Pharmacists
Pharmacists
submit all prescriptions they have dispensed monthly to
the Prescription Pricing Division, sorted into the chargeable group (where patients
have paid a prescription fee), the non-chargeable group
and then by prescriber.
The
basic price of the drug which is reimbursed is calculated
based on an interpretation of the drugs dispensed and
reference to the cost of that drug in that particular
month.
Figure
3 shows the basis of payment for the different items
which can be reimbursed on an FP10 prescription.
Figure 3. Reimbursement
The reimbursement cost of the drug (known as the Net
Ingredient Cost, NIC) is discounted based on a sliding
scale depending on the size of the batch of prescriptions
submitted in that particular month. This is designed
to reflect the level of discount a dispenser would be
expected to achieve from suppliers. The discount does
not include any zero discount products as a contractor
will not have been able to obtain a discount on these
items.
A
container allowance is paid in line with rules set down
in Part IV of the Drug Tariff. This is also included
in the cost of drugs.
The
remuneration element is also calculated in line with
the Drug Tariff rules. There are a range of fees paid
depending on what has been dispensed and also some fees
based on the number of prescriptions in the monthly
batch.
Any
charges collected from patients are netted off the overall
payment due as the Pharmacist retains these.
Locally
Authorised Payments are authorised by the relevant PCT
and are communicated by the PCT to the Prescription
Pricing Division through a secure web connection. There
are a standard range of payments that can be made as
well as payments that are specific to the PCT. These
payments need not necessarily cover the same period
as the prescriptions.
Pharmacists
are paid on the first day of the second month following
that in which they submitted their prescriptions.
The
following table shows an example:
| April |
Prescriptions
dispensed |
| May
|
Prescriptions
batch sent to Prescription Pricing Division |
| June
|
Pricing
finished |
| 1st
July |
Payment
made. |
To
ease cash flow problems for Pharmacists an advance is
paid at the start of the previous month and then recovered
when the prescriptions are paid.
This advance is calculated on the following basis:
The
average cost of prescriptions from the previous months
pricing is paid for the current month's submission and
uplifted by 1%. The account value is reduced to 80%
and in addition appropriate local payments or deductions
are included. For further information see "Your
monthly dispensing payment"
Appliance Contractors
Appliance
contractors are also paid reimbursement and remuneration
in line with the Drug Tariff. Most of these products
are subject to VAT and therefore, because the NHS is
deemed to be the final consumer, VAT is paid on services
and products supplied by appliance contractors.
Appliance
contractors are not paid an advance as the smaller number
of claims allows the Prescription Pricing Division to process these within a month
and pay on the 1st of the month following submission.
The
system for remuneration and reimbursement of appliance
contractors is currently under review as it has remained
unchanged for many years. Currently, the bulk of remuneration
comes in the form of "on-cost" on the price
of a product. Remuneration is not subject to any overall
total as in pharmacy (the global sum). The NHS price
for the product is the list price. Unlike for pharmacies
there is no recovery of any discount which may be available
to the appliance contractor.
Follow
this link for further information click here
Dispensing Doctors
The basic premise is that these payments are calculated
in a similar fashion to those for Pharmacists, however,
there are some notable differences (e.g. dispensing
doctors are not paid a container allowance). From April
2006 all dispensing doctors have to be VAT registered.
The amounts payable in relation to the
provision of drugs and appliances are calculated using
the following information:
- Basic Price (Drug Tariff Part II,
Clause 8, 10, 11, 13 & Part VII)
- Discount Scale (3.17 - 11.18%) (SFE,
Annex G, Part 1)
- VAT Allowance (SFE, Paragraph 17.3
(c))
- Dispensing Fees (SFE, Annex G, Part
2)
- Out of pocket expenses (Drug Tariff
Part II, Clause 12)
The following document has been produced
to act as guidance for dispensing practices on what
endorsements are required for reimbursement:
Dispensing
Endorsement Guidance for Dispensing Practices
Another difference for dispensing doctors
is that payments are made by PCTs from their non-discretionary
funds. Therefore there is no need for any additional
payments authorised locally to be submitted to the Prescription
Pricing Division.
