An £87m increase in pharmacy contract funding for 2009/10 has been announced, a 3.9% increase on last year's funding but there will be no increase in fees. Volume thresholds for the establishment payment and the practice payment will increase by 3%.

This follows the announcement that the medicines margins survey disclosed that significant excess margin had been achieved beyond the £500 million allowed.  To recover this the average item value will be reduced by 9.4 pence per item achieved through a reduction in Category M reimbursement prices with effect from 1st October.

In addition, the Department of Health has agreed to make substantial provisions for a number of one-off costs pharmacy contractors are facing, including preparing for EPS2, information governance, and business continuity planning, to sustain the effective delivery of community pharmacy services. Details of these arrangements will be finalised over the coming weeks.