Background Information and Methodology

November 2024

1. Background information

Prescribing Costs in Hospitals and the Community (PCHC) shows the Actual Costs paid for drugs, dressing, appliances, and medical devices that were issued and used in NHS hospitals in England, and the Net Ingredient Cost for (NIC) drugs, dressings, appliances, and medical devices that were issued in England.

PCHC includes:

prescriptions issued by GP practices and community prescribers in England that were dispensed in the community in the UK (excluding Northern Ireland)
prescriptions issued by Hospitals in England that were dispensed in the community in the UK (excluding Northern Ireland)
prescriptions issued by dental practitioners that were dispensed in the community in the UK (excluding Northern Ireland)
medicines prescribed and dispensed in the Adult Secure Estate
medicines issued in hospitals in England that were dispensed via the hospital pharmacy, homecare companies and outsourced out-patient pharmacy partnerships

PCHC excludes:

prescriptions issued through Armed Services health services in England commissioned by NHSE but not dispensed in the community
medicines issued in hospital in England but not managed via the hospital pharmacy service
dressings and devices issued in secondary care, since supply of these is usually made via the NHS Supply Chain
prescriptions that were issued but not presented for dispensing
prescriptions that were not submitted to the NHSBSA for processing and reimbursement
prescriptions issued by dispensing doctors
items personally administered by medical professionals
private prescriptions

This document will be updated as the statistical methodologies and underlying business processes change over time. It will remain relevant to the most up to date releases of the series.

1.1. Data included

1.1.1 Secondary care medicines data

The secondary care data used in this publication is provided by website. Data is from NHS England sites only and is provided under the agreement entered into by Trusts on the funded licence of RX-Info Define by NHS England.

This secondary care medicines data contains processed pharmacy stock control data in Dictionary of Medicines and Devices (dm+d). standardised format from all NHS Acute, Teaching, Specialist, Mental Health and Community Trusts in England.

Rx-info process data from many sources, with individual provider Trusts having up to 14 data feeds, making up their complete data picture. The main sources of the data are loaded from hospitals daily in most cases, but other sources appear monthly and in arrears of up to 6 weeks.

This data set does not contain records for prescriptions issued by hospitals using FP10(HP) forms but dispensed in the community pharmacy network.

1.1.2 Primary care medicines data

The primary care data used in this publication is taken from the NHSBSA Enterprise Data Warehouse (EDW). This data is collected as a by-product of the process used by dispensing contractors to submit fulfilled prescriptions to the NHSBSA for reimbursement.

Prescription data is collected by the NHS Business Services Authority (NHSBSA) for the operational purpose of reimbursing and remunerating dispensing contractors for the costs of supplying drugs and devices, and providing essential and advanced services, to NHS patients. This data is also used by commissioners, providers, government, academia, industry, and media. It is used to monitor medicine uptake, to allow public scrutiny of prescribing habits, to inform local and national policy, and in academic research.

Prescriptions are issued by GPs and other authorised prescribers such as nurses, dentists, and allied health professionals. Prescriptions issued in in hospitals are either fulfilled by the hospital pharmacy or dispensed in the community.

Prescriptions are issued as either a paper form or an electronic message using the Electronic Prescription Service (EPS). EPS prescriptions make up most of prescribing and dispensing activity carried out in England, accounting for 89% of all prescriptions dispensed in England during 2023/2024. EPS messages are submitted by the dispensing contractor once the prescription has been fulfilled and issued to the patient. The message is initially sent to the NHS Spine, maintained by NHS Digital, and is then sent to the NHSBSA for processing.

Paper prescriptions are compiled by the dispensing contractor and sent to the NHSBSA at the end of each month by secure courier. These paper prescriptions are then scanned and transformed into digital images, which are passed through intelligent character recognition (ICR) to extract the relevant data. Most paper forms go through ICR without any manual intervention. However, there are cases where operator intervention is required to accurately capture information from the prescription form, for example if the form is handwritten or information is obscured by a pharmacy stamp.

After this processing for the reimbursement and remuneration of dispensing contractors, data is extracted from the NHSBSA transactional systems, alongside data from the NHSBSA drug and organisational databases, and loaded into the NHSBSA Enterprise Data Warehouse (EDW), using an extract, load and transform (ETL) process. The ETL arranges the data into a form that is more useful and easier to use than the raw form. The EDW is the source for many of the NHSBSA reporting systems and data extracts, including ePACT2, eDEN, eOPS, the English Prescribing Dataset (EPD), and Official Statistics publications.

