Category M reimbursement prices will be reduced from August by £15 million per month for a 12-month period. The reductions correct overpayments of retained margin for both 2015/16 and 2016/17.

The £15 million monthly reduction represents a drop of around 17-18p per item in average item value from current Drug Tariff prices, although the impact on any individual pharmacy may differ according to its dispensing mix.

Peter Cattee, chair of PSNC’s funding and contract sub-committee, said: “It is always difficult when the margins survey shows that contractors have received more than the allowed margin in any given year. This has particularly been the case in a year in which our businesses have come under a huge amount of pressure as funding has been squeezed.”

PSNC felt the priority was to spread the [overpayments] recovery over as long a period as possible, he said.

Sue Sharpe, PSNC chief executive, said the DH acknowledged that the impact of the Category M readjustments on community pharmacy would be “severe” in light of the recent funding cuts.

“Over many years we have seen that price volatility operates to preclude any real possibility of delivery of the exact agreed sum of margin in year,” she remarked. “We also remain concerned about fair access to margin and local manipulation of the market. The DH has recognised these issues and agreed to work with PSNC to try to resolve them.”

The impact on contractors will be severe