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Pharmaceutical Services Negotiating Committee

Reimbursement Arrangements for Medicines

FP10s

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Different Part VIIIA drug categories - Category A, Category C and Category M

Prescriptions for unlicensed specials and imports (including PSNC's latest guidance)

Brand v generic medicines - Generic medicines not listed in Part VIIIA, Medicines prescribed by brand name, Medicines prescribed by both generic and brand name

NCSO

Price Change Mechanism

Split pack dispensing reimbursement arrangements (new page)

Making substitutions (sugar free and differing flavours)

FAQs and more information


Part VIIIA products

The price used to reimburse a pharmacy contractor for the cost of a medicine dispensed depends on whether the prescribed product is listed in Part VIIIA of the Drug Tariff.

Part VIIIA of the Drug Tariff contains the basic NHS reimbursement prices for products prescribed generically. It includes the vast majority of commonly prescribed products.

Following the Drug Tariff changes which took place on 1st July 2012 (click here for more details), the majority of products in Part VIIIA only have one pack size listed and where there is more than one pack, they have the same basic price per unit dose. Therefore, contractors are only required to endorse the pack size for any Part VIIIA Category C product which has more than one listed pack size.

Part VIIIA listed products are split into a number of categories depending on the method used to calculate the reimbursement prices:  


Category A 

Category A is for generic medicines which are widely available from key suppliers. The price is based on a weighted average of the prices listed by 2 wholesalers (AAH and Unichem) and 2 Generic Manufacturers (Teva and Actavis). In the weighted formula, AAH and Unichem prices have a weighting of 2, the prices from the other suppliers have a weighting of 1.

Reimbursement prices are changed according to the generic price change mechanism.

Out of Pocket expenses cannot be claimed on these products and Broken Bulk can only be claimed if the smallest pack size listed is greater than or equal to £50 and it is not recognised as a special container.


Category C

Category C items are based on the list price for a particular brand or manufacturer’s product. The Drug Tariff is annotated with an indication of which product forms the basis for the reimbursement price. Where this is absent, it means that there is more than one product with a list price matching the reimbursement price.

Out of Pocket expenses and Broken Bulk (if not recognised as a special container) may be claimed if necessary for items in Category C.

If the price is based on a generic product, the reimbursement price is changed according to the generic price change mechanism. If the price is based on a proprietary product, the reimbursement price is changed according to the
proprietary price change mechanism.


Category M

Category M products are readily available generic drugs. The reimbursement price for these products is calculated by the Department of Health based on information submitted by manufacturers on volumes and prices of products sold plus information from the NHSBSA PPD on dispensing volumes.

Category M is the principal price adjustment mechanism to ensure delivery of the purchase profit income promised as part of the new pharmacy contract. The prices are adjusted every three months in light of information from manufacturers and negotiations with PSNC. The Category M prices are published on the PSNC website two weeks before the start of a new quarter.

One problem that can arise is products not being available to purchase at the Category M reimbursement price. The Department of Health sets Category M prices at levels substantially above the prices notified by manufacturers. But when the Category M reimbursement price for a particular product falls, it may take time, and sustained pressure from pharmacies, for wholesale prices to respond. During this period, it is essential that contractors exert maximum pressure on wholesalers.

There have been a number of examples where manufacturers prices were below the Drug Tariff price but a product could not be obtained at the Drug Tariff price from a number of wholesalers.

Out of Pocket expenses cannot be claimed on these products and Broken Bulk can only be claimed if the smallest pack size listed is greater than or equal to £50 and it is not recognised as a special container.

More detailed information on the Category M pricing system including downloadable reimbursement price lists is available in the National Contract Funding Section of the website.


Generic Medicines not listed in Part VIIIA

Where a prescription has been written generically but the item is not listed in Part VIIIA of the Drug Tariff, reimbursement will be based on the manufacturer or supplier’s list price for the endorsed product. Reimbursement prices will change according to the generic or proprietary price change mechanism depending on whether the dispensed product is a  generic or proprietary medicine .


Prescriptions for Unlicensed Specials and Imports

 Unlicensed specials and imports listed in the Drug Tariff

From November 2011, the Drug Tariff now includes a tariff of high volume and high cost unlicensed specials and imports, with set reimbursement prices. The specials tariff is located in Part VIIIB of the Drug Tariff. The prices are set by analysis of a selection of unlicensed specials manufacturer's prices, with a margin included for pharmacy purchase profit. The medicines list encompasses various formulations and preparations such as sugar free, preservative free, various flavours etc.

