Community Pharmacy and the World of GP Commissioning – Prescribing Budgets

In the previous articles in this series we explored what GP consortia were, why they were being formed and we looked at the relationship between community pharmacy and primary care trusts (PCTs).

This article is the third in the series and explores the topic of “prescribing budgets” and how this has affected community pharmacy.

A prescribing budget is a sum of money that has been put aside by the local health trust to pay for the cost of drugs and appliances. Each GP practice has an allocated amount of money that it can use to buy drugs and appliances for their patients. At present most prescribing budgets are “notional”. This means that the actual money is normally in most instances still with the PCT but the GP practice is given a theoretical sum that it should try to adhere to.

As we move into the world of GP commissioning, the actual money will rest with groups of GP practices (known as GP consortia) who will decide how best to distribute the sum to member practices.

Prescribing budgets run into many millions of pounds. For example, a consortia of about 20 practices could expect to have a prescribing budget of anywhere between £20m-£30m. In addition to this, there are a number of factors that affect the prescribing budget. Some include:

1) changes in health need in the area

2) economic climate

3) drug cost inflation

4) patent expiration of drugs

5) local deprivation

6) local prescribing habits

In general, there has been a huge pressure on PCTs and GP practices to cut the cost of their prescribing budgets recently. Even a 1% saving in a consortium’s drug budget could save hundreds of thousands of pounds that could be reinvested into patient care.

So far so good – but what does this have to do with community pharmacy?

In 2005, the community pharmacy contractual framework (alternatively known as the pharmacy contract) was implemented nationally. The contract implemented a new system of reimbursement which meant that the profits made on purchases of medicine by pharmacies were limited to a set amount using a system known as “category M”.

This meant that if the community pharmacists made too much profit in one year, it would be taken off the following year of profits and vice versa. The mechanism for this was the artificial price inflation (or deflation) of a basket of certain medicines to compensate for over or under funding – “category M”.

It was soon realised that there were discrepancies in the system. For example in 2010, if a GP were to prescribe “salbutamol inhaler” the pharmacist would be reimbursed about £3 for the prescription and the GP charged for the equivalent amount on the prescribing budget. On the other hand, if the GP were to prescribe the exact product by brand “ventolin inhaler” the pharmacist would be reimbursed at about £1.50 and the GP charged at the lower rate on their budget. A number of different instances exist of similar sorts of discrepancies. This particular instance is known as “branded prescribing”.

A further example is the “switching” of drugs to similar – albeit different – chemical entities. For example, there have been sustained attempts to change patients from Atorvastatin to simvastatin. The saving that can be made by this switch alone can be huge but may not be suitable for everybody.

If you happen to be a pharmacist in an area where GPs were “hot” on these changes then your income could be significantly different from an equivalent pharmacy in an area where GPs were not so in tune with prescribing costs. This has lead to significant regional variances in pharmacy income even though the total amount distributed nationally is to a set level.

This issue is an ongoing battle between pharmacy representative groups and the government to ensure that pharmacy remuneration is fairly distributed.

In the next article in the series, we will explore the issues related to “medication review” and how recent developments in the pharmacy contract over the past 5 years has sometimes lead some GPs to question benefit of Medication Use Reviews (MURs) in community pharmacy.