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Understanding Income, Controlling Expenditure

Join Dr. Philip Koopowitz, with 29 years' experience, to learn about income benchmarking, dispending profit, controlling expenditure, and smart dispensing practices. Explore the intricacies of dispensing fees, VAT, clawbacks, and profit calculations in your pharmacy operations.

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Understanding Income, Controlling Expenditure

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  1. Understanding Income, Controlling Expenditure • Dr Philip Koopowitz • Dispensing doctor with 29 years’ experience • DDA Board member • DDA Online executive editor • Pharmacy owner – run as a Hybrid with our dispensary • Director of SPOT – independent consultancy for enhancing Dispensing viability • Declaration of interest: • This talk is sponsored by AAH, but I have not been paid by AAH to do this talk • I am an AAH customer (along with being a customer of Alliance and PSUK which is essential for obtaining all possible solus products) • AAH have had no input into my talk and have not seen it prior to today

  2. Income Benchmarking dispensing profit PRICE of DRUGS Dispensing Smart SPOT BEST BUYS

  3. Income

  4. Income • Payment date = end of December (12) • For drugs dispensed during October (10) and sent to Prescription Services(PS) beginning of November (11) • Number of forms – ignore – irrelevant • Number of prescriptions = Number of ITEMS dispensed in October • Do you ever compare the number of items the PS has counted against the number you declared for that month on your FP34D?

  5. Income Basic price = Net Ingredient Cost (NIC) Price according to Drug Tariff for that month (October) If not in DT then price according to DM+D Browser – AMP price

  6. Income Dispensing Fee – Total fees paid across whole practice Calculated per ITEM per registered GP prescriber (Dispensing Fee Scale changes in April and October so as to balance number of items and fees to achieve set amount paid to DDs for Dispensing Fees over the year) If all items are dispensed against the senior partner, then you will have a lower dispensing fee. Salaried GPs and Retainees should have their own Prescriber number and scripts should be allocated as equally as possible against all doctors Hospital scripts, dental scripts, Nurse practitioner scripts are all automatically allocated against the named senior partner Look at who you allocate your FP34D vaccines against!

  7. Income ITEMS OCT 19 SEPT 19 687 – 799 190.7 212.3 800 – 914 188.4 209.7 915 – 1027 186.4 207.5 1028 – 1427 184.4 205.3 1428 – 1999* 182.7 203.4 2000– 2284* 181.1 201.6 Average of about 20 pence per item less!!!

  8. Income VAT EQUIVALENT paid on all items considered PAs by the Prescription Service Calculated as 20% of NIC – Clawback = approx. 17.6% of Basic price of PA items To check whether a drug is a PA according to Prescription Services, go to DM+D Prescribing Information

  9. Income • Payment date = end of December • ADVANCE is for drugs dispensed during November and sent to Prescription services beginning of December • Number of prescriptions = Number of ITEMS dispensed in November

  10. Income • Calculated according to very complex formula ((BP+VAT-DA)/Items) [For October] X 80% Minus Charges Declared [For November] = Advance paid at end of December

  11. Income • Clawback = Discount abatement – Most DDs have 11.18% of the NIC automatically taken off ALL items • All Specials Fees (XP£20) are used to reduce the clawback

  12. Income • Used to calculate Advance – The number of items you say you have dispensed in November

  13. Income • The actual number (October’s counted items) of items which the Prescription Service has deemed to have a prescription charge multiplied by the prevailing prescription charge (this is the amount that you should have collected from patients in October) • Do you compare what you actually collected and the amount the PS take off your income?

  14. Income • The PS take back the payment they advanced you at the end of November(October’s Advance)

  15. Income Payments according to month: Payment date: Month 12 (paid end of December/beginning of January) Basic price (Month 10) VAT allowance (Month 10) Dispensing fees, (Month 10) Advance (Month 11)

  16. Income Subtractions according to month: Subtraction date: Month 12 (subtracted end of December/beginning of January) Clawback (Month 10) Actual prescription charges (Month 10) Advance recovery (Month 10 Declared items and Month 10 Declared prescription charges collected)

  17. Income Payments made end of Month 12 (End December)

  18. Benchmarking Dispensing Profit Dispensing profit • Gross dispensing profit • Net dispensing profit • Profit per dispensing patient • Profit per item • Average fees per item • Average drug profit per item

  19. Benchmarking Dispensing Profit Gross dispensing profit Most Accountants use this figure NHSBSA PS payment MINUS Cost of Drugs (after discounts taken off)excluding VAT (except for PAs) (This excludes staff costs and service charges)

  20. Benchmarking Dispensing Profit Gross dispensing profit Some medical accountant groups have benchmarks, but there seems to be no across the board benchmark Percentage profit Aim for 35% and above Work out how much 2% increase in profit is worth and work out how much work will be involved in chasing this (2% of Total drug income)

  21. Benchmarking Dispensing Profit Gross dispensing profit Beware: If your gross dispensing profit is below 30%, then check with your accountant to ensure VAT is dealt with appropriately

  22. Benchmarking Dispensing Profit Net dispensing profit This takes into account gross dispensing profit as well as all the costs of running the dispensary eg. wages, utilities, rent etc Beware: Must take into account that often dispensers are doing the work of prescription clerks in a non-dispensing practice

