The monthly payment received by pharmacy contractors includes two elements calculated by the PPA.

• An estimated 80% advance payment for prescriptions sent to the PPA approximately one month earlier.
  
• The outstanding balance for prescriptions submitted two months earlier

FOR EXAMPLE :-

1st Quarter payment = Advance for August prescriptions plus total value for July prescriptions, less advance for July prescriptions(paid 1st September).

In addition appropriate local payments such as rota payments, essential  small pharmacy scheme payments are included.

The advance payment is ( a * b * i * 80%) - c = x

Where

a = Your declared number of items for August
b = Your average cost per item for July prescriptions
i  = Inflation factor 1.01%
c = Your declared number of paid items * fee
x = Advance payment.

The timescale for calculating and making payments to contractors is :-

By mid September the PPA has calculated the value of July prescriptions, and also the advance payment for August prescriptions.

The HA notifies the PPA before mid September of the local payments or deductions, to be made on the 1st October.

The PPA then merges all payments together and advises the contractor, approximately five days before the end of September, of the total sum due to be paid on 1st October.

The amount is paid directly by the PPA into the contractors bank account no later than the first working day of the month.

Pharmacists should note that when in a particular month, say July, an exceptional number of very high cost prescriptions are submitted, this will result in the 1st October payment being exceptionally high. This is due to the balance of the July account being above 20% and the advance for August prescriptions being above 80%, reflecting the relatively high average cost per item of the July prescriptions.

If in the subsequent month (i.e. August) the average cost per item returns to nearer the norm, then there will be a reduction in the advance payment for September prescriptions (based on a reduced August average cost per item) and in the 1st November payment - which comprises the outstanding balance for the value of the August prescriptions, and is likely to be considerably less than 20%.

Pharmacists should not therefore seek to compare their monthly payment with the number of prescriptions dispensed in a particular month.

To calculate an 80% advance payment:-

assume that 3500 prescriptions have been submitted for processing, of which 500 attract a prescription charge of £5.80, and that the gross average cost per prescription for the previous month was 900p, and the inflation factor was 1.01%