Janet Morrison on the highs and lows of pharmacy contract negotiation

In this episode, reporter Emily Warner is joined by the chief executive of Community Pharmacy England (CPE), Janet Morrison, for an exclusive look behind the scenes of the pharmacy contract negotiations.

Ms Morrison unpacks what actually happened during negotiations, why the CPE committee was so reluctant to accept the deal, and what the ‘programme of reform’ will entail.

She explains what she is most proud of and most disappointed by in the new contract, as well as the many proposals CPE made that fell by the wayside during negotiations.

And sheds light on the two-month delay in reaching an agreement which sector leaders described as ‘inexcusable’ given the financial pressures facing pharmacy – including the rise in business rates, increased wages, and inflationary costs. 

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This epsiode was produced by Emily Warner. 

Transcript

SPEAKER_00 0:06

Hello and welcome back to the pharmacists podcast for practice and community pharmacists. I'm Emily, your host and the reporter of the pharmacist. And since our last episode, there have been some pretty significant changes for the sector. Yes, I am talking about the new contract. For those of you who aren't familiar with it, the Community Pharmacy Contractual Framework, or CPCS, I know, is an agreement between the government, NHS England, and Community Pharmacy England that sets out the funding for the entire sector each year. Contractors have been waiting a long time for this contract. It should have been published before the start of the financial year in April, but it wasn't announced until the end of May. So that was almost a two-month delay. This was described as inexcusable by sector leaders given the financial pressures facing the sector. But the real question is: was it worth the wait? The new settlement includes a 10.3% uplift for the sector or £340 million, bringing the total to £3.64 billion. This may sound like a lot of money, and it is the highest uplift across primary care. But many sector leaders, including CPE, have warned that it's not enough, and much of it will be eaten up by inflationary costs, such as business rates, and the increase to the national minimum wage. The deal also includes a £200 million increase to the annual medicines margin allowance, the introduction of independent prescribing into pharmacy first and the contraception service from autumn, and a six-feet increase to the single activity fee. Crucially, the funding settlement was only accepted on the condition of a shared program of reform with the government. CPE said it had been very clear that the sector is in a critical position and that a sustainable long-term solution, including urgent reform of the contract funding and reimbursement model, was needed. To help unpack what this deal really means for Community Pharmacy, I'm joined by Janet Morrison, Chief Executive of CPE. Janet, thank you so much for joining us today. I'm sure our listeners are really looking forward to hearing what you have to say. But first, would you like to just introduce yourself and tell us what your role in the negotiations was?

SPEAKER_01 2:42

Hello, my name's Janet Morrison. I'm Chief Executive of Community Pharmacy England. And our primary function is to represent all of the pharmacy owners in England, and in particular to negotiate the contractual framework for the funding and services that we deliver. So that's what we've just recently done for this year 26-27.

SPEAKER_00 3:08

And can you explain to our listeners what the mechanics of the negotiations are? Where do they take place? What's it like to actually be involved in that process?

SPEAKER_01 3:18

Sure. I mean, in reality, we are always in negotiation, if you understand, because we have a continuous relationship with the Department of Health and NHS England, and we're working to influence the process by which they bid for money that will be given to us as part of our contract. So that is a continuous relationship and it's a strong one. But the actual process, the formal process, is that we get a formal letter starting the process, which happened this year at the end of February, and that sets out their main proposals. And then we go through a lot of meetings. Most of the significant ones are face-to-face. We make submissions and counter proposals ourselves and we discuss those. I have a negotiating team who are representative of the main committee. We might meet three times a week and be meeting with the Department of Health and NHS England as well several times that each week. We report back to the committee on progress of negotiations and get their input to our changing priorities or counter-arguments, and then we come to a final decision at the end of the process. So it took about two months to go through that process. Sometimes it goes a bit quiet because the other side have to go back to ministers, and also in the middle of the process, we'll meet with the minister to tackle some of the bigger issues and where we need to seek resolution. And then finally, the committee meet, and it takes a couple of big meetings to go through all the detail and for them to weigh up the consequences of a yes or a no and to land on the views that they take and then and then how we want to communicate the results. So it's a bit of a process. After we've made a decision, the the government then has to get clearance and fix a date for announcement and all of that. So there are some little pauses, but those pauses are usually where we're waiting for them to come back to us with the final offer and the announcement date.

