COVID-19 Costs: PSNC reaches deal with HM Government

  • PSNC has accepted a revised, and much improved, offer on COVID costs
  • Contractors can claim for a range of costs incurred over a 13-month period 
  • Payments to be made in October ahead of the sector paying back £370m Advance Payments 
  • Terms of loan repayments will depend on the amounts claimed, and this is subject to some further negotiation  
  • Details on making COVID costs claims are set out in a Drug Tariff determination, and further commentary and guidance will follow from PSNC 

PSNC has accepted an offer from HM Government that will allow all community pharmacy contractors in England to claim for their COVID-related costs.

The revised offer from HM Government was a significant improvement on their original proposal which was rejected by PSNC last summer.

Specific improvements made to the offer mean that:

  • HM Government has removed the restrictive upper limit on the amount of claims it will pay for, as it had originally proposed to impose a cap of £120m;
  • Contractors can now claim costs incurred from March 2020 to March 2021, i.e. a 13-month period (the original offer had to be to cover costs for just three months);
  • Contractors can now claim for a wider range of costs, including for non-staff costs which had been excluded from the original offer;
  • Contractors’ costs will now not be written off against the retail grants claimed by some pharmacies; and
  • Multiple contractors can now make a single claim per business (the original offer had sought a separate claim per branch, which would have constrained costs claims).

Under the agreed deal, contractors will receive payments for their COVID costs on 1st October, following a claiming period between 5th July and 15th August 2021.

Alongside these cost payments, HM Treasury has insisted that the sector will need to pay back the £370m Advance Payments received last year.

The Department of Health and Social Care (DHSC) plans to take back repayments in six equal monthly sums, also starting from October, but we will have a further discussion on this in due course.

This has been a protracted negotiation with DHSC, with the influence of HM Treasury and its need to protect public monies significant. The improved offer is the result of influencing by PSNC via negotiations, evidenced business cases (using data from our monthly contractor cost surveys) and lobbying – both in public and privately to Ministers – supported by the LPCs and other national pharmacy organisations.

Summary of the Agreement

Drug Tariff determination sets out the details of the deal. In summary, community pharmacy contractors can claim for specific categories of COVID-19 related costs incurred between 1st March 2020 and 31st March 2021 for the delivery of NHS pharmaceutical services.

Contractors will make their claims via a form to be submitted to the NHS Business Services Authority (NHSBSA) between 5th July and 15th August 2021. DHSC will then process the claims and contractors will be paid for their COVID costs in their 1st October payment.

At the same, DHSC will begin taking back repayments of the £370m Advance Payments received last year. The details of this are subject to some further negotiation once DHSC and PSNC have seen the likely quantum of the claims payment and considered cashflow, but contractors should be prepared to begin making repayments from October.

DHSC has set out four categories of COVID-related costs that can be claimed for as follows:

  1. Additional staff costs due to COVID-19;
  2. Costs incurred to make premises COVID-19 secure;
  3. IT and communication costs to support home working and virtual patient contact; and
  4. Notified closures for infection control purposes (maximum 14 days).

On the form contractors will need to set out their costs, and indicate the evidence they have for them. Contractors will also need to confirm that documentation to evidence their claims is available should the NHSBSA ask to see it.

Further Information for Contractors (updated)

PSNC Briefing 016/21: Funding for COVID-19 related costs – summary and FAQs
Briefing describing the arrangements agreed between PSNC and DHSC to reimburse community pharmacy contractors for the extra costs incurred due to the COVID-19 pandemic alongside answers to a number of questions about the process and the deal.

PSNC Briefing 020/21: COVID-19 Costs – Background and NHSBSA claim form overview
More in-depth information about the COVID-19 costs claiming process is now available in this briefing.

PSNC Briefing 021/21: COVID-19 Costs – Further guidance and claim-related FAQs
Further guidance on openings, change of ownership and permanent closures, and claim-related FAQs.

Online workshops/webinars
PSNC will be holding two COVID-19 Cost Claims Workshops for community pharmacy contractors, on Wednesday 14th July and Monday 2nd August at 7.30pm. During the workshops PSNC’s CEO and Director of Pharmacy Funding will explain the deal reached with HM Government, describe the NHSBSA claiming process, and work through some examples.

Webinar 1
Wednesday 14th July
Book your place
Webinar 2
Monday 2nd August
Book your place


Further resources will be issued in the coming days and weeks. Please sign up to our emails to ensure you receive these as soon as they are ready. In the meantime, contractors can start to think about the claims they want to make and how they will evidence those: this needs careful consideration. Contractors should note that claims may be subject to a verification of evidence process by NHSBSA.

