A forecast of the spend for each practice for the current financial year, calculated using the expected profile of expenditure for England.

Calculation
The forecast out-turn (FO) calculation assumes that each month's expenditure for a practice is in line with the national trend for proportionate spend, ie it is assumed that a practice's cumulative spend to date is the percentage of total spend defined by the national trend. The percentages used are updated each year to reflect the latest trend information.

The FO formula for an existing practice is:

(CUMULATIVE ACTUAL COST X 100) /
CUMULATIVE PROPORTIONATE SPEND FIGURE

The FO will not be shown for the first two months of the financial year (relating to April and May dispensing) due to the volatility of forecasting over the beginning of the year. The first month that this will be shown, for each financial year, will be for June dispensing.

The profile listed below will be used to calculate forecast out-turns for 2008/09 prescriptions.

Notes:

1. Profile excludes drugs costs met centrally
2. Includes practice, out of hours, and community nurse prescribing

The total under/over spend for the whole year is shown on the March statement ie the Annual Return.

The forecast profiles are calculated using information from the Prescribing Monitoring Document for the previous year (in this case 2007/08) which is assumed representative of national prescribing expenditure. These are adjusted to account for category M changes in 2007/08. In addition, adjustments are made in the profile to take into account differences in dispensing days.

The forecast profile has now been updated to reflect further changes to category M prices from October 2008 onwards which should reduce the drugs bill by around 32.5m per quarter. The profile for 2008/09 is subject to change and is based on the best information available at the time.

Value Added Forecast
In certain circumstances, there are external influences which can affect the overall spending on prescribing but which cannot be accommodated within the above calculation eg price increases/reductions agreed with manufacturers which will come into effect in mid-financial year.

As a result of such circumstances, the above forecast may be adjusted by a factor calculated from information supplied by the Department of Health (DH).

The method of calculating this factor is as follows:

(FO – adjustment) / FO

Where:

FO is the forecast out-turn figure calculated initially by the system for the country

Adjustment is the national adjustment supplied by the DH.

For example: If the FO for the country was calculated to be £1,000,000 and the DH had advised the PPA that, due to mid-year price reductions, the overall spend for the country was expected to be down by £100,000, then the factor would be calculated as 0.9

(£1,000,000 - £100,000) / £1,000,000

All practice FOs therefore would be multiplied by 0.9 to arrive at the value-added forecast.

This is the amount that would be shown on the statement together with the message:

NB: The FO now contains the value-added calculation provided by the PSU (Prescribing Support Unit)

If this message is not shown then no adjustment has been applied.

No adjustments will be applied to the dispensing for April or May because no forecast will be shown for these two months. Similarly, no forecast is shown in March as this is the annual return and shows the final actual spend for the year.

Exceptional circumstances
The circumstances in which the FO calculation shown cannot be used are as follows:

i) for any practice which set up in-year, the following applies:

- where there is no spend, the FO will be the practice's target budget
- where there is spend, the FO will be calculated as:

(a x (100 - c)) / (b - c)

Where:

a equals the actual spend to date
b equals the cumulative expected proportionate spend from the beginning of the year to the first month with expenditure
c equals the cumulative expected proportionate spend for the months of nil expenditure

ii) where a practice is disbanded during a year, the FO will be the expenditure to date

iii) where there is no target budget and no expenditure, eg the practice no longer exists but the PPA have not been notified, the FO will be zero.

Limitations
As with any calculation of this sort, it is important to bear in mind its limitations. In particular:

- when a practice is first set up, the forecast will be distorted if the first month's spend is not for a full month i.e. the practice started mid-month
- despite the smoothing effect of using a national proportionate spending pattern, forecasts in the early part of the year should be treated with caution. Because of the volatility of both prescribing and the resulting forecast over the first few months of the financial year, no budget or forecast figures will be shown. The first month that these will appear for each financial year will be for June dispensing
- local effects, such as unusual seasonal variations or screening initiatives, cannot be taken into account in the forecast itself, rather they may explain under or overspends.

Relates to England.

PMD