Where an unlicensed special or import in Part VIIIB is prescribed, the contractor will be reimbursed the set Drug Tariff price for dispensing the product. The contractor will also receive a fixed fee for each item dispensed from Part VIIIB, to cover the costs of postage, handling and delivery etc which may be incurred when obtaining the product from the specials manufacturer or supplier. The fixed fee is currently set at £20 per item, and can be claimed by using the endorsement 'SP' on the prescription form. As such, Out of Pocket Expenses could not be claimed against any items in Part VIIIB, and contractors should not include their claim for the £20 fixed fee in their FP34c declaration for out of pocket expenses. Broken Bulk claims and 'DNG' claims will not be allowed for items in Part VIIIB.

Where the pharmacy chooses to supply an order for an unlicensed special item in Part VIIIB under the section 10 exemption (extemporaneous preparation and dispensing - either by the contractor or by a 3rd party), the pharmacy will be reimbursed the Drug Tariff price. The pharmacy will also receive a fixed fee of £20 to recognise the cost of extemporaneously dispensing the product or obtaining it from the 3rd party. To claim this fee the pharmacy should use the endorsement 'ED' on the prescription. As such, Out of Pocket expense claims would not be allowed and contractors should not include their claim for the £20 fixed fee in their FP34c declaration for out of pocket expenses. The pharmacy must endorse the names and quantities of the ingredients used in preparing the product.

Where problems occur in obtaining Part VIIIB products, e.g. due to shortages or other supply issues, the NCSO concession may be extended to the affected products to ensure pharmacies are appropriately reimbursed where a product cannot be obtained at or below the Part VIIIB price.

Unlicensed specials and imports not listed in the Drug Tariff

For unlicensed specials or imports where the item is not listed in Part VIIIB in the Drug Tariff, and where the product is obtained from a manufacturer under an MHRA specials licence, the pharmacy will be required to endorse the full details of the product dispensed, including the invoice price of the product to allow correct reimbursement to be made to the pharmacy. The manufacturer or importer's MHRA licence number should also be endorsed, the batch number of the unlicensed medicine, and the pack size (as required by Part II Clause 9 of the Drug Tariff).

However, as where previously pharmacies needed to endorse the price before discount and then also endorse 'DNG' if they obtained no discount from their supplier, pharmacies should now endorse the price after any discount is applied, and the reimbursement will be based on this price with no need for the pharmacy to endorse DNG on the prescription if no discount was obtained.

A fixed fee of £20 will be paid to pharmacies for each unlicensed special item dispensed, to cover the costs of postage, handling and delivery which may be incurred when obtaining the product from the specials manufacturer or supplier. This should be claimed using the endorsement 'SP'. As such, Out of Pocket expenses will not be allowed and contractors should not include their claim for the £20 fixed fee in their FP34c declaration for out of pocket expenses.

Where the pharmacy chooses to supply an order for an unlicensed special item not listed in Part VIIIB under the section 10 exemption (extemporaneous preparation and dispensing - either by the contractor or by a 3rd party), the pharmacy will be reimbursed for the cost of the ingredients in the product. They pharmacy will also receive a fixed fee of £20 to recognise the cost of extemporaneously dispensing the product or obtaining it from the 3rd party. To claim this fee the pharmacy should use the endorsement 'ED'. As such, Out of Pocket expense claims would not be allowed and contractors should not include their claim for the £20 fixed fee in their FP34c declaration for out of pocket expenses. The pharmacy must endorse the names, quantities and costs of the ingredients used in preparing the product.

Recording requirements when supplying unlicensed specials and imports

When supply an unlicensed special or import to a patient, in all instances the pharmacy must keep a record of the following for 5 years:

  • The source of the product
  • The person to whom and the date of which the product was sold or supplied
  • The prescriber's details
  • The quantity of each sale or supply
  • The batch number of the product

These records must be available for inspection by the Licensing Authority.

In addition to the above, for unlicensed specials or imports not listed in Part VIIIB, the pharmacy must stamp, date, initial and endorse the COA / COC with the invoice price and prescriber's details. At the end of the month, the pharmacy must then send a copy of the COA / COC to the PCT of the prescriber along with the prescriber's details. 


