Category H

A subset of Category C drugs with multiple suppliers will be listed in a new category, Category H, in Part VIIIA of the Drug Tariff from March 2026. Community Pharmacy England objected to the introduction of the changes at this time because of the wider challenges pharmacies are currently facing and the risk that further changes could disrupt the already turbulent medicines supply chain. DHSC is imposing these changes.

Currently, the reimbursement price of a drug listed in Category C is based on the NHS list price of a specific reference product or supplier as published in the NHS Dictionary of Medicines and Devices (dm+d). The majority of Category C drugs only have one brand or supplier.

However, some drugs in Category C are available from multiple suppliers (i.e. there is competition between products and suppliers), but this is not reflected in the current Category C price-setting arrangements. DHSC’s view is that the reimbursement prices for these products are not always reflective of their actual purchase prices, which in turn can have a distortive effect on the distribution of medicine margin.

In 2019, DHSC publicly consulted on a range of community pharmacy drug reimbursement reforms. One of the proposals was to change how reimbursement prices are set for Category C drugs with multiple suppliers. The outcome of DHSC’s consultation showed that only 40% (out of 283 respondents) agreed with the Category C proposals i.e. there was no clear majority in favour of the proposed reforms.

Despite recognising there was a lack of clear majority in favour of the proposal to change the price-setting arrangements for multi-source drugs in Category C, the Department took the decision to progress detailed discussions with Community Pharmacy England to implement this reform which was also included as part of  the Community Pharmacy Contractual Framework (CPCF) 2025/26 funding settlement as an action to improve margin distribution.

Whilst Community Pharmacy England acknowledged that the current approach for setting reimbursement prices of multi-source drugs in Category C should be reviewed, we highlighted significant concerns about DHSC’s proposed price–setting arrangements. We emphasised the importance of detailed discussions about the caveats and safeguards to the system to ensure the protection of patient safety, the prevention of dispensing at a loss for pharmacy owners, and to reduce the risk of any medicine supply issues. Community Pharmacy England’s response to the consultation can be found here.

Community Pharmacy England did not agree with DHSC’s proposed price-setting approach for several reasons outlined below:

• The changes may create unintended risks to patient safety. For example, certain patients would be negatively impacted if they are inadvertently and/or unnecessarily switched to an unsuitable alternative product.
• The changes may conflict with pharmacy professional and regulatory standards or guidance. Several multi-source Category C drugs have differences in licensed indications (and/or instructions for use) across different brands of the same drug. If these products are added to Category H, it may create perverse incentives to drive more off-label prescribing or dispensing, which goes against regulatory and professional guidance or standards set by the MHRA, GPhC, GMC and other bodies.
• The changes are likely to increase workload for both pharmacy teams and prescribers. For example, prescribers may need to issue certain prescriptions by brand to avoid patients stable on a particular brand/supplier’s product being switched to an alternative following any reimbursement price changes.
• The Category H price-setting arrangements would increase the frequency of price changes compared to the current Category C arrangements (which are driven by manufacturer list price changes). Use of lagged data (obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018) to set reimbursement prices for drugs in Category H may introduce pricing volatility and potentially draw more products into the monthly price concession process. These changes risk adding more uncertainty and supply chain instability to an already fragile system, with potential supply disruptions and shortages particularly if there are sudden shifts in demand due to changing reimbursement prices.
• The changes will not help to address some of the more fundamental issues with margin distribution caused by branded generics.
• Introducing a new Drug Tariff category for a relatively small number of products adds more complexity to existing reimbursement arrangements and is a shift away from the previous work carried out by DHSC to simplify the Drug Tariff (in 2005 and 2012).

Despite these concerns highlighted by Community Pharmacy England, Ministers have  decided to introduce Category H in the Drug Tariff from the March 2026. DHSC has imposed these changes on the community pharmacy sector and will begin moving certain Category C products to Category H in a phased approach. 

DHSC will set reimbursement prices for Category H drugs using actual purchase, sales, and volume data obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. These regulations, which have been in effect since July 2018, require manufacturers and wholesalers to provide sales and volume information associated with products purchased for NHS use. Further information can be found on our Information & Disclosure Regulations page.

Drug Tariff prices for Category H drugs will be updated quarterly in the following months: March, June, September and December. Due to the time taken to gather the data and calculate reimbursement prices, DHSC will be using lagged data to set Category H reimbursement prices. For example, Category H reimbursement prices for the March 2026 Drug Tariff will be based on market data obtained by DHSC between September – November 2025.  Please note: price changes for drugs listed in Category A and M follow a different quarterly timetable with prices updated every January, April, July, and October.

Data for all available pack sizes will be used for price-setting. Reimbursement prices will be calculated on a price-per-unit basis except for products classed as special containers, which will be priced per pack.

The reimbursement prices will include an element of retained margin to allow pharmacy owners to earn margin on Category H drugs. However, the margin on Category H drugs will not be adjusted to achieve the annual amount of retained margin under the Community Pharmacy Contractual Framework (CPCF).

Discount deduction – Unless the drug meets the Discount Not Deducted (DND) criteria for Group or Individual items or is granted a price concession, drugs listed in Category H will have the ‘brand’ discount deduction rate of 5% applied.

Price concessions – in any given month, if a pharmacy owner is unable to purchase a particular Category H drug at or below the published Drug Tariff price, a price concession application can be requested for this in the usual way. We encourage pharmacies to report any problems obtaining a Part VIII product at or below the listed Drug Tariff price, using the online feedback form on Community Pharmacy England’s website.