SPEAKER_00 5:32

And who's in the room when these negotiations are happening?

SPEAKER_01 5:35

We have plenary meetings which will be the main participants from the Department of Health and NHS England and then ourselves. But from Community Pharmacy England, it'll be the negotiating team. So that's the committee members plus the executive team and myself, where we will be making arguments, discussing counter proposals and things like that. So it's it's largely that negotiating team with the executive team involved, but then we regularly go back to the committee to reflect on what's happening and to get further input from them.

SPEAKER_00 6:13

Interesting. So how many of these negotiations have you been involved in?

SPEAKER_01 6:18

Oh goodness. Let me think. So I've been here four years, and so I suppose I've been in four negotiations. My first day I was in negotiations in the job, and they did say to me, Did I want to make a speech? And I said, I'd rather not. So that was quite a learning process, and that was on years four and five of the previous five-year deal, and that was pretty hard work because it was all fixed on a basically no growth plan, so that was pretty awful. We then had a further year of negotiations, we had in addition pharmacy first negotiations, and then since the election in 24, we had last year's negotiations, which was the big settlement of 19%, which was the first significant uplift, really, apart from pharmacy first, and then this year's one. So it's been several, but I think it's been it's been quite different really since we've had a new government because we put a lot of years of influence and and building relationships with them prior to the election. So we knew the senior team very well, we knew the special advice as well. We'd already made the case for community pharmacy, and I think that's quite important. We'd commissioned the vision for community pharmacy from the Nuffield Trust and King's Fund. They had involved all of the stakeholders from Department of Health and NHS England and the people who influence them. So that had come up with something that was saying, look at the potential community pharmacy, look at all the clinical services we could provide. So having built on that and built the relationships, our approach was to say, we know the NHS is in crisis and they were hearing that there are black holes in funding across the board, across the whole of the NHS, but we could say we've got quite uniquely, I think, we've got solutions that you could invest in that will take pressure off other parts of the NHS frontline services and enable patients to access healthcare as they started to see during the pandemic. So we've built quite a lot of work into that to enable that. And ministers really bought into the ideas about those clinical solutions. So that's really what they've been investing in, recognising that the foundations are not solid, and therefore, if you want those solutions, you've also got to fund the core resources that we need to make sure the lights are on and the doors are still open.

SPEAKER_00 8:59

Sounds like you were really thrown in at the deep end when you when you did your first negotiations.

SPEAKER_01 9:04

Yes, that was it was a bit of a shock, and and I think there were a number of things that were challenging about that. Firstly, I think the complexity of the contract, which I can understand business owners must find very challenging, but to really be able to understand the different elements and how they plug in together, to understand also what factors affect the government's approach and NHS England's approach. So understanding how their decisions are made and what free flexibility and freedoms they have and what they don't have, and being able to build the relationships that you need with the other side to be able to kind of negotiate properly negotiate, which is to sort of say, you know, this is a real red line for us, we can't go any further. But on the other hand, there may be flexibility on this area. Where can we, where's their movement, where's their give, what would ministers want, but actually what would they want to concede or be helpful? So all of that, and then I think the other part of it is that my committee represents the sector, and the sector is hugely diverse in their business models, their interests, their voice. So trying to navigate the complexity of what does this deal mean for all of these different people, and that the committee have to rise above their own personal interest in their own business or even their subsector's interests to actually think about the impact for the whole sector? Those are really significant things that make it quite a complex process.

SPEAKER_00 10:35

No, I can imagine. And you you just talked about understanding the other side, NHS England stance. Do you think because obviously in this negotiations there was a new health secretary part way through, do you think that impacted it at all?

