What the deduction scale actually does
It reduces your reimbursement on the assumption that you buy below Drug Tariff price. The assumption is applied whether or not your buying terms achieve it. A contractor with the purchasing power of a large group may beat it; an independent frequently does not, and carries the difference silently.
This is separate from Category M and the margin survey, which set reimbursement prices centrally to deliver an agreed retained medicine margin across the whole sector — £1.1 billion in 2026/27, up £200 million. That mechanism is designed to work at sector level. It is not designed to make any individual pharmacy whole, and it does not.
What to do with the number
Two things. Take it to your wholesaler, because a specific annual figure is a far better basis for a terms conversation than a general sense of being squeezed. And use it to test whether a buying group would pay for itself — if the gap is smaller than the cost of joining, the answer is no, and it is worth knowing that before the meeting rather than after.
Get the terminology right, because two things get conflated
The Drug Tariff calls this the Deduction Scale, in Part V, or the discount deduction. It is not the margin adjustment — that is the separate Category M price mechanism. Conflating the two produces a wrong answer, and it happens constantly in trade commentary.
The current rates have been flat since January 2024, when the transition completed: 20% on generics in Category A and Category M of Part VIIIA, 9.85% on appliances in Part IX, and 5% on brands — anything that is neither an appliance nor in Category A or M. They are applied to the monthly total of reimbursement prices for each group.
One trap in the Tariff itself: the old sliding scale of 5.63% to 11.50% by monthly total is still printed in Part V Table 3, labelled as applying up to September 2022 and during the transition. It is historic. If a spreadsheet in your pharmacy uses a banded rate, it is running on a scale that stopped applying more than two years ago.
Not everything is deducted
A meaningful list is exempt, and no endorsement is required for any of it. Cold chain storage items, all of them. Concessionary price products, for the dispensing months they are on concession. Controlled drugs in Schedules 1, 2 and 3 of the Misuse of Drugs Regulations 2001. Cytotoxics and cytostatics, immunoglobulins, insulins for injection, and vaccines and antisera — all of them. Plus unlicensed medicines outside Part VIIIB supplied from an MHRA specials or importers licence holder, endorsed at invoice price less discount.
If your dispensing mix is weighted toward any of those, the headline 20% overstates what you are actually losing — which is a reason to run this on your own figures rather than on a rule of thumb, and a reason the answer differs between two pharmacies of the same size.