Personal Administration GP Claims
Claims for personal administration can be infrequent
and not on a monthly basis similar to other prescriptions,
therefore there are no advance payments. The prescriptions
are processed during the month they are received and
information is sent to the PCT payment site for payments
to be made. The payment is calculated similarly to dispensing
doctors. There are several vaccines that doctors "personally
administer" in high volumes such as influenza vaccination.
The GP practice claims payment for these specific High
Volume Vaccines using the form FP34D Appendix for Dispensing
Doctors and FP34PD Appendix for Prescribing only Doctors.
Local
Supply or National FP10 Routes
Many
PCTs are considering the local supply of drugs as part
of the Pharmacy in the future initiatives. Such schemes
can have significant patient benefits but there are
issues that PCTs will need to address before the final
decision is taken. The list below identifies some of
the issues that arise with such schemes.
| VAT |
- |
Some
schemes may not allow for the zero rating of drugs
supplied via an FP10. This should be checked with
the local Customs & Excise office. |
| National
Pricing |
- |
The
national reimbursement price is based on a ‘basket’
of supplier prices. Care needs to be taken to examine
efficient purchasing is maintained for the whole
NHS. A good deal done locally may adversely effect
the national supply ‘price’. |
| Legislation |
- |
The
Medicines Act and Pharmaceutical regulations apply
to the supply of all drugs. Ensure that the proposed
scheme does not infringe any legislation. |
| Fees
and Charges |
- |
Most
fees are currently funded from central budgets not
the prescriber. Schemes approved by the DH may be able
to access these funds |
| Other
Costs |
- |
Provision
may need to be made for costs of distribution, administration
and collection of patient charges as well as accounts
currently paid to Appliance Contractors. |
VAT
The
following guidelines are intended to give an overview
of the VAT position on dispensing drugs. It is not the
purpose of the Prescription Pricing Division to offer specific VAT advice nor
should any reliance be placed on the following statements
without further investigation. Guidance on VAT issues
is available on the Customs and Excise website at www.hmce.gov.uk.
Particular reference is made to Health Professionals
in VAT Notice 701/57.
Follow this link for further information click
here.
| |
Supply
of drugs
Generally the supply of drugs under NHS arrangements
is a mixture of exempt and zero-rated supplies.
The tax rate is affected by such things as to
who and from whom the drug is supplied and the
nature of the drug or appliance.
Where drugs or appliances are supplied by a GP
to a patient whom the GP is authorised to provide
NHS pharmaceutical services, the supply is zero-rated.
Zero-rating, however, does not apply to drugs
or appliances supplied to other NHS patients or
private patients.
In certain circumstances the supply will be standard-rated.
Supply
of services
The provision of pharmaceutical advice and medical
treatment are exempt services, provided certain
conditions are met.
Reimbursement
of costs
The Prescription Pricing Division reimburses the cost of drug supplies excluding
VAT on the assumption that a contractor will recover
any VAT on standard-rated supplies through the
normal process.
For
dispensing doctors who all now have to be VAT
registered an allowance is made for personally
administered drugs and appliances which are standard-rated.
This is not a VAT payment but a payment of an
allowance to cover the net VAT incurred by the
dispenser for these products.
VAT
registration
Information for GPs on how to register for VAT,
information about the VAT treatment of good and
services they provide and advice about how much
VAT can be recovered on purchases is available
at the following link.
VAT
recovery
If VAT registered you are entitled to deduct input
tax incurred on costs used in making taxable supplies.
Input tax relating to the exempt supplies is not
normally deductible.
If
the input tax relates to both taxable and exempt
supplies, normally only the input tax related
to the taxable supplies can be deducted. Under
these circumstances you are said to be partially
exempt for VAT purposes. Guidance on partial exemption
and related calculations can be found in VAT Notice
706 ‘Partial Exemption’
Follow this link for further information click
here.
Other
related information
VAT Notice 701/31 ‘Health and Care Institutions’
provides further information on this related subject
in respect to hospitals and other care institutions
and may contain some useful guidance.
Follow this link for further information click
here.
