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Your pharmacy receives money from the NHS in two fundamentally different ways. Understanding the difference between these two streams, and how they interact, is the foundation of managing your pharmacy finances.
Stream 1: Remuneration
Payment for services
This is what you are paid for the work your pharmacy does, the services you provide and the professional role you play in the NHS. It includes the Global Sum and all service payments.
~£333m
Total remuneration 2025/26 (est.)
Stream 2: Reimbursement
Being paid back for medicines
You buy medicines with your own money to fulfil NHS prescriptions, and the NHS pays you back. This is like mileage expenses, but for medicines. The Drug Tariff sets the prices the NHS will reimburse.
£1bn+
Total reimbursement annually
Why this matters
Most pharmacy owners think of their income as a single number. In reality remuneration and reimbursement behave very differently. Reimbursement is largely a pass-through, but the difference between what you pay for medicines and what the NHS reimburses, known as margin, is a critical part of your actual income. Understanding this distinction helps you manage your business and interpret your monthly payments.
The Big Picture
The Total Financial Envelope
The total package is negotiated annually between CPS and Scottish Government. It must be large enough to support the viability of the entire community pharmacy network and sustain service delivery across Scotland.
How the Envelope Has Grown
2023/24
£219.5m
£80m
£100m
2024/25
£232.7m
£80m
£110m
2025/26
~£247m (est.)
£100m
£120m
Scotland is unique
The mapped guaranteed income mechanism, where money is moved from the Drug Tariff into guaranteed funding for the network, is unique to Scotland and does not feature in England, Wales or Northern Ireland. It was created as part of negotiations to simplify the old clawback arrangement and gives Scottish contractors a level of income certainty that other UK pharmacies do not have.
Stream 2
Reimbursement and the Drug Tariff
Reimbursement is the process of being paid back when you have spent your own money in the course of delivering an NHS service. You purchase medicines, dispense them to patients, and the NHS reimburses the cost once you submit the prescription.
What Makes Up the £1bn+ in Dispensings
Part 7 medicines (generics) - approximately £320m value. These are the most commonly prescribed generic medicines and are central to the margin system.
Appliances, dressings, foods and hosiery - dispensed under separate parts of the Drug Tariff with their own reimbursement rules.
Non-Part 7 lines - branded medicines and other items. Reimbursed at different rates, with a separate clawback element.
Stoma products - dispensed under a separate contract with its own terms.
Stock orders - items ordered by GPs on Form GP10A. Reimbursed at 17.5% on-cost allowance above net ingredient cost.
Zero discount lines - certain medicines are exempt from the margin calculation entirely.
Understanding Margin
Part 7, Price Adjustments and Your Margin
The key concept
Part 7 of the Drug Tariff is not just a list of prices. It is a financial tool that Scottish Government uses to deliver an agreed level of retained margin to the network each year. Prices are set at the start of the year with the expectation that, across the basket of Part 7 medicines, contractors will retain a target level of margin.
How Part 7 Works
Part 7 covers the most commonly prescribed generic medicines. Prices are set at the start of the financial year.
Whatever brand a pharmacist dispenses for a Part 7 item, the reimbursement is always at the tariff price. Endorsing does not change the Part 7 price.
The Part 7 basket is designed so that, across all lines, contractors retain a target margin. Some lines will deliver more margin, some less, but the basket as a whole should hit the target.
Part 7 also includes sub-parts 7B, 7S and 7U. The CPS Part 7 app and PDFs support your team in navigating these.
Price Adjustments - When Prices Rise
The global medicines market moves constantly. When market prices rise above tariff, the basket is disrupted and margin falls.
CPS monitors this and can apply for price adjustments when there is sufficient evidence of significant, sustained price increases.
Evidence sources include: other nations' actions, wholesaler and manufacturer intelligence, and critically, contractor reporting via the CPS Shortage Reporter at cps.scot.
