplift in the £500 million ring-fenced profit for pharmacy. This means that, as prescription numbers rise, so profit on each individual item is squeezed.

According to the NHS Information Centre, the number of prescriptions dispensed in England rose by 5.8 per cent in 2008 to 842.5 million items, equating to an increase of 46 million items.

Of these, 65 per cent of prescriptions were dispensed generically, which accounted for 26.2 per cent of the cost. In 2007, each patient received 15.6 items on average; in 2008, this figure rose to 16.4.

The rise in prescription items has led to the DoH introducing a reduced dispensing fee from 1 October in an attempt to contain costs, despite the fact that rising numbers of dispensed items implies larger workload for dispensing practices.

A 'cost of service inquiry' will take place in 2010, covering both practice dispensing and pharmacy dispensing. Whether this will ensure that we are adequately remunerated and reimbursed is still to be seen.

Accurate endorsing
When it comes to maximising profits, the Drug Tariff also has pitfalls for dispensing practices relating to endorsement of products with two pack sizes. If you fail to reimburse certain products with the correct pack size you will not be reimbursed correctly and will lose money.

Part VIII of the Tariff lists all the commonly used drugs; look carefully and you will see that, for some, multiple pack sizes are listed. For example, furosemide comes in two pack sizes: 28 at 85p and 250 at £2.12. Reimbursement is based on the cheapest pack size unless you remember to endorse correctly.

If you dispense a pack of 28 furosemide and fail to endorse the pack size, the Prescription Pricing Division will reimburse you on the basis of the 250-pack size as this gives the cheapest price per tablet. You will therefore be reimbursed 28/250 x £2.12 = 23.74 p.

It is illegal to dispense from a pack of 250 and claim you have given out a pack of 28. Other products that have multiple pack sizes in the tariff from October are listed in the box.

From October 2009, a total of 434 products will fall under Category M: 133 drugs have left; 52 have entered. Of those that were already Category M drugs and have remained so, 227 rose in price and 150 saw a price drop.

To maximise profit, try to identify the drugs with the highest tariff price rises when Category M is announced and buy more of these prior to its implementation date, while waiting to buy those products with the highest tariff price falls. A quarterly guide is provided by the DDA, to help practices in doing this.

Lately, there have been problems sourcing many branded goods, which have eaten up a considerable amount of staff time. It is worth finding out if there are generic alternatives that can be easily sourced; in the long-term doing this might prove more profitable.

With the dispensing of generic drugs now being a core part of our workload, dispensing practices should take time to weigh up suppliers before buying generics.

In the past, we would spend time sourcing the best branded deals for our dispensaries. It strikes me that we need to now focus our time and energies on sourcing generics and negotiating deals that works best for our practices.

Products that have multiple pack sizes from october

  • aspirin
  • azathioprine
  • betahistine
  • cefalexin
  • cefradine
  • ciprofloxacin
  • co-amilofruse
  • co-amoxiclav
  • co-codamol
  • co-dydramol
  • co-fluampicil
  • dihydrocodeine
  • domperidone
  • doxycycline
  • furosemide 20mg
  • gemfibrozil
  • gliclazide
  • hydrocortisone 1% cream and ointment
  • indapamide
  • lactulose
  • levothyroxine (all doses)
  • mefenamic acid
  • metformin (all doses)
  • metoprolol
  • naproxen 500mg
  • paracetamol
  • piroxicam gel
  • prochlorperazine
  • sulfasalazine tabs
  • terbinafine tabs
  • tramadol 50mg caps


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