What will the community pharmacy reform programme change?

What is the reform programme?

The reform programme is a commitment, not a body. It appears in the 2026/27 Community Pharmacy Contractual Framework (CPCF) settlement published on 29 May 2026. The signatories were the Department of Health and Social Care (DHSC), NHS England and Community Pharmacy England (CPE). The relevant sentence is short. CPE and the government have committed to "work jointly on a programme of reform" that recognises the challenges facing the sector and ensures "a pharmacy network that is fit for the future".

CPE's own account is more specific. Its briefing to contractors says the government confirmed "a joint programme of reform with Community Pharmacy England". The programme is meant "to inform future strategy for community pharmacy and input to the next contractual negotiations and beyond". Its news statement says the work will explore "alternative contract, funding and reimbursement models". And it says the commitment "was a significant factor in the Committee's decision to accept the settlement".

That last point explains why the programme matters. CPE accepted a deal it called insufficient, in part because of a promise to talk about the model itself. Peter Cattee, who chairs CPE's funding and contract subcommittee, put it plainly: "My focus is now firmly on delivering the shared reform agenda. It is the most important part of this settlement". He also set out the agenda as CPE sees it. Review the current funding model. Tackle loss-making dispensing. Make core NHS services economically sustainable. Engage on network capacity and future planning. The money in the deal is covered in what the 2026/27 pharmacy contract actually pays; this article is about the promise attached to it.

What is on the table?

Seven subjects have been named by one side or the other. None has a proposal attached yet. The table gathers them from the settlement document, CPE's briefing 009/26 and The Pharmaceutical Journal's account of the negotiation.

Two things are missing from that list. There is no mention of the total funding envelope, which stays a matter for annual negotiation. And there is no mention of the fee-for-item model itself. The single activity fee, at £1.52 from May 2026, is the assumed base. Reform, on the evidence so far, is about how medicines are reimbursed and how margin is shared, not about replacing the dispensing fee.

CPE has also opened the door wider than the settlement did. Its statement calls on the sector "to come together on a radical programme of reform". It says it will invite all sector bodies to put forward ideas, with regional roadshows through June and July 2026. That is an invitation, not a scope. What lands in the programme depends on what owners and their representatives put in.

Why has reimbursement come to a head?

Because the cost of medicines has outrun the mechanism that reimburses them, and the sector's finances have no cushion left to absorb the difference. Three sets of figures show it.

First, volume and cost. NHSBSA's Prescription Cost Analysis, published on 4 June 2026, records 1.30 billion items dispensed in the community in England in 2025/26 at a cost of £11.6bn. Items rose 3% on the year and costs 4%. Every extra item earns the same fee; every price rise the Drug Tariff does not track is absorbed by the pharmacy until a concession catches up.

Second, concessions. The Pharmaceutical Journal reported price concessions at a three-year high as the deal was signed. Dr Olivier Picard, chair of the National Pharmacy Association, said in May that he had counted 95 concession lines in March 2025 and 216 a year later. Even after a concession price was revised, he said, he was still dispensing some lines at a loss. For the mechanism, see how price concessions work and why pharmacies dispense at a loss.

Third, the economics. DHSC and NHS England commissioned an analysis from Frontier Economics and IQVIA, published in October 2024. It found 47% of pharmacy branches were not profitable at EBITDA level. It estimated the full economic cost of the service at £5.063bn in 2023/24, against £2.755bn of funding. DHSC's own written answer of 24 February 2026 put funding £791m below its 2015/16 value in real terms. A network in that position cannot carry losses on individual lines the way it did a decade ago. Whether the 2026/27 rise changes that is examined in whether the 10% funding uplift is enough.

How is margin distributed today?

Through a target, a price list and a survey, none of which looks at an individual pharmacy. DHSC allows the sector a fixed sum of retained margin each year: £900m in 2025/26 and £1.1bn in 2026/27. It delivers that sum mainly through Category M, which sets the reimbursement prices of more than 600 generic medicines. Category M prices are revised every quarter using manufacturers' sales data and NHSBSA dispensing volumes, with a built-in correction for any over- or under-recovery.

