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Thinktank the Office of Health Economics (OHE) has warned that margin write-off agreed in the recently announced 2026/2027 pharmacy contract “will be on the lower end of what is needed and will possibly not cover all … costs” such as worsening supply chain issues, increased items and staff overheads.
The contract, announced on 29 May 2026, revealed that the government agreed to write off up to £239m of margin funding over-delivery accrued up to March 2026, and it introduced an overall funding budget for provision of the community pharmacy contract framework (CPCF) and Pharmacy First of £3.636bn.
This is a £340m, or 10.3%, uplift in nominal value from the 2025/2026 contract, but in real terms equates to just £273m, the Office of Health Economics said. It added that this covers just 11% of the shortfall identified by the NHS-commissioned analysis of community pharmacy in 2025 — which the Office of Health Economics estimates is now at £2.5bn in real terms.
At a press briefing on the contract, held on 2 June 2026, Janet Morrison, chief executive of Community Pharmacy England, said of the margin allocation and write-off: “We don’t really know if that number is going to stabilise the medicines supply.”
Given “the challenges in the global market and the impact potentially on the medicine supply chain”, Morrison said CPE would “need to keep a really close eye on what’s going on” and continue conversations with government about whether funding for medicines was enough.
“The evidence shows some people are really struggling to regularly make their wholesaler bills. Some people are really struggling in terms of being able to keep the cash flow and respond to workforce costs and the rising costs of general inflation. So we’re going to keep an eye on it,” Morrison added.
Morrison said the negotiator had agreed the contract on the condition of further discussions about longer-term reform — for which it had a date planned to meet with government “shortly”.
She said the funding agreed in the contract was “a small start” to lay the foundation for future services, including prescribing.
OHE chief executive Graham Cookson exclusively told The Pharmaceutical Journal: “The problem is that a single funding pot is being asked to do three things at once: address years of real-terms cuts, cover current cost inflation and fund the much-needed expansion into new clinical services.
“This current injection of funds must be protected in order to pay for critical backfill of services. At the same time, funding has to grow to finance new services like prescribing. And eventually, we need to reach a point where we can diversify funding sources, so that we’re not constantly having to fire-fight. Addressing the structural underfunding of the sector can’t come at the expense of new services for patients,” Cookson added.
The 2026/2027 contract includes the addition of new prescribing pathways within Pharmacy First, contraception and hypertension services.
Henry Gregg, chief executive of the National Pharmacy Association, said: “This confirms that last week’s uplift, although a good start, falls significantly short of plugging the gap facing pharmacies across the country between running NHS services and the actual cost of doing so.
“We estimate that due to rising costs, this gap could in fact be even wider than suggested.
“The OHE is right to say that the funding of important new clinical services for patients should not come at the expense of overall core funding which pharmacies depend on.
“If we are to have a genuinely sustainable pharmacy sector that is able to expand the number of services it offers patients, we must have real reform to the pharmacy contract rather than simply putting money into a system that we believe is failing and unfair to many of our members.”
A spokesperson for the Department of Health and Social Care (DHSC) said the funding uplift “recognises the financial strain pharmacies, like many businesses across the country, are facing from inflation caused by global events”.
“This government recognises the vital role of pharmacists, which is why for the third year running community pharmacies have received one of the biggest funding uplifts across the NHS,” they added.