SPEAKER_01 10:48

Actually, the previous Secretary of State resigned the day we made the decision. So that didn't impact. And obviously, the terms and the broad agreement of what we were going to get had been set some time before. The main negotiation where there's flexibilities was with Minister Kinnock, and he's stayed, he's been our minister since the election, and we have a strong relationship with him. He is very well briefed and he fully understands the complexity of the contracts. I'm I'm impressed by the level of knowledge he has for a minister who's got a very wide brief. But I think if we said had said no to the deal, I think that would have had a significant impact because the new Secretary of State, James Moray, was previously the chief secretary to the Treasury, and he will have seen what percentage uplifts there were across the whole of government. And the NHS and defence have got the highest settlements in terms of NHS have got three per cent. He'll have seen departments like education getting 0.6%, he'll have seen Ministry of Justice getting about 1.6%, local government getting 2.6%. So I think he'd probably be pretty wide-eyed if he'd seen that we'd been offered 10% and had turned it down because it's the best deal in primary care and it's considerably higher than the funding settlements across lots of vital departments of state. So I think it would have been quite significant for us in terms of relationships that that would be the first thing he knew about us when he'd arrived in office.

SPEAKER_00 12:40

CPE has said comparatively this is a very good uplift, but you've also said it's probably not enough to completely stabilize the sector. Did you have a figure in mind or an outcome in mind going into negotiations that you wanted to see?

SPEAKER_01 12:55

The bit I I'd slightly correct you on is I don't think this is a good uplift. I think what we've recognised is that ministers have given us preferential treatment again this year compared with other contractors across primary care and indeed across the NHS. We know it's not enough because the amount of money that's there will barely cover the increase in activity and inflation this year. So it doesn't do anything to close the gap and build on sustainability, and that's a serious, serious concern. And I've been going around the country this week talking to contractors and hearing their views, and you know, people are in serious financial trouble. So I don't think we'd say it's a good deal, but what we thought was it's important that we continue to make progress and that we critically had a commitment from ministers to look at what reforms now need to be made so that we can have a longer-term strategy for community pharmacy because we're going year by year by year, it feels like sticking plasters. So we need to have a strategy for community pharmacy, and we also need to consider what needs to change. We put a lot of proposals into negotiations for reforms and changes that would support the sector, and now we need to have a programme of work with them. So the fact that ministers committed to that was really critical to the decision to accept, and I think also recognising that through the process we did win some more significant concessions. So they had moved to try to accommodate us. That included things like the write-off of over-delivery of margin, which wasn't on the table at the beginning, and they accepted that, and that's costing over £240 million, and not easy for the department to get that from Treasury. And then there were other concessions around improving the SAF, not as much as we'd like, but it's a contained envelope, so they they have to move things around to try and make that money, and other concessions in terms of improving some of the payments for IP and things like that. So yeah, it was it was a very it wasn't an easy decision for the committee because they all know the the pressures they're under, but they wanted to build and continue to build, and they felt that they would lose that opportunity to persuade and influence the future direction of the sector if they didn't say yes to it.

SPEAKER_00 15:32

What were the three biggest sticking points or the most difficult things to decide on during negotiations? And which of those do you think are resolved and which still need to be discussed?

SPEAKER_01 15:44

I'd say the biggest problem is that it's 10.3%. And as I said, with all the calculations that we did at the beginning of the process, we work with the Department of Health and NHS England to project activity growth over the year when we do those projections, and then we look at the impact of business rates, we look at the impact of the national living wage, general inflation, fuel cost rises, all of the things, the inflationary impacts. It was going to cover that, but it was barely going to make a contribution to the bottom line. I think that's the biggest sticking point of all. I think the second piece is about margin, and I would say that it was really important to ministers that they put in 200 million to the margin allowance and they accepted writing off the over-delivery because really we argued that it was essential and impossible to take it out. But I guess the difficulty with that is there's no real science to saying that 1.1 billion is enough for margin, and so we said to them we're going to have to continue to work on this really closely together, not least because we don't know the impact of the Iran war or other global impacts on the supply chain. So it may not still be resetting, it may not be enough, and we've got a large number of proposals for reform in that area where we really need to look at is this system working? Are there shorter term improvements or does it need a complete rethink? So that was one area. And then the other key area is around independent prescribing. It was clear that ministers really wanted to introduce independent prescribing into our services with pharmacy graduates coming out as independent prescribers. But we were very concerned that it's not sufficient in terms of the investment that's going in. So we think it's really important for clinical future, but I think they're underestimating the cost of the clinical governance, the infrastructure, the digital commitment, and the workload that's going to be involved. And so we were very anxious and talked about it with the minister to say we're concerned we could be set up to fail. It doesn't recognise those true costs. And also we put them on warning, really, that if you want this to be a meaningful contribution, which we all do to primary care, then there's going to have to be significant continuing investment in that in the future. So I think that was really difficult. And I think that there's still going to be a huge amount of work to be done to introduce all of the frameworks of clinical governance, which we think they've sort of their thinking looks about right, but there's going to be a lot of work to put that in place in time for the autumn. So we'll see if that's doable.