Primary care medicines data in this publication is limited to only prescription items that have been dispensed by a community pharmacy or appliance contractor in England. Items dispensed by dispensing doctors or submitted for reimbursement via a personal administration account have been excluded.

The primary care data includes all prescriptions issued in England and subsequently dispensed in the community in England, Scotland, Wales, or the Channel Islands. The data excludes any prescriptions issued through Armed Services health services in England commissioned by NHS England but not dispensed via a community pharmacist.

1.1.3 Medicines prescribed and dispensed in the Adult Secure Estate

By Adult Secure Estate we mean adult prisons and detention centres. Health services to patients who are in prison or detention are supplied under contract commissioned by NHS England Specialised Commissioning Directorate. A breakdown of spend by BNF chapter is not currently available.

1.2. British National Formulary (BNF) hierarchy

These statistics use the therapeutic classifications defined in the BNF to group medicines together based on their primary therapeutic indication. The NHSBSA uses and maintains the classification system of the BNF implemented prior to the release of edition 70, including the six pseudo BNF chapters (18 to 23) created by NHS Prescription Services used to classify products that fall outside of chapters 1 to 15. Most of the presentations held in these pseudo chapters are dressings, appliances, and medical devices. Each January the NHSBSA updates the classification of drugs within the BNF hierarchy, which may involve some drugs changing BNF codes and moving within the hierarchy.

The BNF has several levels. In descending order from the largest grouping to smallest they are chapter, section, paragraph, sub-paragraph, chemical substance, product, and individual presentation. Presentations in chapters 20 to 23 do not have assigned BNF paragraphs, sub-paragraphs, chemical substances, or products.

Within the secondary care data which is provided by Rx-Info the BNF classification is obtained from an extract of the dm+d.

1.3. Geographies included in this publication

The primary care data geographies used in this publication are based upon NHSBSA administrative records, not geographical health boundaries as defined by the Office for National Statistics (ONS). These administrative records more closely reflect the operational organisation of dispensing contractors, than do other geographical data sources such as the National Statistics Postcode Lookup (NSPL).

The NHS England Regions and Integrated Care Board (ICBs) shown in the statistical summary tables of this release are based on the NHS organisational structure at the end of July 2022. Organisational changes implemented in July 2022 have resulted in the replacement of Sustainability and Transformation Partnerships (STPs) with Integrated Care Boards (ICBs).

Within the secondary care data ICB is provided by Rx-Info, who use NHS Digital Organisation Data Service (ODS) as their source.

This publication presents the ICB names as described by the Office of National Statistics (ONS) and not as how they are stored in NHSBSA or Rx-Info data. This is different from other NHSBSA publications.

2. Methodology

2.1 Changes to the methodology

This November 2024 edition of the publication uses an updated Actual Cost for prescription items dispensed in the community. Between October 2022 and January 2024 the discount deduction applied to pharmacy contractors transitioned to new arrangements. You can see more information about these transitional arrangements and the new arrangements in Part V of the Drug Tariff for England and Wales.

Actual Cost is now defined to be basic price of the drug minus the National Average Discount plus Payment for Consumables plus Out of Pocket Expenses plus Payment for Containers. Payment for Consumables was previously known as container allowance. You can read more about this on this page of the NHSBSA website.

This change to the definition of Actual Cost means that some figures for the years 2022/2023 differ from those reported in previous editions. For example, the total Actual cost for 2022/2023 reported in this current edition is 0.2% less than the equivalent number reported in the previous edition.

3. Strengths and limitations

3.1. Strengths

The main strengths of these statistics are the completeness of the primary care dataset, and the accuracy of information captured during processing activities carried out by the NHSBSA. The primary care dataset covers all prescribing dispensed in the community in England, and captures data in a consistent way across the whole dataset. All the primary care data has come from the same administrative source. The NHSBSA requires this administrative data to be as accurate as possible because it is used for paying dispensing contractors for services provided to NHS patients.

The NHSBSAs transition to a single source of drug information in April 2020 increased the accuracy of these statistics. Known issues and limitations with the previous legacy system were eliminated. Items previously captured as unspecified drugs are now captured correctly, and the capture of quantity information about prescribed drugs is now more accurate. Also, due to the editorial policy of DM+D, there is now greater consistency in the naming of presentations.

