The National Health Service (Charges and Pharmaceutical and Local Pharmaceutical Services) (Coronavirus) (Amendment) Regulations 2021 (the 2021 regulations) made changes to the system for dispensing prescription medicines for pandemic disease or in other emergencies. This instrument was laid under the made negative procedure on 19 February 2021 and became law on 1 March 2021.

On 26 April 2021 Lord Hunt of King’s Heath (Labour) is due to move the following regret motion:

That this House regrets that the National Health Service (Charges and Pharmaceutical and Local Pharmaceutical Services) (Coronavirus) (Amendment) Regulations 2021 (SI 2021/169) do not address the underlying funding problems faced by the pharmaceutical sector, which may affect the capacity of local pharmaceutical services to respond to future emergencies.

What do the regulations do?

The purpose of the 2021 regulations is to make it easier for pharmacies to dispense certain medications in specific circumstances. If medications to help treat coronavirus outside hospital are found, the regulations aim to allow them to be dispensed in such a way as to maximise take up.

Legislation enacted in 2015 provided that some prescribed medicines and products could be dispensed free of charge. The 2021 regulations amended these earlier regulations so that either the secretary of state or an approved NHS body can make certain prescription medicines free of charge if they are for or in anticipation of pandemic disease, or in other serious emergencies.

The 2021 regulations also made changes to existing legislation on the obligations of different types of pharmacy. As a result, certain types of provider of community pharmacy services will be required to provide a home delivery option to patients for specific prescription items in a pandemic situation, free of charge.

The regulations were laid on 19 February 2021 and came into effect on 1 March 2021. This timing breached the convention that negative statutory instruments should, where possible, be laid in Parliament at least 21 days before coming into effect. The Government stated in the explanatory memorandum that this was so that relevant new treatments can be distributed easily as soon as possible, should they become available.

How do community pharmacies work?

Most community pharmacies are “independent businesses contracted by the NHS to provide certain services for local populations”, summarises the King’s Fund.

Community pharmacies are contracted and commissioned in England under the national Community Pharmacy Contractual Framework (CPCF). This sets out the services that need to be provided, how quality is assured and other expectations, such as safety. The CPCF is negotiated nationally between NHS England and NHS Improvement, the Department of Health and Social Care and the Pharmaceutical Services Negotiating Committee (PSNC), the pharmacy sector’s representative for the negotiations. The latest CPCF runs from 2019/20 to 2023/24.

The services that community pharmacies provide are categorised as essential, advanced, enhanced or locally commissioned:

  • Essential services are provided by all pharmacy contractors and are commissioned by NHS England. This includes dispensing medicines and disposing of unwanted medicines.
  • Advanced services are also commissioned by NHS England. They can be provided by all contractors once accreditation requirements have been met, and include services such as providing flu vaccinations and consultations on referral from GPs and other NHS services.
  • Enhanced services include anticoagulation monitoring. As they are enhanced services they can be commissioned by NHS England, but these types of services are often commissioned locally by clinical commissioning groups or local authorities.
  • Locally commissioned services are commissioned by local public bodies, such as clinical commissioning groups or local authorities, to meet the needs of particular local populations. Examples include sexual health services, needle and syringe exchange services, and smoking cessation services.

How are community pharmacies funded?

The overall amount the NHS will pay to community pharmacies in England is set in the CPCF. For 2019/20, this amount remained unchanged from the previous year at £2.592 billion. The CPCF states that it will remain at this level every year until 2023/24. The 2019/20 to 2023/24 CPCF is the first time that the PSNC, the Department of Health and Social Care and NHS England and Improvement have agreed a multi-year settlement.

There are two main elements to how this funding is delivered to pharmacies, through fees for the services they provide, and retained margin:

  • Fees are paid to each pharmacy on a per-activity basis for the essential services they provide. There is a flat fee for every prescription item dispensed. Additional fees are paid for advanced and enhanced services.
  • Retained margin is the margin made when pharmacies purchase medicines for NHS patients at prices below the level at which the NHS reimburses them for those medicines. The amount pharmacies collectively are allowed to earn in margin is capped every year (it is currently £800 million). The amount is monitored through a survey. If pharmacies are earning too much margin, the Department of Health and Social Care will adjust its reimbursement rates for certain medicines readily available in generic form.

In addition, a small proportion of pharmacies’ funding comes from schemes designed to promote quality and access.

Many pharmacies also earn income through retail of over the counter goods, as well as private services such as travel health advice. The King’s Fund states that “although the proportion of NHS and non-NHS income varies between different community pharmacies, NHS income tends to make up the majority of income, particularly for smaller independent pharmacies”.

What concerns have been raised about community pharmacy funding?

A 2020 report by consultants EY, commissioned by the National Pharmacy Association trade body, highlights the fact that community pharmacy funding in England is approximately £200 million per year less than it was in 2016. The report estimates that 28 to 38 percent of community pharmacies are in financial deficit, and 52 percent of owners are planning to sell their businesses. The report argues that one of the primary causes of low profitability in the sector is low fees, stating:

Benchmarking the fees paid for services carried out by pharmacies against analogous services in other settings reveals they are several times lower. The current low fees are likely to be a barrier to providing new or additional services.

The report predicted that by 2024 the average pharmacy would be making a £43,000 deficit, and that this would result in the closure of many pharmacies.

Responding to a debate in the House of Commons in March 2021 on the impact of Covid-19 on pharmacies, the Minister for Prevention, Public Health and Primary Care, Jo Churchill, said she would work with the sector to examine funding pressures:

I am aware of the concerns that current funding is not enough, and I need to work with the sector to look at things in much more detail, because pharmaceutical services are complex, and there is a range of different providers.

[…]

Whether they are independent, small-chain or large-chain pharmacies, no two pharmacies are the same. The solution has to be one that we can tailor. A balanced and considered approach must be taken to maintain the variety and vibrancy that we all recognise as absolutely key in the pharmacy network. People and patients absolutely value the diversity that best suits them and their own needs. We need a sustainable funding model that works for all types.

She also said that while the Government was aware of concerns about pharmacy closures, the overall number is higher than it was ten years ago:

I have heard the concerns about pharmacy closures, and I can assure Members we monitor the issue very closely indeed. Our data shows that, despite the number of pharmacies reducing since 2016, there are still more than there were 10 years ago. We have seen more closures in deprived areas, as many Members have said. However, importantly, there were more in deprived areas, so making sure that there are still more pharmacies in deprived areas is extremely important.

Proportionally, the closures reflect the spread of pharmacies across England, with closures tending to be where they are clustered. The most recent data shows that three quarters of the closures were part of large chains, and that aligns with consolidation announcements made before the pandemic. It is important that we protect access to pharmaceutical services. The pharmacy access scheme protects access in areas where there are fewer pharmacies and higher health needs so that no area is left without access to a local NHS pharmacy.

Cover image by Dima Mukhin on Unsplash.