SPEAKER_00 18:49

Do you think the contracts has now got the right balance between investing in the core activity and you know dispensing and also expanding services?

SPEAKER_01 18:59

So a lot of people have lost faith in margin and don't believe that they're getting their fair share or can't see the connection between what they do and what they get paid. So that's quite a contentious issue. A lot of people would would like to see more money going into the SAT as being their core cost. And last year we got a 19 pence increase to the SATH. This year we were only able to get that five pence increase, and that was challenging because that's really the sort of core costs. Whether the balance is right is quite a difficult question because it really is impacted by the overall quantum, and we don't think that's enough. We still got about 75% of our funding goes into dispensing and supply. Part that's for clinical services has been growing over the last few years, but it's still only 25%. So that means that those activity costs aren't sufficient to make you sustainable because they don't contribute enough to the bottom line. So I think what it suggests is we are going to, as part of the reform agenda, have to take a really hard look at what's the best way to ensure that you can afford to have the capacity, the establishment, the premises, and the staff team that you need to keep open alongside building the flexibility for clinical services and growing that. So I think that's one of the big areas we've got to think about further. So I don't know if the balance is right, but I don't think people will be happy about having only a small increase in the SAT.

SPEAKER_00 20:36

What are you most proud of about the final contract?

SPEAKER_01 20:40

I think I'm pleased that we continue to be prioritized by the government, that they recognise the potential of community pharmacy, and that they've also committed to work with us in partnership to secure the future. But honestly, I think I take my hat off to the commitment of my committee because it's an incredibly intensive process. They work super hard, the negotiating team put a huge amount of time in. I'm not sure how they run their businesses when they're putting so much time in. They give it serious consideration and they genuinely are trying to do the best thing for the whole sector, not just for their bit of the sector.

SPEAKER_00 21:24

I guess on the flip side of that, what's the thing that you were most disappointed by in the contract or that you wanted and weren't able to agree on with the government?

SPEAKER_01 21:33

I think we bombarded them with a lot of proposals for longer-term changes and reform. I think we still feel like there's a lack of flexibility on some of the regulatory easements that we would like to see. I think they could go further on, for example, pharmacist flexibilities and to easing Some of the pressures and expectations through regulation. And I think probably we had too many proposals for change, but I want to make sure that we pick them up through negotiations. One of the examples for that is is on business rates. We were proposing that we would be compensated for those like other operators in primary care. And we didn't make a lot of headway on that. So we'll have to come back to that.

SPEAKER_00 22:30

CPU says it's clear with the government that the sector is still in quite an unstable position and reform is needed to you said to the contract funding and reimbursement model. So I was just wondering if you have any idea of when that will begin and what the first changes to be implemented as part of that might be.

SPEAKER_01 22:51

Okay. So we've got our first meeting set up with the minister in a couple of weeks to start that process. We have a committee meeting coming up, so we will get the mandate for them about the proposals to take forward and the work programmes. It's going to be an immense amount of work. So I think that there's sort of three areas we're going to look at. One is margin, the equity of distribution, and ways to improve that in the short term, but also alternative models. The second is about the future of clinical services and the network. And then the third is around the funding, contract, and reimbursement mechanisms that will be needed to get to where we want to be for clinical services. Some of those I would like to see progress before the next negotiations, obviously, but some will be more fundamental and therefore will be more complex and take longer. And we've got to look at capacity on both sides to do that. And also it's not going to be very straightforward for us at CPE or for the sector because lots of people say, Oh, we need contract reform. If you say what in particular, then range of views on some people say, Well, I just want an establishment payment, like we used to have, and other people say, no, no, no, I don't want to be bothered with dispensing and supply anymore. I just want to do services. And other people will say, No, no, no, I need a balance between the two, and da da da, and I wouldn't want that kind of funding model. So the complexity of being able to come to a view just on behalf of the sector is going to be hard. A meeting with a sector body shortly, so we will have a chance to fully brief them on the deal. But more importantly, we say to them, okay, what is your input? So I think it's going to be quite a complex and challenging piece of work, but it's important because I think if we're not there trying to do that work with government, the risk is it will happen to us anyway. In some ways, we need to flush out what are what's Department of Health plans, what's NHS England's real plans? Where do they think it's going?

