Category A
Published on: 2nd April 2024 | Updated on: 21st March 2024
From April 2024, reimbursement prices of medicines listed in Part VIII Category A of the Drug Tariff began transitioning to the new arrangements. These new arrangements for the setting of Category A reimbursement prices were imposed by the DHSC.
The changes have been introduced as part of a series of drug reimbursement reforms proposed by the Department of Health and Social Care (DHSC) following a public consultation in 2019.
Background
Products in Category A includes generics, which are widely available. Under the old arrangements, the Secretary of State determined the monthly prices for products in Category A to be the average of the list price (calculated for the pack size listed in the Drug Tariff) weighted by the following four manufacturers and suppliers: A A H Pharmaceuticals Ltd, Alliance Healthcare (Distribution) Ltd (each with a weighting of 2), Teva UK Ltd and Accord-UK Ltd (each with a weighting of 1) on or before the 8th of the month being reimbursed. A product had to score 4 in the weighted formula to be considered for Category A.
However, DHSC wanted to move away from this price-setting approach as they believe that supplier list prices do not reflect actual selling prices to pharmacy owners by the manufacturers and wholesalers. Furthermore, DHSC is aware of instances where the supplier had multiple price lists, did not produce price lists, or used the Category A reimbursement price in the Drug Tariff as their list price. Typically, these issues resulted in reimbursement prices being significantly higher than actual selling prices.
Ministers opted to proceed with making the changes to Category A price-setting arrangements by using actual sales and volume data obtained by DHSC under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. DHSC’s decision was primarily focussed on an ambition to equalise access to margin on Category A medicines. DHSC also believes the changes would improve value for money for the NHS and the taxpayer.
New arrangements to determine Category A reimbursement prices
Under the new arrangements, following a transition period, the reimbursement prices for medicines in Category A will be determined using actual purchase, sales and volume information already obtained by DHSC in the quarterly collection under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. The Department’s information gathering powers, which came into effect from July 2018, requires manufacturers and wholesalers to provide sales and volume information associated with products purchased for the NHS. DHSC use the information gathered via these regulations to inform price setting for Category A & M. Click here for further information on the Information and Disclosure Regulations.
The updating of prices for Category A medicines will follow the same cycle as Category M, with prices changing every quarter in the following months: January, April, July, and October. Reimbursement prices will be set using price per unit, with the exception of special container products (available in multiple pack sizes) which will be priced using sales and volume data corresponding to the complete pack sizes only. All available pack sizes of licensed generic medicines will be considered. One quarters’ sales and volume data will inform price-setting. For example, Category A reimbursement prices for April 2024 Drug Tariff will be based on information submitted by suppliers between October – December 2023. If pharmacy owner is unable to purchase a particular Category A medicine at or below the Drug Tariff listed 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 stated Drug Tariff price, using the online feedback form on Community Pharmacy England’s website.
The reimbursement prices will include an element of medicine margin, to allow pharmacy owners to earn medicine margin on the Category A generic medicines they dispense. However, unlike Category M medicines, the margin on Category A medicines will not be adjusted to achieve the annual amount of medicine margin agreed under the Community Pharmacy Contractual Framework (CPCF).
Notice of these changes has been outlined on the NHSBSA’s website.
Transition period
From April 2024, reimbursement prices for products in Category A will transition to the new arrangements over six quarters following a variable weighting system between the old and new methodology (see Table 1 below). From July 2025, the transition period will end with Category A reimbursement prices set only using information from suppliers obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018.
Table 1
| Quarterly cycle for price-setting | Old weighting system based on the weighted average of list prices of four suppliers | New weighting system based on information obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018 |
| April 2024 – June 2024 | 85% | 15% |
| July 2024 – September 2024 | 70% | 30% |
| October 2024 – December 2024 | 50% | 50% |
| January 2025 – March 2025 | 30% | 70% |
| April 2025 – June 2025 | 15% | 85% |
| July 2025 onwards | 0% | 100% |
During the transition period, the old methodology for price-setting will use a weighted average of the list prices of the following suppliers: A A H Pharmaceuticals Ltd, Alliance Healthcare (Distribution) Ltd, Teva UK Ltd and Accord-UK Ltd on or before the 1st of the month, one month before the start of the next quarterly cycle for price-setting, as set out in Table 2 below. In the weighted formula, A A H Pharmaceuticals Ltd and Alliance Healthcare (Distribution) Ltd prices have a weighting of 2, the list prices from the other suppliers will have a weighting of 1.