Rx-Info have ‘normalised’ the secondary care data across the different trusts. This makes it comparable format across the trusts. The secondary care data is available from one single location, their Define system.

3.2. Limitations

3.2.1 Exclusions

These statistics exclude prescriptions that were issued but not presented for dispensing and prescriptions that were not submitted to the NHSBSA for processing and reimbursement. Prescriptions issued by dispensing doctors, items personally administered by medical professionals and private prescriptions are also excluded, and so do not give a full picture of all prescribing in England.

3.2.2 Undefined Data

The secondary care dataset contains records for drugs, dressing, appliances, and medical devices issued within hospitals in England but not included in the BNF. These are drugs manufactured as specials, dressing, appliances and medical devices, which are not listed in the Dictionary of Medicines and Devices (dm+d).

3.2.3 Central Rebates

Central rebates are from arrangements NHS England have agreed with pharmaceutical companies following successful negotiations to commission a variety of treatments both in the cancer drugs fund (CDF) and in routine commissioning. This includes treatments for both rare diseases and more common conditions. Owing to commercial sensitivity, the central rebate figures are only available at a national level. It is not possible to calculate this down to the ICB and BNF Section levels.

3.2.4 Secondary Care Data

Due to commercial confidentiality, it is not possible for us to present the secondary care data any lower then BNF Section. Actual Costs include any discount, but discounts on individual drugs are commercially sensitive and so are not publicly available. However, the discounts on some drugs are significant.

3.3. Uses of PCHC

See our Official Statistics guidance table for a short summary of the key criteria covered by PCHC. To expand on the points outlined in that document, see the below summaries for suitable/unsuitable uses for PCHC.

3.3.1 PCHC can be used for:

obtaining a national view of costs for prescriptions dispensed in hospitals and the community in England across the calendar year
analysis of cost trends in by BNF Chapter, BNF Section and ICB
allowing public scrutiny of national prescribing habits

This release includes supporting summary data tables presented in Excel. These tables enable analysis of some key areas of interest.

3.3.2 PCHC cannot be used for:

obtaining breakdowns to more granular geographies than ICB
obtaining breakdowns to more granular BNF levels than BNF Section
obtaining a final figure representative of the total cost to the NHS; the Net Ingredient Cost (NIC) for prescriptions issued in primary care does not include all the elements that contribute towards the final cost to the NHS, for example remuneration to contractors, discounts, advance payments, and patient charges
analysing the method of dispensing

Note that, for prescriptions issued in primary care, we assume that the items claimed for on the prescription forms are the same as those dispensed to patients. Whilst it would break the dispensing contractor terms of service to dispense another item (except in instances where a Serious Shortage Protocol is in place), the NHSBSA has no way of confirming what has in fact been dispensed.

For medicines issued in hospitals, the quality of the data depends upon the accurate submission by hospitals to Rx-Info. Note that hospitals continue to submit data to Rx-Info after the dataset is extracted for this publication. This means that the data held by Rx-Info updates while our extract does not. The updated data does however appear in the subsequent edition of this publication, as that will work from a new data extract.

4. Revisions

Any revisions that we make to these statistics will be made in line with our Revisions and Corrections policy. Any significant errors that are identified within these statistics after their publication that would result in the contradiction of conclusions previously drawn from the data will be notified of prominently on our website and any other platforms that host these statistics, corrected as soon as possible, and communicated clearly to users and stakeholders.

In line with principle Q2.5 – Sound methods, within the Code of Practice of Statistics and our Revisions and Corrections policy we are releasing data from 2016 to 2020 with this publication to maintain as consistent a time series as possible for users after the changes in methodology have been applied to these statistics.

6. Quality of the statistics

We aim to provide users of this publication with an evidence-based assessment of its quality and the quality of the data from which it is produced. We do so to demonstrate our commitment to comply with the UK Statistics Authority’s (UKSA) Code of Practice for Statistics, particularly the pillar of Quality and its principles.

Q1 Suitable data sources – Statistics should be based on the most appropriate data to meet intended uses. The impact of any data limitations for use should be assessed, minimised, and explained.

Q2 Sound methods – Producers of statistics and data should use the best available methods and recognised standards and be open about their decisions.

