An analysis by the Company Chemists' Association has found that the actual value of the retained margin for pharmacies in England should be around £1.28 billion, but the allocated margin for 2024/25 was £850 million, resulting in a shortfall of almost £430 million.
The analysis examined what the value of retained margin should be had it grown in line with inflation and the volume of dispensing since 2014/15.
The CCA analysis also found that the retained margin per item has fallen by a third (33 percent) in real terms since 2014/15.
In the last five years, it has gone down nearly a quarter (23 percent).
The CCA study pointed out that the £50m uplift in margin to £850m for 2024/25 was offset by rising dispensing volumes and inflationary pressures.
While the model of procurement, combining drug tariff pricing and retained margin, has led to the UK having some of the lowest medicine prices in the world, continued underfunding of both threatens the UK’s attractiveness in a global market.
CCA chief executive Malcolm Harrison said, “The retained margin system only works if it is funded properly. Inadequate funding can act as a disincentive for value-based procurement.
The £430m gap between what margin is and what it should be is deeply concerning."
A separate CCA analysis has highlighted the link between depressed drug tariff pricing leading to avoidable shortages, and the taxpayer having to foot the bill for inflated prices to secure the supply of those medicines.
The CCA wants the government to explore the merits of implementing a shared margin system, currently being practised in Scotland.
This principle ensures the benefits of cost savings from effective medicines procurement are shared equally between pharmacies and the NHS.
Pharmacies in Scotland are incentivised to continue to source medicines at the best possible value for the taxpayer.