SPEAKER_00 25:01

Do you think there'll be any short-term changes or reforms by next contract negotiations, or do you think this is much more of a long-term effort?

SPEAKER_01 25:10

I r I really hope so. I think there are things on margin that could be done sooner to speed up the process of measurement, to be able to be more flexible in moving the tariff in response to what's happening in the market, and some other ways to distribute the margin across the different categories of medicines to see if there's a better way of delivering it and a fairer way to deliver it. I hope we could see some of those changes really quickly. But I think if we're talking about wholesale reform and revolution, will be more complex for them and more disruptive. So I think those elements could take quite a bit longer.

SPEAKER_00 25:53

And obviously this year the negotiations started relatively late after the GP contract came out and overran past that kind of first of April deadline. I wonder if you could tell me why you think that happened.

SPEAKER_01 26:06

Yeah, I think in our last negotiation they said we would start negotiations in September. That didn't happen because the Department of Health were wrangling with the Treasury over funding for uh redundancies in the ICBs and in NHS England. It had nothing to do with any of our contracts, it was just simply the process by which budgets were being set. I don't think the government's ever been very good at starting negotiations on time. It's clearly preferable that you would start them before a financial year begin begins so people are ready to do it, and it it does mean there's quite a rush afterwards. If you're introducing, for example, when we introduce pharmacy first, massive problems in getting the IT enabled and ready for the launch of the service, and that again delays moving forward. The one thing I would say is I wouldn't ever envy being in the GP's boat because government had got fed up with the GPs and their industrial action, and so they involved other bodies outside of the BMA in the negotiation, and they actually imposed the settlement before the GPs had even voted on it. So I think there's a cautionary tale there about when your relationships sour through industrial action, the consequences, so I wouldn't want to be in their shoes.

SPEAKER_00 27:36

And do you think having a slightly delayed negotiations actually puts more pressure to get a deal agreed?

SPEAKER_01 27:44

I don't know. I mean, I think they always come to us late and then say we want to do it really quick. And then when we say, well, okay, but we need to discuss all of these major items, they never manage to hit their own deadlines because if there's major movement and we do get major concessions, they always have to go back to ministers and to Department of Health Finance or NHS England Finance or even to the Treasury. So we kind of take it with a pinch of salt when they say we want to do it quick, because we're like, oh, so you've taken all the time in the world to get to here, and now you want to speed us through. Well, that's not a real negotiation. So we take as long as it takes, and then they always take a little bit longer than they think they will to get things cleared. So we refuse to be rushed because we still want to be heard on all of these really important critical issues for the sector. And actually, since it it was our argument that you we have to have a reform agenda, that's really important, and we got that through making the point that we had so many proposals that couldn't be dealt with during the negotiation.

SPEAKER_00 29:00

We hear a lot about this £2.5 billion funding gap from sector bodies, but I I don't hear as much about it from the government themselves. So do you think the government has plans to address this funding gap? Because it's something that came up during negotiations.

SPEAKER_01 29:15

It's always the number one thing that we're talking about with them. They accepted the findings of the Independent Economic Review. They know that there's a significant funding gap. They are concerned, really concerned, about the stability of the network, and in particular the stability of medicine supply and the impact on patients. And that's as it should be, because the number one driver for any of this is the interest of patients and communities. So they know about the funding gap. What they'd say is we're operating in a really difficult fiscal environment. You know, the NHS had a sort of 3% real terms increase. They've got, I think year-on-year, a 1.1% increase in demand with an aging population. They are Treasury expecting them to make 2% per year efficiencies and all of that. So they just sort of say, we know there's a huge funding gap there, but there are huge funding gaps across the whole of the NHS. This is all we have, and we are treating you beneficially. So they know it, they are concerned, but they would say we're doing the best that we can do for you. So it's the number one point that comes up. But I think it might be quite naive to say, this is what we're owed where when you're going to give it to us, because if we were to close the funding gap, we'd need an increase of about like 45%. I mean, you know, we have to recognise every day we hear the news that government hasn't got any money, the cost of living crisis, the impact of having to spend more on defence, not being able to pay for housing or pay, you know, uh invest in all of the other areas of the economy. That's the real world.