Q3 Assured quality – Producers of statistics and data should explain clearly how they assure themselves that statistics and data are accurate, reliable, coherent, and timely.

This is an assessment of the quality of these statistics against the European standard for quality reporting and its dimensions specific to statistical outputs, particularly:

Relevance
Accuracy and reliability
Timeliness and punctuality
Accessibility
Coherence and comparability

These principles guide us and are complimented by the UKSA’s regulatory standard for the Quality Assurance of Administrative Data (QAAD). You can view our QAAD assessment of prescription data on our website.

6.1. Relevance

This dimension covers the degree to which the product meets user need in both coverage and content

The PCHC publication, released annually, summarises the total costs of all NHS prescriptions which have been issued in England for the preceding financial years. The statistics also give cost breakdowns to both BNF Section and ICB levels. The statistics cover from the 2019/20 financial year onwards, allowing the analysis of cost trends over time. We believe that they can be used to inform policy decisions at a national and local level, by the public to scrutinise prescribing habits, and by academia and applied health researchers for matters relating to public health.

We will be gathering feedback from users of these statistics on an on-going basis to help shape them and ensure that they remain relevant and of use.

6.2 Accuracy and Reliability

This dimension covers the statistics proximity between an estimate and the unknown true value

6.2.1. Accuracy

These statistics are derived from data collected during processing activities carried out by the NHSBSA to reimburse dispensing contractors for providing services to NHS patients. Prescriptions are scanned and subject to rigorous automatic and manual validation processes to ensure accurate payments are made to dispensing contractors. Where electronic prescriptions are used the scope for manual intervention and input into data is reduced dramatically.

The figures used are collected as an essential part of the process of reimbursing dispensing contractors (mainly pharmacists and dispensing doctors) for medicines supplied. All prescriptions which are dispensed in England need to be submitted to the NHSBSA if the dispenser is to be reimbursed, and so coverage should be complete. Due to the manual processes involved in the processing of prescriptions there may be random inaccuracies in capturing prescription information which are then reflected in the data. NHS Prescription Services, a division of NHSBSA, internally quality assures the data that is captured from prescriptions to a 99.70% level via a statistically valid random sample of 50,000 items that are reprocessed monthly. The latest reported Prescription Processing Information Accuracy from NHS Prescriptions services, which covers the 12 month period August 2023 to July 2024, is 99.90%.

6.2.2. Reliability

Within the primary care data, as there is a manual data entry element to this system then inevitably some small errors may occur in the data. The NHSBSA and NHS Prescription Services take measures to minimise these errors. This includes the presence of a permanent dedicated accuracy team within NHS Prescription services which provides feedback to operators around any errors identified to help prevent regular occurrence.

6.3. Timeliness and punctuality

Timeliness refers to the time gap between publication and the reference period. Punctuality refers to the gap between planned and actual publication dates

The PCHC publication is published annually. The publication date is determined by the availability of the datasets.

Primary care data is dependent on the completion of processing by NHS Prescription Services, allowing adequate time for the compilation and quality assurance of the publication. The data is usually available six weeks after the end of the month that the data relates to.

Secondary care data is collated from hospital trusts by Rx-Info. Rx-Info run an annual exercise where data is finalised for a financial year and any further ‘backtracking’ cannot occur, this occurs in July every year. We will look to bring the release forward in the year where available resource allows and in line with user feedback.

Future releases will be announced in advance in line with our statistical release calendar.

6.4. Accessibility and clarity

Accessibility is the ease with which users can access the data, also reflecting the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of the metadata, illustrations, and accompanying advice

The statistical summary narrative for this publication is presented as an HTML webpage, with supporting documentation also released in HTML format. Summary data and additional analysis is presented in tables in Excel files.

The R code used to produce the publication will also be made available from the NHSBSA GitHub in due course.

Clarity

A glossary of terms is included in this document.

6.5. Coherence and comparability

Coherence is the degree to which data have been derived from different sources or methods but refer to the same topic or similar. Comparability is the degree to which data can be compared over time and domain

6.5.1. Comparisons over time

Changes to the figures displayed in these statistics over time should be interpreted in the context of the wider prescribing system, including the availability of medicines, release of new medicines and their costs, and changing national and regional prescribing guidelines.

