The costs incurred by pharmacies in England of providing community pharmacy services average £243,364-£245,407 per pharmacy branch, according to new estimates from PricewaterhouseCoopers (PwC).

This figure was calculated thus: total NHS cost = operating costs + fair return on investment, says PwC, reporting on the findings of a Cost of Service Inquiry (COSI) which it has conducted for the Department of Health (DH).

The study also finds wide variations in the allocated NHS costs per fee item dispensed, depending on the type of pharmacy. While the average is a little over £3.00,the figure is lower for independent pharmacies but for large multiples it is close to £5.00, it says.

In October 2009, the DH asked PwC to conduct the COSI, estimating the costs, currently and within a five-year timeframe, incurred by pharmacies in England for providing the community pharmacy services defined under the national NHS community pharmacy contractual framework (CPCF). The results of this work are intended to inform negotiations between the DH and the Pharmaceutical Services Negotiating Committee (PSNC) regarding the appropriate level of funding required to provide NHS pharmaceutical services to patients.

Responding to the COSI report, the DH and PSNC say that while PwC's findings provide "important evidence" to inform future negotiations on the future funding for community pharmacy, there are a number of further considerations to take into account. These include:

- negotiations around the "reasonableness" of the PwC estimates and any adjustments, for example in respect of the extent to which the NHS should pay for different categories of cost, as well as uprating the COSI findings to the current year - some of PwC's estimates are for the year ended March 2010;

- reviewing the medicine margin arrangements, taking into account recommendations made by the National Audit Office (NAO) in March 2010, such as extending the medicine margin survey beyond independent pharmacies to other pharmacy types, with a consistent approach on cost of service and making more timely adjustments to medicine margin to reduce regulatory lag; and

- reviewing the distribution of CPCF funding to incentivise and support high-quality and efficient services.

"This means that the overall outcome cannot be judged from the COSI report alone. Nevertheless, as the report is complete, it was considered appropriate for it to be published at this stage," say the DH and the PSNC. 

"The report reflects costs reported at the time of the inquiry and it is not yet updated to take account of the changes since then - of which there are many," says the PSNC. Nevertheless, it also describes the COSI report as "an important document and required reading for all contractors," and the Committee will be running a series of meetings across the country in July and August to enable contractors to discuss it with the PSNC's chief executive, Sue Sharpe, and other members of the Committee team.

The DH and the PSNC add that they are already "in active discussion" about the future funding for community pharmacy, but that reaching conclusion on all these matters "is likely to take some time."