Changes to how we estimate the financial impact of Price Concessions on the NHS

Since 2017 we’ve been producing estimates on the impact of Price Concessions (where a medicine is not available at the agreed Drug Tariff price, and it’s agreed that NHS reimbursement will be higher for that month). We started with a series of blogs describing the problem of increasing costs. We then turned this analysis into a web tool and a tailored email alert service. Our email alert service allows information on the predicted cost of price concessions to drop into user’s inboxes within a few minutes of Community Pharmacy England providing updated concessions. For example, the latest announcement on concessions came out at 12:03 on Thursday 25th July, and emails started being sent out one minute later.

How do we calculate the impact for organisations?

We’ve used the same method of estimating these costs since we released the tool in 2018.

We calculate the difference between the Drug Tariff cost per unit (e.g. tablet, capsule, millilitre) and the concession cost per unit, and multiply it by the quantity prescribed for the latest month we have, which is usually two months behind. For example, for concessions relating to July 2024, our initial estimations are based on May 2024 prescribing. When the prescribing data is available, we update our estimate to take into account the actual prescribing for that month (and the colour on the chart turns from red to blue, as you can see above).

To make it more accurate, we used an average value to take into account the discount that’s applied to the Drug Tariff price when contractors are reimbursed. We set this value as 7.2% when we created the methodology for the tool, which was close to the National Average Discount Percentage (NADP) value at the time, and it’s stayed that way ever since.

Why the change now?

Following a consultation, in 2022 the Department of Health and Social Care announced changes to the discount system for pharmacy contractors, giving different discount rates for different categories of the Drug Tariff. Also in 2023, it was announced that, from April 2023, drugs subject to concessions would not have any discount applied to the reimbursement (making the reimbursement for the drug cost the same as the Drug Tariff).

For pharmacy contractors, this change had transitional arrangements between October 2022 and April 2024. However, the way the NHSBSA calculated the discount on prescribing data wasn’t updated until April 2024.

What changes have we made?

We’ve made two main changes:

For any price concession on or after April 2023

We now calculate concession prices without discount. In effect this means that the price concession impact is greater than before, as the “normal” tariff price would have been subject to a discount.

For any price concession on or after April 2024

We now use the new discount percentages for tariff prices:

• Category A and M of Part VIIIA of the Drug Tariff: 20%
• Appliances (not usually seen in price concessions): 9.85%
• Anything else: 5%

We’ve taken the opportunity to go back and revise the calculations across the entirety of the data we hold, so you may see some changes in our previous months’ data as well.

In summary:

Month of concession	Drug Tariff price	Concession price
Before April 2023	Tariff Price - 7.2% NADP	Concession price - 7.2% NADP
April 2023 - March 2024	Tariff price - 7.2% NADP	Concession price
April 2024 onwards	Tariff price - tariff discount	Concession price

Anything else I need to know?

There is also now an additional payment awarded to contractors called a retrospective top-up payment, where it was felt that the original price concession was too low. We’re currently working on how to show users the impact of this change. So far there have been very few products that this applies to, and it currently has a minimal impact.

We’re also writing a paper about how we designed and built the price concessions tool, and how accurate the forecasting is, which we hope to publish in the near future.

How do I sign up for price concession alerts?

If you haven’t already done so, you can easily sign up to price concession alerts. We have them for every practice and Sub-ICB location in the country, as well as one for the impact on the whole NHS in England. Simply go to your organisation at https://www.openprescribing.net, click on the link for the price concessions dashboard, and enter your email address in the subscribe box.

As always, we’re always delighted to hear from you about our tools, and what new things you’d like to see from us. Please drop us a message either by email or tagging us on X (formerly Twitter).