These statistics use the BNF therapeutic classifications defined in the British National Formulary (BNF) using the classification system prior to BNF edition 70. Each January the NHSBSA updates the classification of drugs within the BNF hierarchy which may involve some drugs changing classification between years of PCA data. This data is therefore correct at the time of publication but may differ in the following year. The NHSBSA publishes the latest BNF information each year via its information systems.

The data for secondary care is provided by Rx-Info. Rx-Info use an extract from the dm+d to obtain BNF classifications.

7. Glossary of terms used in these statistics

Actual Costs within primary care

Actual Cost is the cost recharged to NHS commissioners for the provision of drugs, appliances, and medical devices by dispensing contractors. It is calculated as the basic price of the drug (NIC) minus the National Average Discount (NAD) plus Payment for Consumables (PCSM) plus Out of Pocket Expenses (OOPE) plus Payment for Containers (PCTN). Using the National Average Discount Percentage (NADP), this can be written as :

Actual cost = NIC × (1 – NADP) + PCSM + OOPE + PCTN

The NADP is calculated using the discount rates applied to individual dispensing contractors according to the Drug Tariff for England and Wales for Pharmacy and Appliance contractors and the General Medical Services Statement of Financial Entitlement Annex G Part 1 for Dispensing Doctors and Personal Administration accounts.

Actual cost is not reflective of the payment made to a dispensing contractor for the cost of the individual drugs dispensed and excludes other fees paid that a prescription item may attract.

Actual Costs within secondary care

Actual amount paid by the NHS for the medicines, taking into account any local, regional or national contract prices, Patient Access Scheme (PAS) or commercial access agreements.

British National Formulary (BNF)

PCHC data uses the therapeutic classifications defined in the British National Formulary (BNF) using the classification system prior to edition 70. NHS Prescription Services have created pseudo BNF chapters for items not included in BNF chapters 1 to 15. The majority of such items are dressings and appliances, which have been classified into six pseudo BNF chapters (18 to 23). Information on why a drug is prescribed is not available in this dataset. Since drugs can be prescribed to treat more than one condition, it may not be possible to separate the different conditions for which a drug may have been prescribed. The BNF has multiple levels, in descending order from largest grouping to smallest: chapter, section, paragraph, sub-paragraph, chemical substance, product, presentation. Presentations in chapters 20-23 do not have an assigned BNF paragraph, sub-paragraph, chemical substance or product.

Costs at list price – net ingredient cost

In British pound sterling (GBP). The amount that would be paid using the basic price of the prescribed drug or appliance and the quantity prescribed, sometimes called ‘Net Ingredient Cost’ (NIC). The basic price is given either in the Drug Tariff or is determined from prices published by manufacturers, wholesalers, or suppliers. Basic price is set out in Parts VIII and IX of the Drug Tariff. For any drugs or appliances not in Part VIII, the price is usually taken from the manufacturer, wholesaler, or supplier of the product.

Dispensed in the community

When a prescription item is dispensed in the community this means that it has been dispensed by a community pharmacy, appliance contractor, dispensing doctor, or is a personally administered item.

Dispensed in hospitals

When a prescription item is dispensed in a hospital this means that it has been dispensed via the hospital pharmacy, homecare companies and outsourced out-patient pharmacy partnerships.

Integrated Care Board (ICB)

Integrated care boards (ICBs) are a statutory NHS organisation responsible for developing a plan in collaboration with NHS trusts/foundation trusts and other system partners for meeting the health needs of the population, managing the NHS budget and arranging for the provision of health services in the defined area. They took over the functions of Sustainability and Transformation Partnerships (STPs) in July 2022.

Population estimates

The Office for National Statistics (ONS) produces annual estimates of the resident population of England and on 30 June every year. The most authoritative population estimates come from the census, which takes place every 10 years in the UK. Population estimates from a census are updated each year to produce mid-year population estimates (MYEs), which are broken down by local authority, sex and age.

Prescription/prescription form

A prescription (also referenced as a prescription form) has two incarnations: a paper form, and an electronic prescription available via EPS. A paper prescription can hold up to a maximum of ten items. A single electronic prescription can hold a maximum of four items.

8. Feedback and contact us

Feedback is important to us; we welcome any questions and comments relating to these statistics.

Please quote ‘PCHC – Background Information and Methodology Note’ in the subject title of any correspondence.

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You can contact us by:

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Prescribing Costs in Hospitals and the Community