PSNC statements

Simon Dukes, PSNC Chief Executive, said:

“After many months of frustration and uncertainty, I hope it will be a relief to community pharmacy contractors to hear today that we have reached a deal on COVID-19 costs for the sector. We have a constructive way forward, and a chance for contractors of all shapes and sizes to claim for the full range of pandemic-related costs that they incurred last year.

The deal is not quite what PSNC had asked for: we wanted contractors’ COVID loans simply to be written off against the costs they have incurred during the pandemic. But this was rejected outright by HM Treasury and this deal is the best one we could get, giving every contractor a fair chance at having their costs covered.

Last summer HM Government made us an offer on COVID costs: claims were to be limited in a number of ways, such that it seemed impossible for contractors to claim even the £120m that was on the table. This was not acceptable, and PSNC has spent almost a year since then pressing for a better deal. It is regrettable that we had to do so, and that we had to take our dispute public in January. And it is regrettable that at no point in our difficult negotiations have the NHS stepped in to support us. Pharmacy should rightly feel aggrieved at this ongoing battle to prove itself as a critical part of the NHS family.

But what all that work has achieved is significant movement from HM Government in their final offer to us (including further movement from DHSC even over the past few days) and a fair chance to claim what we as a sector are owed. PSNC’s overwhelming vote in favour of this deal reflects the fact that this was the best offer available: given the lines drawn by HM Treasury, there simply was no further offer to be squeezed out of HM Government.

Our focus must now turn to helping contractors to make robust claims that cover as many of their costs as they can: there is work for PSNC to do to help, but also work for contractors to do to think carefully about this and to make claims that are as complete and accurate as they can be. It is critical that every contractor who has borne costs makes a claim – they need this money, and we need them to show HM Government the sorts of costs that pharmacies have absorbed, in good faith, to help the NHS through this crisis.”

Bharat Patel, independent contractor and Vice-Chair and Negotiating Team Member at PSNC said:

“When we went into negotiations on contractors’ COVID costs last summer I was hoping that we would get a good deal, and quickly: I had taken HM Government and NHS promises to give the NHS whatever it needed in good faith, and I could see the incredibly valuable work that we and pharmacies all over the country were doing for our local communities.

So that first offer from HM Government felt like a betrayal of the promises made, which undervalued community pharmacy.

Looking at how far we have come since then, I’m pleased to be able to give all contractors the chance to make claims for a much fuller range of costs. I have agonised over the administrative burden – I know this will not be an easy process for me and my colleagues – but having heard the views of HM Treasury over the past year, and been through the hours of negotiations on this topic, I do believe it is in our best interests to accept this offer and to engage with the claims process.

It is now critical that all contractors make a claim and that their claims are as complete and accurate as possible. Contractors can submit a variety of forms of evidence to support their claims – while this makes it difficult for PSNC to produce a template claim for contractors, we hope it gives as many contractors as possible the best chance of claiming their costs.

Meanwhile, we need to continue to shout about the value of what we are doing and working to influence officials and Government: PSNC will continue to focus on this, working with LPCs and other national pharmacy organisations.”

Peter Cattee, Chair of PSNC’s Funding and Contract Subcommittee, said

“This has been a difficult negotiation: HM Treasury has had significant involvement and has at all stages interrogated PSNC’s data and highlighted its duty to protect public monies.

PSNC had argued for a straight write-off of the Advance Payments against costs as this would have reduced the administrative burden on contractors: HM Treasury refused to accept this and instead require evidence directly from contractors. PSNC also argued for a minimum claim to be available to all contractors without the provision of evidence, but this was also rejected outright by HM Treasury.

The delays in reaching agreement – caused by the long delay in getting to a final offer from HM Government – have been a considerable concern for PSNC, but we could not accept the initial inadequate offer on COVID costs. Better to wait for a deal that gives contractors the chance to claim for a wider range of costs and period, although understanding the impact of evidencing, which must be kept manageable.

Alongside discussions on COVID costs, negotiations on Year 3 of the five-year Contractual Framework are continuing apace – PSNC had been clear to HM Government that this could not be settled before COVID costs were resolved, so we are pleased that this first step has now been done. Discussions on the annual review and PSNC’s bid for an uplift to pharmacy funding are also still not resolved and could take some time, and we are very cognisant of the cashflow challenges that pharmacies will face in the second half of this year, not only from the Advance Payment repayments, but also wider factors such as uncertainty over margin, PEPS and the pandemic. This will factor into our Year 3 negotiations and into discussions with DHSC on repayments of the Advance Payments.”


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