  23. Benchmarking Dispensing Profit Profit per Dispensing Patient Gross dispensing profit divided by number of dispensing patients Aim for over £65 per dispensing patient

  24. Benchmarking Dispensing Profit Dig deeper • Average drug profit per item (Total basic price minus clawback, plus VAT, minus drug costs (ex VAT) divided by number of items pa) • Average dispensing fee per item (Total dispensing fees divided by number of items) • Average profit per Item (Gross profit divided by total number of items pa)

  25. Benchmarking Dispensing Profit Monitoring Dispensary Performance • Alastair Carmichael’s figures • Practice profitability reviews carried out over last 3 ½ years. • 68 practices reviewed in England & Wales • Average gross profit (excl VAT) = 34.5% (range from 22% to 43%) • Average profit per item = £2.60 (range from <£2.00 to £3.37)

  26. ********* 100mg tabs x 28 tabs ********* 500mg tablets x 56 Reimbursement per average prescription form (2.5 items per form)

  27. ******** 100mg tabs x 28 tabs ********* 500mg tablets x 56 + AVERAGE PROFIT PER FORM

  28. Profit Factors affecting dispensing gross profit Income • Dispensing fees and clawback • Loss of business – to local pharmacy, to internet pharmacy (EPS) * • Drug tariff prices • Category M • Price concessions • CCG pressure

  29. Profit Factors affecting dispensing gross profit – Drug costs • Prescribers • Practice formulary • CCG Formulary • Hospital prescribing • Discounts • Generic buying • Use of PIs • Ignorance!

  30. PRICE of DRUGS - REIMBURSEMENT • Drug tariff price • Reimbursement price (NIC-clawback) • DM+D AMP Reimbursement price • Non-DM+D prices • DM+D without AMP price

  31. PRICE of DRUGS - REIMBURSEMENT • Drug tariff price Prescription Services Net Ingredient Cost (NIC) Price Set for each month, sometimes have concession prices which might raise or lower price

  32. PRICE of DRUGS - REIMBURSEMENT • Reimbursement price NIC minus 11.18%- on ALL products

  33. PRICE of DRUGS - REIMBURSEMENT • DM+D AMP reimbursement price DM+D price of all products in drug tariff as well as those not listed in drug tariff eg Valsartan 160mg (TEVA) which is different from the DT price (Need to take 11.18% off this price as well)

  34. PRICE of DRUGS - REIMBURSEMENT • Non-DM+D prices Products and brands (including specific generic manufacturers) not listed in DM+D Must endorse purchase price in left hand column and will be reimbursed this price minus 11.18%

  35. PRICE of DRUGS - REIMBURSEMENT • DM+D AMP without price If no price is listed in DM+D, must endorse purchase price in left hand column and will be reimbursed purchase price minus 11.18%

  36. Dispensing Smart Prescribed by BRAND Dispense: UK Brand Parallel Import OR Change script to: Branded generic Different brand Generic

  37. Dispensing Smart Prescribed by BRAND Dispense: UK Brand Parallel Import Voltarol gel 100g (UK) – Loss = £0.15 Voltarol gel 100g (PI) – Profit = £0.87

  38. Dispensing Smart Prescribed by BRAND Flixonase x 150 dose - Basic price = £11.01 UK Brand - Profit = £0.01 PI Brand – Profit = £2.08 OR CHANGE to GENERIC Fluticasone nasal x 150 dose – Basic price = £7.69 Generic supplied – Loss = -£0.24 to Profit = £2.78 Save NHS £3.32 per pack and maintain or increase practice profit

  39. Dispensing Smart If you change script to: • Brand • Branded generic • Generic or • Generic manufacturer specific The doctor MUST initial all changes All CHANGES must be in the main body of the script Flixonase aqueous nasal spray x 150 dose Fluticasone aqueous

  40. Dispensing Smart Prescribed GENERICALLY Dispense: • UK brand/branded generic • PI • Generic

  41. Dispensing Smart Valsartan 160mg capsx28 Price = £10.92 (reimbursement price= £9.70) Purchase price = £11.10 DM+D AMP Prices

  42. Dispensing Smart Prescribed GENERICALLY If purchase price >Drug Tariff price Options Do Not Change Script vs Change Script

  43. Dispensing Smart Option 1: Do nothing- Dispense at a loss

  44. Dispensing Smart Option 2: Do NOT Change script - If Drug tariff > DM+D AMPReimbursement Price Valsartan 160mg capsx28 Price = DT = £10.92 Sometimes you have to accept a loss!!!

  45. Valsartan 160mg caps x 28 Crescent

  46. Dispensing Smart Option 3: Do not change script – Dispense brand or branded generic if it is cheaper than Drug Tariff price

  47. Drug Tariff = £1.61 • Betnovate =Reimbursement price = £1.43 • Actual cost after discount of Betnovate = £1.26 –DO NOT CHANGE Betamethasone valerate 1% cream x 30g

  48. Dispensing Smart Option 4: Change script - Manufacturer’s reimbursement price (from DM+D AMP) >Drug Tariff Add generic manufacturer to main body of script – no need to put in price

  49. Dispensing Smart Valsartan 160mg capsx28 Price = £10.92 (reimbursement price= £9.70) Purchase price = £11.10 DM+D AMP Prices

  50. Valsartan 160mg caps x 28 TEVA

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