Out-of-pocket expenses – Claims for out-of-pocket expenses (over 50p) can be made for any drug listed in Category H if all the criteria Drug Tariff criteria are met i.e. circumstances giving rise to a claim must be deemed exceptional, the product must not be frequently supplied and all reasonable steps are taken to avoid incurring out-of-pocket expenses. It’s important to note that these are cumulative requirements, so all three conditions must be satisfied before an out-of-pocket expense claim is considered. Further information on out of pocket expenses can be found here.

Broken Bulk – Broken Bulk may be claimed for drugs in Category H (except for those classed as special containers or where OPD +/- 10% rules have been utilised). Pharmacy owners should only claim Broken Bulk (by endorsing the item ‘BB’ along with the pack size used) if it is unlikely that they will be able to dispense the residual balance again within six months of splitting the pack. Further information on Broken Bulk can be found here.

DHSC says it will consider all drugs with multiple suppliers in Category C for movement to Category H i.e. the product must have at least two manufacturers listed under the same generic description in the NHS Dictionary of Medicines and Devices (dm+d).

Over 100 multi-source drugs in Category C appear to meet DHSC’s criteria for entry to Category H. Community Pharmacy England has strongly objected to DHSC’s proposals to consider all multi-source drugs in Category C and urged DHSC to take a cautious approach with moving these to Category H.

In light of feedback shared by Community Pharmacy England, DHSC is starting by moving only the following 11 products to Category H from March 2026 (see the announcement here).

• Cinchocaine 5mg / Hydrocortisone 5mg suppositories
• Doxazosin 4mg modified-release tablets
• Etodolac 600mg modified-release tablets
• Isosorbide mononitrate 25mg modified-release capsules
• Nicotine 4mg medicated chewing gum sugar free
• Omeprazole 10mg dispersible gastro-resistant tablets
• Omeprazole 20mg dispersible gastro-resistant tablets
• Omeprazole 40mg dispersible gastro-resistant tablets
• Pseudoephedrine hydrochloride 60mg tablets
• Ursodeoxycholic acid 500mg tablets
• Verapamil 120mg modified-release tablets

We believe DHSC’s ambition is to seek to include all products that fulfil the Category H entry criteria, in a phased approach.

Please note: where a drug is available as both a generic and branded product, DHSC will continue to assess if the generic is suitable for entry to either Category A or Category M, subject to meeting the associated entry criteria. If a generic drug does not fulfil the entry criteria for Category A or M, it will be assessed for entry to Category H.

Q. How will Category H drugs be reimbursed if prescribed by brand?

A. Any branded prescriptions will continue to be reimbursed in line with the list price as published in the NHS Dictionary of Medicines and Devices (dm+d) (in line with the current price change mechanism). Category H reimbursement prices only apply where a drug is prescribed generically.

Q. Will moving from monthly to quarterly price-setting arrangements make the Drug Tariff less responsive to price changes in the market?

A. Currently, reimbursement prices of Category C products are updated monthly depending on changes to the NHS list prices of the reference products and following the current price change timetable.

Moving from a monthly to a quarterly price-setting approach using data obtained under the DHSC’s information gathering powers will introduce a lag in price-setting (with prices updated quarterly using sales data that is 3-6 months old). Additionally, the monthly price adjustments applicable under the current price-change mechanism will be lost. Community Pharmacy England is concerned that the use of lagged data to set reimbursement prices for drugs in Category H may introduce pricing instability for branded products that generally see very little price fluctuation. In response, DHSC stated as part of the outcome to the consultation that “using market information instead of list prices to inform Category C reimbursement prices will mean that reimbursement prices respond quicker to pharmacy purchase prices. Furthermore, the government has found that stability in the reimbursement price gives contractors confidence in purchasing. Changing the reimbursement prices on a monthly rather than quarterly basis could create considerable instability in market confidence, as contractors will not know from one month to the next what they are going to be reimbursed”.

Q. Is there a risk that the changes may lead to more price concessions and supply disruptions to products in Category H?

A. Generally, very few Category C drugs enter the price concession process each month. However with certain multi-source Category C drugs moving to Category H, Community Pharmacy England is concerned that the new price-setting arrangements for these products will introduce price volatility, potentially draw more products into the price concession process, lead to more supply disruptions and increase the risk of dispensing certain branded products at a loss, where the impact on individual businesses could be notable depending on their dispensing mix.

DHSC maintains that if a pharmacy owner is unable to purchase a particular Part VIII drug at or below the published Drug Tariff price, an application can be made for a concessionary price. We encourage pharmacies to report any problems obtaining a Part VIII product at or below the stated Drug Tariff price, using the online feedback form on the Community Pharmacy England’s Price Concessions webpage.

Q. Are the changes likely to impact pharmacy teams and prescribers?

A. DHSC has indicated that if the pharmacist has concerns that a specific brand is needed by the patient, the pharmacist should check with the prescriber and get the prescription changed. Community Pharmacy England is concerned that pharmacy workload and cost will increase if pharmacists need to check the indication with the prescriber and/or ask the patient to return to their prescriber for a branded prescription so that an appropriate licensed product can be supplied.

DHSC’s arrangements could also increase prescriber workload and cause delays in patients being able to access their prescribed treatments in a timely manner if they are referred back to their GP to obtain a new prescription for a specific brand they are stabilised on.