This
information has been provided for general information
and does not constitute advice. The NHS Business
Services Authority Prescription Pricing Division
does not take any responsibility for any loss
as a result of the information provided and recommends
that specialist VAT advice should be sought prior
to making decisions regarding the VAT treatment
of any transaction or your own VAT affairs. |
Home Oxygen Therapy Service
Oxygen
suppliers are now responsible for delivering an integrated
oxygen service (i.e. cylinder, concentrator and liquid).
The supplier will provide the home oxygen service ordered
by clinical staff on a Home Oxygen Order Form (HOOF).
The supplier will provide the equipment that best meets
the clinical needs of the patient as indicated on the
HOOF. The supplier is also responsible for arrangements
for the payment of patient's electricity costs associated
with use of equipment supplied.
Each
oxygen service supplier will be able to access the Prescription
Pricing Division website and submit oxygen payment claims
at any time within the first 10 calendar days of the
month following that in which the home oxygen service
has been provided.
Part
X of the Drug Tariff gives a guide to the Home Oxygen
Therapy Service arrangements which have been in place
since February 2006.
The
PCT where oxygen supply has taken place as part of the
Home Oxygen Service is responsible for payment of that
service and all costs are charged back to that PCT.
For
information on the Home Oxygen Service, follow this
link.
Prescribing
Information
A
full list of the paper and electronic reporting systems
are available at the following link Information
services.
User defined reports are available to PCTs via the electronic
systems. Prescribing information is drawn from the prescriber
details found on each prescription. The only information
that is available at this level concerns the reimbursement
cost of the drug as some of the remuneration elements
are based on the batch of prescriptions not the individual
script.
However,
even at the reimbursement level the cost of a prescription
is not always apparent. The cost of a drug to the NHS
varies dependant upon where it was dispensed due to
the discount scale. For performance management purposes
it is important to reflect the cost of the same drug
equally across all prescribers. Therefore two methods
are employed; the first is to ignore discount and report
the Net Ingredient Cost (NIC); the other is to average
the discount claimed in a particular month across all
drugs. Calculation of this average is not available
when all the reports are produced and therefore can
be the average of the previous month.
The
first method of showing NIC only is used in reports;
the second method is used in budget reports, such as
Prescribing Monitoring Documents (PMD). The costs of
the same drug can vary therefore between months as the
average discount shifts each month. Reports that show
previous months data such as PMD use the latest average
discount calculated for the month in question.
Hospital
Prescribing
The
Prescription Pricing Division also reimburses prescriptions that are prescribed
by a NHS Trust but dispensed in a community pharmacy.
The method of reimbursement is exactly the same as any
other type of script, the differing treatment lies in
the recharging to the prescriber. The drug cost is discounted
by the average discount of the previous month and then
a fee is calculated as accurately as possible on the
particular script (no allowance is made for fees that
relate to the size of the batch). If the prescription
attracted a patient charge this would be offset against
the charge.
This
treatment means that the full cost of the prescription
(as opposed to the drug element only) is recharged to
the prescriber. The Prescription Pricing Division invoices this recharge directly
to the NHS trust.
Detailed guidance is also available under the section
on NHS Trusts at the following link.
Drugs
Bill Charging
The
total cost of drugs in any month is charged back to
the prescriber on the basis of the cash paid out in
that particular month.
The
payments in any one month are made up of the 80% advance
and the balance of the previous months account. Therefore
the charge is calculated on 80% of the drug cost (NIC
less discount) for the current month and 20% of the
previous month. Other costs that are not part of the
performance reporting but are part of the drugs charge
e.g. VAT, dentists prescribing etc. are prorated to
PCTs on the basis of their share of the total drugs
cost.
The
Prescription Pricing Division produces a monthly schedule along with the Itemised
Prescribing Payment (IPP) reports to the DH to enable
them to charge individual PCT cash limits for this expenditure.
For an example and explanation of the IPP report please
see the following link.
The
methodology for charging the drugs bill costs to PCT
is in the NHS finance Manual under PCT detailed guidance,
please see the following link
 .
We
have tried to ensure this information is factually correct
at the time it was produced and aim to keep it up to
date. If you have any queries regarding the information
provided on this page, please contact us using the email
address below.
suzanne.jones@ppa.nhs.uk
Prescription Information Manager
|
