101 QUESTIONS ON FUNDING you’ve always wanted to ask… Presentation to SIGMA Conference – Feb 2009

1. 101 QUESTIONS ON FUNDING you’ve always wanted to ask… Presentation to SIGMA Conference – Feb 2009 Mike Dent – Head of Finance, PSNC

2. Q1 Where…does my funding come from? • Global Sum held centrally • PCT recharges covers Practice payments, MUR and EPS • Buying profit comes from PCT drugs budget • Arrangements being made to devolve GS funding provides opportunity for PCT “management” but fees likely to continue to be set centrally

3. Q2 What…happened with 2008/09 funding? • Some good news – payments should now include extra cash • £71m from formula, net £25m on Reg Burden • £150m extra in response to evidence provided by PSNC – linked to cost inquiry • Changes: • Practice payment up to 70ppi • Additional 30ppi for 6 months • Cat M down 16ppi from October • Big sign of faith in pharmacy

4. Q3 Why…does my incomefluctuate so much? • Income has always fluctuated to some extent • Global Sum outcomes • Discount inquiry additional claw-backs • DH hits on major generic lines • Recent years suffered because measured profits much higher than allowed amount. • Adjustments have been painful, exaggerated by PPD’s method for calculating advances • Now measured excess much smaller and seeking to smooth the process

5. Q4 How…does PSNC measure buying profit? By survey that looks at: • Independents (1-5 contracts) only • Sampled across country, location types and sizes • Actual purchase prices paid • Including actual discount received • A sample of brand and generic lines • Strong methodology, complex analysis and long period of negotiation

6. Q5 Why…do Category M prices move so much? • One intention behind Cat M was to line up prices with production cost and to equalise margins in supply chain • Prices set quarterly based on manufacturers’ average selling out price – outliers excluded • During year see relative movement, once a year see recalibration • Overall level of prices adjusted according to outcome of margins surveys

7. Q6 What…will be the impact of PPRS 2009? • PSNC successfully lobbied for delay to avoid stock shortages over Christmas • Price changes suggest some modulation but PI market hit anyway by exchange rate • DH using current margin as baseline and not getting involved in DTP • Generic substitution under discussion • Impact will be picked up by margin survey negotiations

8. Q7 Why…do I lose money on certain lines? Dispensing at a loss is complex issue • Sometimes loss on generics due to time-lag inherent within Cat M methodology • Clawback is average incorporating brand, PI and generic so makes average brand look bad but flatters generic purchases • Some lines receive no discount but not on DNG list • Branded generics should be sorted by generic substitution

9. Q8 What…is happening in Newcastle? • PPD single-mindedly pushed through big changes to its systems to accommodate EPS • Now recognising contractors as stakeholders and working with PSNC to solve problems • Current big issues are switches and item count • Contractor payments tool developed - used in advance of payment to try to spot likely errors. • Major priority – significant resources being devoted to this issue at PSNC and NPRC

10. Q9 What…does my FP34 tell me? • Not user friendly but contains vital information • Create database in excel of key fields • Look at your items vs. national trends • Look at your NIC per item vs. national trends • Look for changes in mix – SDR / ZD / expensive • Look for unusual movements in fees, switches • Be aware of fluctuations due to advances

11. Q10 Where…can I get information from? • PSNC website: • www.psnc.org.uk • Community Pharmacy News • Delivered monthly to all contractors • PSNC Information Team • Available during office hours - 01296 438423

12. What…would I like to ask today?