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Pharmaceutical Services Negotiating Committee

Pharmacy Fees and Allowances

Funding for the National Contract is distributed through a variety of fees and allowances along with an element of guaranteed purchase profit.

Essential Services

Advanced Services

Individual pharmacies' income may vary, as under the previous contract, according to the mix of products dispensed and the numbers of additional fees earned, for example, for dispensing controlled drugs and expensive prescription items.

Essential Service Payments


Pharmacy contractors receive a professional fee for every item dispensed including medicines and appliances. This fee is currently 90p per item.

Pharmacy contractors can also claim a range of additional fees which are set out in Part IIIA of the Drug Tariff including fees for things such as dispensing unlicensed specials or imports, measuring and fitting hosiery and trusses and dispensing controlled drugs.

Pharmacy contractors also receive an expensive prescription fee equivalent to 2% of the net ingredient cost of items dispensed that cost over £100.

In 2005, the urgent (out of hours) additional fee was removed from the national arrangements. Out of hours arrangements are now commissioned locally by PCTs to meet local need. Information on any locally agreed arrangements in your area is available from the PCT or LPC.

Establishment Payment

The levels of the Establishment Payments are set out in Part VIA of the Drug Tariff.

At the end of each 6 month period between April-September and October-March, if the total amount a pharmacy contractor has received through the monthly establishment payments is less than the amount which would have been paid out had the payments been calculated on a 6 month basis, a pharmacy contractor can claim a 'top up' payment from their PCT. Click on the link below to access more detailed information and a template claim letter:

Claiming an Establishment Payment 'Top-up'

Practice Payments

Practice Payments are a significant element of the funding recharged to PCTs.

All pharmacy contractors are eligible to receive the Practice Payments which include a contribution for the provision of auxiliary aids for people eligible under the Disability Discriminiation Act 1995 (DDA). The payments levels are set out in Part VIA of the Drug Tariff.

Since 1st October 2005, pharmacies have been required to have minimum dispensing support levels in order to receive the full Practice Payment. Reduced levels of payment apply where pharmacists do not regularly employ the prescribed level of support. The requirements are set out in Part VIA of the Drug Tariff. There have been no changes to the required staffing levels up to 2012/13.

These levels do not reflect desirable staffing levels. They are a bare minimum below which no pharmacy could meet the new contract service requirements. For most pharmacies higher staffing levels will be required to provide the new contract services. Pharmacies that cannot demonstrate that they employ dispensing support staff at these levels will only receive the payment levels associated with their actual level of staffing. So for example a pharmacy dispensing 7,000 items a month with staffing levels of 75 hours per week will, from the 1st October, receive Practice Payments at the level for 5,000 items, not the level for 7,000 items. Detailed guidance on making the declaration of dispensing staff hours is available by clicking on the link below:

Guidance on Declaring Dispensing Staff Levels

At the end of each 6 month period between April-September and October-March, if the total amount a pharmacy contractor has received through the monthly practice payments is less than the amount which would have been paid out had the payments been calculated on a 6 monthly basis, a pharmacy contractor can claim a 'top up' payment from their PCT. Click on the link below to access more detailed information and a template claim letter:

Claiming an Practice Payment 'Top-up'

Establishment and Practice Payment Threshholds

One aspect of the annual funding adjustment process is the increase of the thresholds governing receipt of the Establishment Payment and the per-item Practice Payment. These were set in April 2005 on the introduction of the national contractual framework and have been increased annually since October 2006 by 3% (allowing for roundings). The principle of annual increases to reflect increase in dispensing volumes was agreed as part of the contractual framework. In practice increases have been restricted to 3%. If these had increased at average market levels then the latest (October 2012) basic threshold would stand at 2815 not 2430 items per month.

Practice Payment VAT rates

Before October 2008, 10% of the Practice Payment was deemed by HMRC to be subject to VAT. This reflected specific sums that were paid to contractors via the Practice Payment covering the disposal of unwanted medicines and signposting. The increase in the Practice Payment from October 2008 represents increased funding to cover the cost of dispensing medicines which is zero rated. Revised guidance on how the Practice Payment should be apportioned is available in the VAT Section of the PSNC website.

Transitional Payment

In England, Transitional Payments ceased from April 2011. In October 2010 PSNC secured agreement from DH to postpone recovery of £20m excess margin until 2011/12. The removal of the Transitional Payment was intended to recover part of this £20m. The remainder was been recovered by a reduction in the Practice Payment level. Detailed payments levels were set out in Part VIA of the Drug Tariff.

Repeat Dispening Annual Payment

All pharmacy contractors receive an annual repeat dispensing payment of £1500, not only those contractors dispensing repeat prescriptions. This is paid monthly calculated as 1/12th of the annual payment (£125 per month).

Advanced Service Payments

New Medicine Service (NMS)

In March 2011, Bob Alexander (Director of NHS Finance) wrote to PCT Chief Executives to inform them that Ministers had agreed to invest in developments in the CPCF, namely the NMS, up to a maximum of £55 million per year in 2011/12 and 2012/13.

The following information describes the NMS payment structure.

Year One (October 2011 - March 2012)

In year one the funding structure for the New Medicine Service was made up of two elements - a fixed, one-off implementation payment and target payments (linked to prescription volume) based on the number of NMS episodes that were completed. In year two (2012/13), the funding structure comprises target payments only.