SPEAKER_00 31:12

And do you feel like now government has quite a good handle on the realities of community pharmacy, even if the uplift they've given is not enough to address all of the issues that exist in community pharmacy?

SPEAKER_01 31:24

I totally honestly I would say Minister Kinnock is exceptionally well briefed. He understands entirely, and sometimes it's quite hard when we're talking to uh business owners and their frustration because they say, Haven't you told them? or why haven't you told them? Well, haven't look, we provide all the evidence, we do analysis of pressure survey, we look at the outlook, the number of closures, uh, we look at consolidations, we look at the accounts of the large companies and see how many are operating with post-tax losses. That's known. They've got a grasp of it. They're doing, they would say they're doing the best they can do. We'll push them as hard as we can to do more.

SPEAKER_00 32:11

And then my last question just on the independent prescribing. We've heard that they're going to roll this out in autumn. Do you know what the next thing contractors should expect to see is? Is it kind of more guidance on how that will be implemented?

SPEAKER_01 32:28

There's a huge amount of work to be done now on all of the infrastructure requirements, clinical governance, all of that. They will, for example, they will also have to get clinical sign-off for the proposed expansion of pharmacy first conditions that could be included for IPs. So there's going to be a lot of process. We will publish all of the guidance and materials when we have them, but I guess we will also have a bit of a cautionary note which is to say contractors should think really hard about whether this is for them because we don't think it's fully funded. And in particular, you know, there is a massive concern that a consultation for an independent prescriber is set at £17. That's the same as for a pharmacist using PGDs, and that doesn't reflect the extra responsibility, accountability, and workload. So I think we'd we will provide all of that material, but I can't say what the time frame is because it has to go through some of their own NHS England clinical processes as well to be approved. I'll be impressed if they hit their deadlines.

SPEAKER_00 33:49

What is the incentive for a pharmacist to deliver those independent prescribing services if they're not being remunerated?

SPEAKER_01 33:57

Well, the issue is that if you look at the 200, I think it's 210, I'm not sure, 200 Pathfinder sites where IP has worked, the actual IPs who've been involved, the pilots, are so enthusiastic. I mean, I was up in County Durham yesterday meeting some independent prescribers, and in their pharmacy, they absolutely loved it. The satisfaction of being able to complete a patient's episode of care without having to prefer them somewhere else, update all the records, blah blah blah. They really, really have embraced the opportunity to provide high-quality clinical services to patients. So really loved that, and they've seen the value of it. And where it's worked really, really well, the GPs and other partners also have super valued it and just seen it as a triage system for them and taking workload off. So I think the incentive for them is that clinical satisfaction of using their skills, and I think that's why there is a considerable amount of disappointment about how much funding is available. But I still think independent prescribers have a significant role in private services and pharmacies. You can't use private services in every area because of the wealth of the local population things, but I still think they can be used. But that's the potential, and people can see it, and who've the people who've done it love it. If I'm honest with you, I still think though it's a challenge for us because if you've got a limited package, if that funding had been really, really significant, then the four-fifths of pharmacies who don't have independent prescribers would probably have been pretty cross because that would have meant less money for the SAF. And that's one of the questions we're going to face in the future, having services that are getting hopefully more funding, but which not everyone can provide. And I think that's going to be one of our strategic dilemmas in the future.

SPEAKER_00 36:06

Thanks, Janet. That was really interesting. I'm sure the whole sector is glad to have you on their side fighting for sustainable funding and greater recognition of the value pharmacists bring to the health service. We'll be watching closely over the coming months as you work with the government to expand independent prescribing in pharmacies and begin this program of reform.