Adjusted prices can be granted at any point in the month and apply for the whole month once granted. Reporting shortages is one of the most important things your team can do.
How Margin is Measured: The CPS Survey
CPS commissions a detailed margin survey each year to measure what margin is actually flowing through the network. The survey is based on pharmacy purchasing data, not wholesaler data. Selected contractors provide invoices and purchase records for a sample of Part 7 drugs. This data is used to calculate the official margin result, which Public Health Scotland then verifies.
Why Pharmacy Data?
There is clear agreement that margin must be measured using what pharmacies actually paid, not what wholesalers charged. This gives an accurate picture of real-world margin delivery.
Participation is Mandatory
If your pharmacy is selected for the survey, participation is a terms of service obligation. CPS works to validate all data rigorously and investigates outliers.
The Result Matters
The survey result informs margin sharing arrangement calculations and feeds into the following year's negotiations. Accurate reporting protects the whole network.
Stream 1
Global Sum and Your Monthly Payments
The Global Sum is the total remuneration budget for the network. It is split into individual service payment pools, each of which is distributed to contractors based on activity, registration, or a flat rate. The 2024/25 Global Sum was £232.7m, uplifted 6% from the previous year.
2024/25 Payments
Complete Payment Schedule at a Glance
Important: These are the 2024/25 figures from PCA(P)(2024)28. The 2025/26 reimbursement circular PCA(P)(2025)07 confirms the mapped guaranteed income increases to £100m and guaranteed minimum increases to £120m. Full remuneration figures for 2025/26 will be confirmed in a separate circular when negotiations conclude.
Your Safety Net
The Guaranteed Minimum Income
The Guaranteed Minimum Income is the floor that protects the network. If margin delivery falls below this level across the network in any year, Scottish Government and Health Boards are responsible for making up the deficit.
What it Protects
If the Part 7 basket delivers less margin than the guaranteed minimum, the shortfall must be funded by Scottish Government or Health Boards.
It is measured across the whole network, not per pharmacy. Individual pharmacies experience margin differently.
CPS monitors delivery monthly against this threshold and will negotiate support if margin is not being delivered in-year.
Cashflow Protection
Q4 of 2022/23 highlighted that margin can fall significantly within a year even if the annual total is on track.
CPS negotiated a cashflow protection mechanism so that if margin is not delivering monthly or quarterly, support can be provided in-year rather than waiting for the year-end calculation.
This is monitored regularly and further action is considered if the guaranteed minimum is not being delivered in any given period.
Practical Finance
Managing Your Pharmacy Cashflow
Understanding Your Advance Payments
Most monthly payments are made as advance payments, calculated as 100% of your mean monthly payment over the previous 12 months. You are then reconciled against actual activity each month.
February and March advances are based on your 12-month rolling mean.
New contractors start at a base advance of (days open / 31) x £18,000 for the first month.
If you take over from an existing contractor, you inherit their dispensing history for advance payment purposes.
Key Cashflow Actions
Report drug shortages promptly via the CPS Shortage Reporter at cps.scot. This is the primary mechanism for price adjustments that protect your margin.
Achieve 80% eClaims to receive your Service Efficiency Payment. Below this threshold you receive nothing for that month.
Check your Dispensing Pool payment against your dispensing activity. If you believe your advance does not reflect your activity, contact PHS.
If you are an Essential Small Pharmacy and your Establishment, Dispensing Pool and Pharmaceutical Needs Weighting total falls below £4,412, you should receive a top-up payment automatically.
Further Resources
Financial Framework
Full detail on every payment line, including eligibility, calculation and current values. Available in the members area.
CPS Part 7 App
Supports your pharmacy team in identifying Part 7 lines, checking tariff prices and understanding adjusted prices.
Shortage Reporter
Report individual lines or bulk shortages at cps.scot. This is critical to CPS's ability to secure price adjustments that protect network margin.
Community Pharmacy Scotland - Financial Module for Contractor Owners - 2025/26