What you keep is the gap between the reimbursement price, after the discount deduction, and your invoice price. The discount deduction has been a fixed rate by category since October 2022: 20% on generics, 5% on brands and 9.85% on appliances. Before that it was a sliding scale from 5.63% to 11.5% based on monthly reimbursement. It was abandoned after research found no evidence that the discounts pharmacies obtained correlated with their monthly reimbursement.

Two distributions are at issue, and they are different problems. Between pharmacies, margin depends on what each contractor pays, its product mix and whether its high-volume lines are the ones Category M treats generously that quarter. The fixed deduction takes 20% off a generic whether you obtained that discount or not. Along the supply chain, the question is how much of the money DHSC counts as pharmacy margin is captured by manufacturers and wholesalers before it reaches a dispensary. The settlement's phrase, "distribution of medicine margin across the supply chain", points at the second. CPE's agenda points at both.

What has DHSC already changed on its own?

Quite a lot, and without agreement. DHSC has been changing reimbursement in stages. The fixed discount deduction arrived in October 2022. Category H, which stems from a 2019 consultation on reimbursement reform and started in March 2026, is the latest change and the most contested.

Category H is a new category in Part VIIIA of the Drug Tariff. It covers a subset of Category C medicines with at least two manufacturers listed under the same generic description. DHSC announced it in December 2025 and moved 11 products in March 2026, with more than 100 multi-source drugs meeting its criteria. Prices are set from the actual purchase, sales and volume data DHSC collects under the Health Service Products (Provision and Disclosure of Information) Regulations 2018. They are updated in March, June, September and December using data three to six months old.

The margin design is the point to notice. CPE's briefing records that Category H prices "will include an element of retained margin". But that element "will not be adjusted to achieve the annual amount of retained margin under the Community Pharmacy Contractual Framework". In other words, Category H margin sits outside the £1.1bn steering mechanism. Concessions still apply. CPE objected to the timing and warned that the new prices "will introduce price volatility and potentially draw more drugs into the price concession process". Ministers proceeded anyway.

That is the context for the joint programme. DHSC does not need it to change the Drug Tariff; it has the power to impose. The programme gives CPE a seat at the design stage, and it gives DHSC a sector that has agreed to be consulted rather than one that objects after the fact.

Will pharmacies stop dispensing at a loss?

Not under the 2026/27 deal, and not before the programme produces something. The settlement changed no reimbursement rule. A pharmacy that pays more than the Drug Tariff price for a medicine earns the same £1.52 fee and carries the loss unless a concession is granted for that month. Even then, the concession price may sit below what it paid.

The problem has a regulatory edge. The terms of service require a pharmacy to supply with reasonable promptness. CPE's briefing lists "supply with reasonable promptness (which links to dispensing at a loss)" among the topics for future regulatory review. The tension is obvious: an owner is obliged to supply a medicine that the NHS will reimburse below cost. Any reform has to reconcile the duty with the price.

Several routes exist, and none has been chosen. Concessions could be granted earlier or set closer to invoice prices. Reimbursement for shortage lines could move to a purchase-price basis. Category H-style pricing from real sales data could be extended, which is DHSC's direction but not CPE's preference. Or the terms of service could be amended so that a pharmacy is not obliged to supply at a loss. The honest answer is that the programme could change any of these and has so far committed to none.

When will anything happen?

There is no published timetable. The settlement commits both sides to work jointly and stops there. CPE's briefing places implementation from 2027/28 onward. Everything with a date is either a regulatory change already agreed or an existing review.

The last row is the one that counts. Whatever the programme produces has to be ready in time to shape the 2027/28 settlement, or it becomes a promise carried into another year. The Pharmacy Access Scheme review has the same deadline; see what changes to the Pharmacy Access Scheme in 2027/28.

What should an owner do now?

Build the evidence, because reimbursement reform will be argued with data. The sector's case for change rests on what pharmacies actually pay against what the Drug Tariff reimburses, and that record sits in your own invoices.

It is rare for both sides to agree to look at the model rather than the number, and rarer for the sector to be asked what the model should be. The programme could produce a reimbursement system that tracks real costs. It could also produce a report. For the wider picture on what next year holds, see what is coming for UK pharmacy in 2027.

Key takeaways

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