Pharmacy funding 2026: what it means for your business

Image: Nathaniel Yeo for Unsplash

The latest pharmacy funding settlement, which was announced in May 2026, represents a notable uplift, with total funding reaching £3.636 billion - an increase of 10.3% year-on-year, equivalent to approximately £340 million. This continues a more positive trajectory following a prolonged period of flat funding across the sector.

The settlement also provides a £200 million increase to the margin allowance. In addition, following representations from CPE, the government will write off net contract (margin) over-delivery accrued up to the end of March 2026, potentially saving pharmacy owners up to a further £239 million in recovery costs, which is aimed at helping to stabilise the increasingly volatile medicines supply chain.

A key feature of the settlement is the restructuring of the funding model. Payments previously associated with services such as Pharmacy First have been absorbed into core funding, providing greater income certainty and improved cash flow stability for operators. This shift should offer increased predictability for pharmacy businesses navigating an already complex financial landscape.

The settlement places a clear emphasis on dispensing activity. The Single Activity Fee has increased by 6 pence to £1.52 per item, reinforcing the importance of core dispensing income. In contrast, clinical service fees have remained largely static, indicating that the immediate priority is to sustain core operations rather than significantly expand service-based income streams.

At the same time, the direction of travel toward a more clinical role for community pharmacy continues. The introduction of independent prescribing from 2026 marks a significant milestone, complemented by the ongoing expansion of Pharmacy First and prevention services. Together, these developments underline the sector’s evolving role within primary care.

However, demand pressures remain a critical factor, as rising prescription volumes and increasing service delivery requirements mean that much of the funding uplift is likely to be absorbed by increased costs.  As a result, while the headline increase is significant, its impact may be less pronounced at an operational level.

WHAT THIS MEANS FOR BUSINESSES & BUSINESS VALUES

The write-off of the medicine margin overpayments of £239 million is seen as a great step forward for pharmacy owners, as it will help to reduce pressures on Gross Margin, which filters through to profitability. This, coupled with the increase in the single activity fee and the ability to become independent prescribers and provide an improved level of Pharmacy First services, will go towards improving the service provisions offered and the ability to generate higher margins and improved profitability.

Overall, we foresee the new funding adding value and profitability to pharmacy businesses, assuming operators are proactive, working towards a more clinically-led service provision rather than prescription-led operations. We expect to see improvements in value and EBITDA over the coming 12 months, which should continue to stimulate the market and provide greater demand and competitive tension for businesses on the market.

It is considered that the 2026 funding settlement provides short-term stability, enhances funding certainty, and supports the continued shift toward clinical service delivery. However, it stops short of fully addressing the long-term financial sustainability challenges facing community pharmacy.

To discuss the pharmacy funding and what it might mean for your pharmacy business in more detail, get in touch with Christopher Vowles: christopher.vowles@christie.com or 07791 183 966