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Changes to Category M reimbursement

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Changes to Category M reimbursement

From August 2018, the Department of Health and Social Care (DHSC) will stop the £15 million per month reduction in Category M reimbursement prices. Category M reimbursement prices will be amended from August 2018; this is outside of the usual 3-monthly cycle of price updates.

How are Category M prices calculated?
There are two factors which determine the Category M prices:

1.  The retained margin of profit for contractors in the total funding for pharmacies

•  The DHSC initiated the monthly reduction in August 2017 to recover the excess estimated margin paid out to pharmacies during 2015/16 and 2016/17 years.

•  A 12-month period for the monthly reductions was agreed with the Pharmaceutical Services Negotiating Committee (PSNC) to end in July 2018.

•  Pharmacy contractors saw a drop in their average item value (AIV) of between 17 and 18 pence per item when the reduction was implemented.

2.  The information supplied by manufacturers on the volume of medicines sold and their prices, and that from the NHS Business Services Authority (NHSBSA) on dispensing volumes (underlying prices).


The changes to Category M and margin recovery are only in place for two months. The negotiations for the 2018/19 Community Pharmacy Contractual Framework have not yet begun.

The NPA will publish a guidance document on these Category M reductions and what this means for contractors in the short term.

Pharmacies urged to get to grips with FMD
The Falsified Medicines Directive (FMD) comes into force next year on February 9. The “Way Forward for FMD in Community Pharmacy” covers key assumptions about FMD, high level processes for incorporating authentication in to existing dispensing workflows, handling stock transition, what IT systems will need to deliver and implications for patient safety. If you have not started to prepare for FMD, you will need to carefully consider the PMR system you are using and whether it will be suitable for when the FMD is introduced. The guidance paper has been published on and you can go to the NPA website for updates.

For further information email the Pharmacy team at or call 01727 891800.


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