The latest PSNC guidance on reimbursement arrangements regarding unlicensed specials and imports can be downloaded from the publications database.

 


No Cheaper Stock Obtainable

Occasionally there are shortages of the products listed in Part VIII of the Drug Tariff, for example, if there are manufacturing problems or a change in demand, leaving pharmacy contractors faced with dispensing an equivalent product that is only available at above the set Drug Tariff price.

NCSO (No Cheaper Stock Obtainable) is a concession which is only granted by the Department of Health where there is a recognised stock shortage and there is a licensed equivalent product available. The concession is not granted where the product is still available in the market at or below the Drug Tariff price, for example where one key wholesaler still has stock.

If this status is granted, pharmacy contractors will be reimbursed based on their endorsement rather than the fixed Drug Tariff Price but it is essential that contractors endorse the prescription with the initials ‘NCSO’ and full details of the product dispensed (e.g. manufacturer, brand name or price if it is an uncommon item and pack size). The endorsement must also be signed and dated. If any of this information is missing, payment will be based on the Drug Tariff price rather than the endorsed product.

Once the NCSO Concession has been granted, it only applies for that particular month. If at the beginning of the following month the situation is not resolved, a new application is made. To report a stock shortage, please contact the PSNC Information Team who will investigate the extent of the stock shortage and approach the Department of Health to apply for the NCSO Concession if appropriate (contact: 0844 381 4180 or 0203 1220 810 or email
shortages@psnc.org.uk).

Information on products that have been granted the NCSO Concession can be found on the supply issues 
section of this website.


Medicines Prescribed by Brand Name

Where a prescription has been prescribed by brand name, reimbursement will be based on the list price for the prescribed product. Reimbursement prices will change according to the proprietary price change mechanism.

Branded medicines are priced according to the PPRS. The PPRS is structured to provide safe and effective medicines for the NHS at reasonable prices, promote a strong and profitable pharmaceutical industry capable of sustained research and development expenditure that leads to future availability of new and improved medicines, and encourages the efficient and competitive development and supply of medicines to pharmaceutical markets in the UK and abroad.

In essence, the PPRS operates by restricting each company's profit to a target Return on Capital employed (ROC), after taking into account allowances for expenses including research, marketing and administration. However no profits are guaranteed and there are tight restrictions on the circumstances in which medicine prices can be increased.


In February 2007 the OFT recommended that the Pharmaceutical Price Regulation Scheme (PPRS) should be reformed, to deliver better value for money from NHS drug spend and to focus business investment on drugs that have the greatest benefits for patients. The Department of Health are currently reviewing the OFT’s recommendations but this is expected to lead to substantial change in the way that the PPRS Scheme is organised.

On 2nd May 2007 following a consultation with the Association of the British Pharmaceutical Industry, it was agreed that 40 members of the Pharmaceutical Price Regulation Scheme (PPRS) would be invited to supply additional information on the sales of branded medicines under the 2005 PPRS, i.e., on a voluntary basis. Those members not prepared to agree to supply the information voluntarily will be subject to Regulations requiring the supply of more detailed information on the sales of their branded medicines. More information regarding the PPRS is available from the

2009/10 PPRS agreement

In late 2008 the Department of Health announced the summary of a PPRS agreement for 2009/10. The headline agreements with industry were:

  • a cut in the cost of drugs sold to the NHS: a 3.9 per cent price cut will be introduced starting in February 2009.
  • a further price cut of 1.9 per cent will be introduced in January 2010;
  • Subject to discussion with affected parties, the Department of Health will also introduce generic substitution from January 2010. There would be further price adjustments on January of each year aimed as the proportion of savings from generic substitution varies with time;
  • action to support innovation so patients have faster access to new medicines that are clinically and cost-effective;
  • a new non-contractual voluntary scheme providing stability and predictability in Pharmaceutical Pricing for the next 5 years;
  • new and more flexible pricing arrangements that will enable drug companies to supply drugs to the NHS at lower initial prices, with the option of higher prices if value is proven at a later date; and

Medicines Prescribed by Both Generic and Brand Name

In cases where both the generic name and a product’s brand name or manufacturer have been prescribed, the NHSBSA would interpret that as an order for a proprietary product and the contractor would be reimbursed according to the normal Drug Tariff rules, that is based on the manufacturer’s list price. This would be irrespective of what the pharmacist has endorsed.

