Photo of Anirudha Panse, Citi, David Walton and Michael Hamilton, NHS Business Services Authority.

Historically, pharmacies typically received advance payment from the NHS Business Services Authority after 30 days, with the balance being paid on the following month. Under the new scheme, however, pharmacies may be eligible to receive early payment on monthly sums due to them from the NHSBSA as quickly as eight calendar days. This helps them with their cash balances and reduces their borrowing costs.

The challenge

Pharmacies receive a monthly payment from the NHSBSA comprising the following elements:

• An estimated advance payment for prescriptions submitted one month earlier (dispensed two months earlier). This payment is based on the total number of prescription items declared and the latest available average net ingredient cost for that pharmacy, less the value of prescription charges collected and declared.
• Plus the full value of the priced prescriptions submitted two months earlier (dispensed three months earlier).
• Minus the recovery of the estimated advance payment paid the previous month related to prescriptions submitted two months earlier.

The Department of Health wished to introduce a new automated scheme designed to give pharmacies earlier access to the estimated advance payments. This means that pharmacies may be eligible to receive early monthly sums due to them from the NHSBSA as quickly as eight calendar days, to help with their cash balances and reduce their borrowing costs.

The solution

As part of a broader UK government initiative aimed at helping small and medium enterprises (SMEs), this solution is a government-sponsored programme called ‘The Pharmacy Earlier Payment Scheme’. It is a collaboration between the Department of Health, The National Health Service and Citi. The scheme accelerates prescription repayments to English pharmacies to improve the pharmacy’s NHS pharmaceutical services cash flow and minimise their borrowing requirements.

The new programme means that after dispensed prescriptions are submitted and accepted by the NHSBSA, a non-recourse early settlement is now available from Citi, should the pharmacy wish to receive an early payment. The charge applied by Citi is based on the NHSBSA settling at maturity on day 60. This means that current borrowing charges are significantly reduced and Days Sales Outstanding (DSO) reduces to approximately eight days (a minimum 22-day improvement).

The implemented solution works as follows:

• NHSBSA sends the approved dispensed prescription file to Citi as soon as it is approved.
• Citi emails the enrolled pharmacies to notify them of all approved items.
• The email contains a link to the Citi platform, where the pharmacy can view the approved dispensed prescriptions.
• The pharmacy can choose to take an advance payment in full and final settlement, with a small charge applied.
• The charge is transparent and can easily be calculated independently by the pharmacy.
• The pharmacy can choose not to take early settlement and receives the full value at maturity, but has control to see the prescriptions are approved and will be paid.
• Over 90% of pharmacies settle their invoices automatically and do not have the manual processes on the Citi platform.

Best practice and innovation

The innovation surrounding this service includes:

• Streamlined pharmacy on-boarding to reduce delays in accessing cash.
• No limits on joining, either value or volume, meaning the service is accessible to all.
• Full Dispensed Prescription process redesign by the NHSBSA to ensure automation of all data exchanged.

The programme is an excellent example of a large purchasing organisation using its credit strength to protect its supply chain and reduce costs.

The innovation is the adaptation of supply chain finance from a predominantly corporate product to meet the specific needs of a public sector service.

“The programme is already very successful, is still growing and is expected to double in throughput in FY 2014, helping more and more small businesses,” concludes a senior civil servant involved in the project.