Table 2
| Time period | Cut-off date for use of list prices applied under old weighting system |
| April 2024 – June 2024 | List prices from on or before 8th February 2024 |
| July 2024 – September 2024 | List prices from on or before 8th May 2024 |
| October 2024 – December 2024 | List prices from on or before 8th August 2024 |
| January 2025 – March 2025 | List prices from on or before 8th November 2024 |
| April 2025 – June 2025 | List prices from on or before 8th February 2025 |
| July 2025 onwards | End of transition |
During transition, not all products in Category A will have a reimbursement price based on the new arrangements. For these products in Category A, the reimbursement prices will based on be the average of the price calculated for the pack size listed in the Drug Tariff weighted by the following four manufacturers and suppliers; A A H Pharmaceuticals Ltd, Alliance Healthcare (Distribution) Ltd, Teva UK Ltd and Accord-UK Ltd on or before the 8th of the month being reimbursed. In the weighted formula, A A H Pharmaceuticals Ltd and Alliance Healthcare (Distribution) Ltd prices have a weighting of 2, the list prices from the other suppliers have a weighting of 1.
Further information on Category A changes can be found here.
Click on a heading below for more information.
| Category A | Category C | Category M | |
| Products included | Readily available licensed generic medicines (low volume) | Not generally available as a generic (or does not meet qualifying criteria for Category A or M) and their price is based on a particular brand or manufacturer. | Readily available licensed generic medicines (high volume) |
| Price-setting approach |
Based on weighted average list prices of 4 suppliers A A H Pharmaceuticals Ltd, Alliance Healthcare (Distribution) Ltd, Teva UK Ltd and Accord-UK Ltd changing to Based on sales and volume information obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. |
Based on list price of particular brand or manufacturer. | Based on sales and volume information obtained under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. |
| Frequency of price changes | Monthly changing to Quarterly (Jan, Apr, Jul, Oct) | Monthly | Quarterly (Jan, Apr, Jul, Oct) |
| Broken Bulk eligibility (excluding special containers) | If necessary for products with smallest listed pack size of £50 or over. | Yes | If necessary for products with smallest listed pack size of £50 or over. |
| Out-of-pocket expenses eligibility | No | Yes | No |
Q. What was Community Pharmacy England’s response to these changes?
A. Community Pharmacy England acknowledged that the old price-setting arrangements for Category A medicines was flawed and understood that DHSC wanted to make the improvements. However, we do not believe a price-setting approach similar to Category M should be adopted for medicines in Category A, which are lower volume generics. In formal response to the original 2019 public consultation and throughout subsequent discussions, Community Pharmacy England has re-iterated its concerns to DHSC that their proposed changes to Category A will:
- make the Drug Tariff less responsive to price changes by introducing a lag in the price-setting process;
- introduce price volatility and amplify the risk of price concessions;
- increase the risk of dispensing at a loss, where the impact on individual businesses could be notable depending on the dispensing mix; and
- create further instability in the supply chain and reduce market attractiveness to new entrants, creating the potential for more supply disruptions and shortages in the longer term.
Read Community Pharmacy England’s response to DHSC’s 2019 consultation on drug reimbursement reforms here.
Q. Will the changes drive mass movement of products between different Drug Tariff categories?
A. From April 2024, a large number of products will move from Category A to Category C as these do not meet the qualifying criteria to remain in Category A. At the same time, any products which do not meet the qualifying criteria to remain in Category M will move to Category A or C. The movement of products between different Drug Tariff categories is to ensure that the products are placed in the appropriate category to allow reimbursement prices to be calculated accordingly.
Q. Will the changes to Category A lead to more price concessions?
A. Community Pharmacy England is concerned that using lagged data for price-setting and moving to less frequent price updates for Category A medicines could increase price volatility and potentially result in dispensing at a loss. However, DHSC’s position is that if a pharmacy owner is unable to purchase a particular Category A medicine at or below the Drug Tariff listed price, a price concession application can be requested for this. 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 Community Pharmacy England’s website.
Q. Can Broken Bulk claims be made for medicines listed in Category A?
A. If necessary, Broken Bulk may only be claimed for those medicines in Category A whose smallest pack size has a price greater than or equal to £50. Pharmacy owners should only claim Broken Bulk (by endorsing ‘BB’ and pack size used) where it is unlikely that they will be able to dispense the residual balance again within six months. Further information on Broken Bulk can be found here.
Q. Can Out-of-Pocket expenses be claimed on medicines listed in Category A?
A. No. As before, Out-of-Pocket expense claims cannot be made for any generically prescribed medicines listed in in Category A of the Drug Tariff. Further information on Out-of-Pocket expenses can be found here.
Related links
View the announcement in full on the NHSBSA website.
Briefing 006/24: Category A drug reimbursement reforms FAQs
Read Community Pharmacy England’s (formerly PSNC) response to DHSC’s 2019 consultation on drug reimbursement reforms here.
