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When a contractor does not hold stock of a medicine and can only obtain it at a price that is above reimbursement, it may be reasonable to wait for clarification of pricing – depending on the impact on the patient and length of the delay, as Richard Hough and Thorrun Govind explain…

Community pharmacies remain under significant financial pressure, with many routinely dispensing medicines at a loss. This has reignited debate about whether contractors can refuse to supply prescriptions where reimbursement fails to cover the acquisition cost.

At first glance, this may appear to be a commercial question; in reality, it is a legal one, rooted in the statutory framework which governs NHS pharmaceutical services.

A long-standing feature of the system

Dispensing at a loss is not a new issue for community pharmacy. It has long been recognised that there are circumstances in which the purchase cost of a medicine exceeds the reimbursement price. This can affect branded medicines, generics and appliances alike.

When the current contractual framework was introduced in 2005, it formalised the concept of retained medicines margin. Under that system, a defined level of purchase profit is delivered to the sector as a whole.

The intention is to ensure that contractors are appropriately remunerated overall, rather than at the level of individual prescriptions.

The consequence is a “basket” approach, under which some items will inevitably be dispensed at a loss, which is offset by profit on others. The system has never guaranteed that each individual prescription item will generate a profit.

A system under increasing strain

While that position remains unchanged in principle, there are clear signs that it is under increasing strain in practice. Contractors continue to rely on medicines margin and supporting mechanisms such as Drug Tariff concessionary pricing, which is intended to address situations where medicines cannot be sourced at the listed reimbursement price.

There has, however, been a marked increase in reliance on those mechanisms. Growing numbers of price concessions reflect wider pressures in the medicines supply chain and the increasing frequency with which medicines cannot be obtained at or below Drug Tariff prices.

This raises legitimate questions as to whether the system is still operating within the parameters on which it was originally designed.

A contractual obligation, not a commercial choice

The legal position must be viewed through that wider context. Pharmacy contractors operate under a statutory contract with the NHS, which is governed by the NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 (the PLPS Regs).

Under the PLPS Regs, contractors agree to provide pharmaceutical services in accordance with specified terms of service. In return, they receive remuneration under the NHS funding model. Crucially, that arrangement is not dependent on the profitability of individual prescription items.

The obligation to dispense arises from that statutory framework. It is not a matter of commercial discretion.

A key element of the NHS terms of service is the requirement for contractors to supply medicines ordered on NHS prescriptions “with reasonable promptness”. This provision imposes a clear duty to dispense while recognising that the timing and manner of supply may depend on the circumstances.

The meaning of ‘reasonable promptness’

The concept of “reasonable promptness” introduces an important but limited degree of flexibility into the legal analysis. It is not defined in rigid or prescriptive terms and does not impose a fixed timeframe for supply. Instead, it requires contractors to exercise professional judgment in light of the full factual context. 

In practice, this involves a balancing exercise. Relevant considerations are likely to include the clinical needs of the patient, the urgency of treatment, the availability of stock, and the operational realities facing the pharmacy, including supply chain constraints. Financial considerations may also form part of that overall assessment, but they are unlikely to be determinative in isolation.

This distinction between obligation and timing is significant. While the framework is strongly resistant to outright refusal to dispense valid prescriptions on financial grounds, there may be circumstances in which a delay in supply is capable of justification if it can properly be characterised as consistent with reasonable promptness.

For example, where a contractor does not hold stock of a medicine and can only obtain it at a price which is materially above the Drug Tariff reimbursement level, it may be reasonable in some cases to await clarification of pricing, including the possibility of a concessionary price.

Whether such an approach is lawful will depend on all the circumstances, including the impact on the patient and the length of the delay.

Similarly, even where stock is held by the pharmacy, the position is not entirely absolute. Where dispensing would result in substantial and sustained losses of a scale that could threaten the viability of the business, there is a credible argument that this may form part of the overall assessment of reasonableness.

However, the weight to be given to financial considerations will be heavily influenced by the clinical context. Where patient need is urgent, the scope for acceptable delay is likely to be limited.

Importantly, the concept of reasonable promptness does not create a freestanding right to refuse to dispense loss-making prescriptions. Rather, it provides a framework for assessing questions of timing and practicality.

Any reliance on that concept must be objectively justifiable by reference to patient need and the broader circumstances, not simply the commercial consequences of supply.

When refusal is permitted

The framework does permit refusal to dispense in limited circumstances, but these are defined by considerations of legality, validity and patient safety.

Pharmacists are entitled, and professionally obliged, to ensure that prescriptions are genuine, complete and clinically appropriate. Refusal may therefore be justified where there are concerns that a prescription is invalid, ambiguous or unsafe, or where it has not been properly issued.

In such cases, refusal is not only lawful but necessary. The key point, however, is that such grounds are rooted in patient protection and professional standards, not financial viability.

The limits of the framework

What the framework does not provide for is equally significant. There is no express right to refuse to dispense a valid prescription solely because it is loss-making.

On the contrary, the structure of the system strongly suggests that contractors are expected to continue supplying medicines in accordance with valid prescriptions, even where individual transactions are commercially unfavourable.

The existence of system-level mechanisms, including medicines margin and concessionary pricing, reinforces that interpretation. The system is designed to operate on an aggregated basis, not to guarantee profitability at the level of individual items.

This creates an inherent tension. Pharmacies are commercial enterprises operating under real financial pressure, yet their ability to respond to those pressures is constrained by a framework which prioritises continuity of patient access to medicines.

The risks of refusal

Refusing to dispense on purely financial grounds carries significant legal and regulatory risk. Such a decision is likely to be characterised as a breach of NHS terms of service.

Potential consequences include the withholding of remuneration, contractual enforcement action and, in more serious cases, removal from the pharmaceutical list. In addition, any attempt to rely on technical grounds to justify non-supply may attract regulatory scrutiny.

There is also a broader public interest dimension. Community pharmacies form part of the NHS’s essential infrastructure, and decision makers are likely to prioritise patient access to medicines over commercial considerations.

A question of intent

It may be tempting to look for indirect means of managing financial exposure, for example by adopting a stricter interpretation of prescription validity. However, such approaches are unlikely to provide a reliable or defensible solution.

The framework permits refusal where it is necessary to protect patients, not where it is convenient to protect margins. Any attempt to use technical deficiencies as a proxy for financial considerations risks undermining both legal compliance and professional obligations.

Ultimately, the issue turns on intent. Decisions must be grounded in clinical and legal justification, not commercial preference.

A system under strain

Dispensing at a loss is not new, but the scale at which it is now occurring raises serious questions about the sustainability of the current model.

The legal position remains clear. Pharmacies may refuse to dispense where there are genuine concerns about prescription validity or patient safety. They may, in limited circumstances, be able to justify a delay in supply by reference to the concept of reasonable promptness. However, cost alone is unlikely to justify refusal under NHS terms of service.

If the system is no longer operating as intended, the answer is unlikely to lie in stretching the boundaries of the existing legal framework. Rather, it points to the need for a reassessment of the funding model itself.

Until then, contractors remain under a legal obligation to dispense valid prescriptions, notwithstanding the financial pressures involved.

Richard Hough is a partner and head of healthcare at Brabners and a former pharmacist. His co-author Thorrun Govind is a pharmacist and solicitor at Brabners.