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Chapter 4 – Changing the arrangements for dispensing doctors in England and Wales
- Calculating the envelope for dispensing doctors’ remuneration for 2006/07
- Discount enquiry and full pay review
- Dispensary quality and payments scheme
- Maintaining clinically cost effective prescribing
- Removal of the link between pay and drug costs
- Support for people with disabilities
- VAT reimbursement
4.1 A new system for the remuneration of dispensing doctors has been developed. Under the new system, the on-cost allowance has been abolished. This removes the direct link between drug costs and remuneration. Dispensing doctors will receive a fee for each item that they dispense. The new fee scale is calculated by dividing the dispensing doctors’ remuneration envelope by the number of items expected to be dispensed in 2006/07.
4.2 The Prescription Pricing Authority (PPA) in England (which will be known from April 2006 as the Prescription Pricing Division of the Business Services Authority) and the Prescribing Services Unit (PSU) in Wales will continue to calculate the amounts due to doctors in fees and allowances for dispensing and personal administration and these are paid through the Exeter system. The PPA system will be changed to implement the new fees from 1 April 2006 onwards. The new calculations will be applied to prescriptions submitted to the PPA for April 2006 (these will be submitted by 5 May). The PPA will calculate an interim payment which is due on 1 June and the actual entitlement (less interim payment) will be due on 1 July.
Calculating the envelope for dispensing doctors’ remuneration for 2006/07
4.3 The remuneration envelope is based on the actual payments made to dispensing doctors for both fees and on-cost allowance, appropriately adjusted to reflect anticipated payment levels for 2006/07.
4.4 In calculating the remuneration envelope for 2006/07:
- it was also agreed that the container cost allowance of 3.8p per dispensed item was longer appropriate as most drugs are now pre-packed by suppliers. Instead, 10% of the current container cost allowance envelope was included in the overall remuneration envelope
- £1.4m was included to support dispensing practices in meeting their responsibilities under the Disability Discrimination Act 1995.
4.5 Under the Disability Discrimination Act 1995 (DDA), dispensing doctors as service providers have a duty to make reasonable adjustments to enable someone with a disability to utilise the service. Reasonable adjustment may include the provision of an auxiliary or compliance aid to enable a person who is disabled to obtain and take their medicines. In determining what is reasonable, consideration needs to be given to the individual circumstances of the patient and the dispensing practice, and a judgement made by the specific provider, the dispensing practice.
Discount enquiry and full pay review
4.6 The Technical Steering Committee has been asked to oversee a full pay review covering dispensing doctors and a review of the discount factor applied to the drug tariff when reimbursing dispensing doctors for the purchase of drugs dispensed.
VAT reimbursement
4.7 In England and Wales From 1 April 2006 the Department of Health will not pay a VAT allowance on dispensed items. This means that practices will need to register for VAT purposes with HM Revenue and Customs (HMRC) if they require VAT reimbursement after 31 March 2006.
4.8 From 1 April 2006 the Department of Health will pay a VAT allowance on personally administered items for all practices, as these are an exempt supply for VAT purposes and are therefore not re-claimable from HMRC. Previously, the Department of Health had excluded VAT-registered practices from this re-imbursement.
4.9 The PPA system will be changed to implement the changes in VAT allowances for all items dispensed and personally administered from 1 April 2006 onwards. This means that practices which are not currently registered for VAT will be able to claim VAT allowance on dispensed items through the PPA system for all items dispensed up to and including 31 March 2006. These prescriptions should be submitted by 5 April. The PPA will calculate an interim payment due on 1 May and actual entitlement (less interim payment) due on 1 June.
4.10 Assuming that a practice registers for VAT with HM Revenue and Customs (HMRC) with an effective date of 1 April 2006, VAT can be reclaimed from HMRC on items purchased on or after 1 April 2006 which the practice intends to dispense.
4.11 Practices will be able to audit stock in hand on 1 April in order to reclaim VAT on items purchased before 1 April but not dispensed until that date or later. Entitlement to VAT recovery will be governed by the intent to make taxable supplies with the goods in question, once VAT registration has been effected.
4.12 An information sheet about the VAT registration process for dispensing practices has been developed by HMRC and is available via the GPC and NHS Employers websites. This information sheet provides:
- advice about how practices can register for VAT
- information about the VAT treatment for goods and services
- advice about how much VAT can be recovered on purchases.
4.14 Primary Care Organisations (PCOs) need to be aware that all dispensing practices are likely to register with HM Revenue and Customs for VAT from 1 April 2006. This may have implications for any reimbursement provided by PCOs to contractors for premises and IT if the reimbursement is gross of VAT. If contractors are registered for VAT they may be able to claim reimbursement of some of the VAT costs of capital expenditure from HMRC. PCOs therefore need to be aware of the VAT status of practices and what sums they can reclaim from HMRC in order to avoid double payments of VAT costs.
Dispensary Quality Payments Scheme
4.15 Dispensing practices will be paid for providing a high quality of dispensary services under a new Dispensing Quality Payments scheme. Details about this scheme are still being negotiated and will be published as soon as possible.
Maintaining clinically cost effective prescribing
4.16 Guidance which outlines what might be considered to be excessive or inappropriate prescribing has been developed for PCOs and health professionals. It is available at Annex 8 .