In late 2003, the RPSGB Legal Department issued the following legal and ethical guidance for 3 different scenarios:

1) A brand being prescribed, but the generic name also being included in the prescription-:

It would be our view that except in an emergency, the brand should be supplied unless the prescriber has confirmed otherwise. Where the prescribers intentions are ambiguous the pharmacist should make further checks as to which product should be supplied.

2) A branded generic being prescribed-:

Again except in an emergency or on the approval of the prescriber, the pharmacist should supply the brand that has been ordered on the prescription.

3) A brand being prescribed, and another brand with the same product licence number being supplied-:

There is unlikely to be any offences under the Medicines Act 1968, provided the products have identical specifications and the item is not mislabelled. In respect of the Code of Ethics, except in an emergency, pharmacists should not substitute a specifically named product for another product without the approval of the patient, or carer and the prescriber. However, if both products have the same marketing authorisation it may be difficult to argue that the pharmacist has supplied a medicinal product which is not of the nature and quality required by the prescriber.


Price Change Mechanism for Medicines

As prices in the market are constantly changing, there is an agreed mechanism in place to increase and decrease the reimbursement prices for medicines. Click on the link below for more information:

Price Change Mechanism


Substituting Sugar Free Medicines

The Code of Ethics states that 'Except in an emergency, pharmacists must not substitute any other product for a specifically named product without the approval of the patient or carer and the prescriber' and under the NHS Terms of Service, a chemist is required to supply the drugs ordered with reasonable promptness.

The RPSGB have confirmed that when a prescriber does not specify 'sugar free' and a pharmacist supplies a sugar free medicine then this would not be in breach of the Code of Ethics.

However if a sugar free formulation has been prescribed, then the pharmacist should supply this, other than in exceptional circumstances. The exception to this would be when a Schedule 2 and 3 Controlled Drug has been prescribed, as the Code of Ethics Service Specification 19 (Services to Drug Misusers) states that a pharmacist must not deviate from the instructions given on the prescription and sugar free/colour-free preparation must not be dispensed unless specifically prescribed.

Pharmacists should endorse the prescription appropriately. The pharmacy will be reimbursed based on the prescribed product with the normal reimbursement rules applied.


Substituting Flavours

The Royal Pharmaceutical Society have confirmed that it would not be a breach of the Code of Ethics if pharmacists substitute different flavours of the same product, for example of a nutritional drink, to meet patient preference. If an alternative flavour is dispensed, the prescription should be clearly endorsed with information on the dispensed product.

Payment will be based on the prescribed item. Pharmacists are reminded that if the prescription does not state mixed, assorted or various flavours, only one professional fee will be paid per prescribed flavour regardless of whether multiple flavours have been dispensed and endorsed. If the prescription orders mixed, assorted or various flavours and several flavours of the same preparation are supplied, the contractor will receive professional fees equivalent to the number of different flavours dispensed and endorsed on the prescription form.


Frequently Asked Questions

I have received a prescription for '5ml Neosporin Eye Drops, use once daily in both eyes.' Will I be paid for dispensing two bottles?

No, the NHS Business Services Authority Prescription Pricing Division will only reimburse you for the quantity ordered (in this case one bottle (5ml)). If you believe that in the interests of the patient, two bottles should be supplied, the prescriber should be asked to amend the prescription accordingly.

If I receive an FP10 prescription for ‘Co-codamol 30mg/500mg caplets’, how much will I be reimbursed?

The British Pharmacopoeia provides authoritative monographs for different dosage forms. There is no monograph that defines caplets; caplets are considered tablets (i.e. capsule-shaped tablets). A prescription for Co-codamol 30mg/500mg caplets would therefore be reimbursed based on the Part VIII price for Co-codamol 30mg/500mg tablets.

If I receive an FP10 prescription for ‘Salbutamol Easi-Breathe Inhaler 100mcg’ (i.e. where the order includes both a generic description and a trademarked name of a licensed product). What should I dispense?

If a generic prescription includes a trademarked name to describe the product then, legally and ethically, the pharmacy should dispense the proprietary product which meets this description.

In the above example, the prescriber is directing the pharmacist to dispense the proprietary drug Salamol Easi-Breathe. The prescription should ideally be endorsed with the full brand name and reimbursement will be based on the branded products’ list price.



More Information

For guidance on the basis of reimbursement for a particular product, please contact the PSNC Information Team.

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