Pharmacy funding

Published on: 12th September 2014 | Updated on: 1st August 2022

Funding 2019/20 to 2023/24

In July 2019, Community Pharmacy England, NHS England and NHS Improvement (NHSE&I) and the Department of Health and Social Care (DHSC) agreed a five-year deal for community pharmacies, guaranteeing funding of £2.592bn per year until 2023/24. The briefings below provide an overview of the distribution of funding during the course of the four years and more detail for 2020/21.

Community Pharmacy England Briefing 028/19: Information on the community pharmacy contract settlement and funding for 2019/2020 to 2023/24

Community Pharmacy England Briefing 010/20: Community Pharmacy Funding in 2020/21

Learn more about the five-year CPCF deal on our dedicated webpage.

Pharmacy funding under the national framework is distributed in two ways: i) fees and allowances, and ii) retained buying margin.

Fees and allowances

‘Fees and allowances’ refers to the payment pharmacies receive for the provision of pharmaceutical services, also commonly referred to as ‘Remuneration’. All fees and allowances are recharged to NHS England. These consist of the ‘global sum’ elements covering Single Activity Fees, Item Fees and Establishment Payments.

National fees and allowances payments can be further categorised in two ways, i) payment for Essential Services, and ii) payment for Advanced Services. Essential Services are services which all community pharmacy contractors must provide, Advanced Services may be provided if the contractor chooses to provide them.

For information on the fees and allowances pharmacies are paid under the terms of the national contract please click the following links.

Fees for Essential Services

Fees for Advanced Services

Retained buying margin

‘Retained buying margin’ is the profit community pharmacies are allowed to retain through the cost effective purchasing of prescription items. The national arrangements allow for £800m to be delivered to community pharmacies annually in retained buying margin. The government use Category M in the Drug Tariff to calibrate the amount of margin available in the market.

For information on Category M please click here.

Margins Survey

Part of the agreement is that pharmacy margin levels will be monitored and adjusted with the aim of delivery a specific level of margin to community pharmacy each year. This section contains information on how the Margins Survey is conducted.

Cost of Service Inquiry

The 2010 COSI commissioned by DH and PwC was intended to form the evidence base for negotiations for future funding. This section contains information on the COSI.

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