Implementation payment

Each community pharmacy delivering the service had access to an implementation payment of £750 in year one. To obtain their implementation payment, the community pharmacy had to certify that the service has been provided a minimum of 6 times prior to the 31 March 2012. They also had to certify that:

  • the service will be delivered by pharmacists that have signed the self-assessment of readiness for community pharmacists;
  • the premises meet the requirements of the service specification;
  • a Standard Operating Procedure (SOP) is in place;
  • all dispensing staff understand the aims and objectives of the service, are aware of the eligible conditions / therapies, understand the SOP, and understand their role, if any, in delivering the service; and
  • the contractor or their representatives has been in communication with local GP practices about the service.

The NMS payment structure

On 4th April 2012 PSNC and NHS Employers announced that Department of Health Ministers had agreed changes to the New Medicine Service (NMS) payment structure.

From May 2012 onwards contractors earn between £20 and £28 for each completed NMS they provide depending on the total number of patients who receive the service in the month. The structure rewards each NMS provided whilst also encouraging the provision of the service to the greatest number of patients.

In recognition of the work that contractors undertook between October 2011 and April 2012, a loyalty payment was made to contractors for activity that fell below the first target level or between target levels. Claims for completed NMS submitted for this period which fell below the first target level were rewarded at £20 each while those which fell between bands were rewarded at £25 per intervention.

Commenting on the change, Sue Sharpe, Chief Executive of PSNC said:

“The NHS and the Department of Health are committed to changing funding structures away from fees per item of service, and this underpinned the original NMS funding structure. We were able to use evidence from contractors to demonstrate the problems with the structure and we are pleased to have been able to persuade NHS Employers and the Department of Health that it was necessary to change the NMS payment structure.”

“We believe the revised arrangements we have negotiated provide a fair reward for pharmacy contractors providing the NMS. There has already been much positive feedback about the service from patients and pharmacists, and we hope the new payments will encourage all contractors to build this valuable service into their practice.”

Detailed information on the changes to the NMS funding system

When is the NMS complete (and payment can be claimed)?


Medicines Use Review (MUR)

The fee for delivering the Medicines Use Review and the Prescription Intervention Advanced Service is set out in Part VIC of the Drug Tariff; these fees are claimed via the FP34C Submission Form.

The fee for provision of an MUR is £28. Pharmacies that make arrangements to provide Advanced services before 1 October in any financial year are able to conduct and be paid for a maximum of 400 reviews in the financial year (1st April - 31st March). The limit for pharmacies that enter arrangements on or after 1 October in any financial year is 200 for the financial year.

The Department of Health has issued guidance to PCTs on the procedure to follow in the event that a pharmacy contractor claims payment for MURs in excess of the annual cap:

DH Guidance to PCTs on Contractors Exceeding the Annual MUR Limit

Claims made by pharmacy contractors for MURs are paid on trust. However, the NHS Counter Fraud and Security Management Service have confirmed that as with other systems where remuneration is paid based on a self declaration, the NHS has monitoring arrangements in place to detect fraudulent activity. To avoid any suggestion of a fraudulent claim, or simply poor practice in making claims for payment, PSNC recommends carrying out the following checks:

1. Before submitting any claim for payment of MURs (using Form FP34C), contractors should ensure that copies of the certificates of accreditation for every pharmacist who may undertake MURs at the pharmacy have been sent to the PCT (the PCT may monitor this during the monitoring visits);

2. Each month, carefully check the pharmacy records of MURs undertaken that month, to ensure that the pharmacist who undertook the MUR consultation is accredited (and the certificate sent to the PCT as above);

3. Each month count carefully the number of MUR reports for consultations carried out that month, to ensure that an accurate claim is made. These reports should be filed safely as they are the main evidence that an MUR has been carried out. Contractors may be required to produce them in the event of a Counter Fraud investigation;

4. Maintain a cumulative log of numbers claimed, so that the limit is not exceeded (currently 400 reviews per year);

5. If any MUR consultations are to be conducted away from the pharmacy premises, contractors should check that they have written confirmation of the consent of the PCT, which should be carefully filed in the pharmacy.

Appliance Use Review (AUR)

The fees for delivering the Appliance Use Review Service are set out in Part VIE of the Drug Tariff. These fees are claimed via the FP34C Submission Form.

The fee for an AUR is £28 for an AUR conducted on pharmacy premises or £54 for an AUR carried out in a patients home. If more than one AUR is conducted in the same location within a 24-hour period then £54 will be paid for the first AUR, and £28 for each subsequent AUR.

The maximum number of AURs for which claims for payment may be made is not more than 1/35 of the aggregate number of specified appliances dispensed during that financial year.

Stoma Appliance Customisation (SAC)

The fees for providing the Stoma Customisation Service are set out in Part VIE of the Drug Tariff. When this service is provided, £4.32 is paid per qualifying* Part IXC item dispensed, regardless of whether customisation was required.

*Qualifying Part IXC items for stoma customisation are one-piece closed bags (under “colostomy bags” chapter heading of current Drug Tariff), drainable bags (under “ileostomy bags” chapter heading) and bags with tap (under “urostomy bags” chapter heading), items under “two piece ostomy system” and “flanges” chapter headings, as well as Skin Protectors and Stoma Caps.


Useful Links

Current funding settlement details

Principles for funding agreement

Pharmacy Contract and Services


Back to National Contract Funding section