Anarchy in the UK

No future for many English independent pharmacies as a new report predicts an average annual $78,000 loss per store

A new report by EY – formerly Ernst and Young – has shown that the financial performance of community pharmacy as a sector, and as individual businesses, indicates that the network in England is unsustainable under the current financial framework.

The report, Impacts of current funding, policy and economic environment on independent pharmacy in England, shows that as it stands, between 28% and 38% of the network is in financial deficit, with 52% of owners planning to sell their businesses.

By 2024, EY projects that this will rise to 64 to 85% under the current funding arrangements – and in its base case scenario, a network-wide £497m deficit (AUD$908 million), or 19% of revenues.

“Persistent financial deficits of this scale will likely result in businesses having insufficient cash to continue trading and a contraction of the network,” it warns.

“No industry is likely to be sustainable with so many operators in deficit.”

Around half of England’s 11,539 pharmacies are independently owned.

“Community pharmacy funding in England is £2.6bn (2.3% of total NHS England spend), which has already been reduced by c. £200m since 2016, but community pharmacy manages the procurement and dispensing of £9.1bn of medicines in primary care (8.1% of total healthcare costs),” the report states.

The NHS has set out plans to expand pharmacy’s role in several areas, including providing primary care consultations, medicines management and preventive health roles, and supporting urgent care needs.

But resources are already under pressure, with 71% of respondents saying the constraints of current staff, and 87% saying the inability to afford to put on new staff, were preventing them from offering new services.

Premises with an above average level of revenue were more likely to be in deficit.

“Approximately 11% of respondents stopped providing home delivery services, previously provided for vulnerable patients. Of these, all respondents highlighted financial pressures and 91% suggested staff shortages as a reason for this.”

Looking to the future, “We ran a number of scenarios for the future financial performance of community pharmacy, utilising different start points for the average 2019 deficit and projecting forwards using either historic trends or on an assumptions basis”.

“In all cases we projected a steep decline.

“Our base case projection was the average pharmacy premise making a £43k [AUD$78,000] deficit by 2024 (£497m for the network as a whole). This is an estimated average fall of £68,272 [AUD$124,767] per pharmacy between 2019 and 2024.

“Looking at the whole network, by 2024, 64% to 85%of community pharmacy premises are projected to be in deficit.

“The base case, which assumed revenues stabilise at 2019 levels and costs to increase at inflation rates dependent on the type of cost, suggested 72% of community pharmacies to be in deficit by 2024.

“Such poor financial performance would place the financial sustainability of the network at risk, with significant implications for patients’ ability to access local healthcare services and NHSE’s ambition for community pharmacy.

“These projections are made on data that predates the COVID-19 crisis. Based on our interviews it is likely the crisis will have further weakened the network although the long-term effects can not be ascertained as yet.”

The National Pharmacy Association called on policymakers to safeguard the network from “collapsing as an unintended consequence of short-term cost savings”.

Andrew Lane, NPA Chair, said, ““This report from EY shows the precarious situation facing pharmacies up and down the country”.

“Community pharmacies act as a vital lifeline in communities across the land – and there’s a very real threat they could close unless ministers act now. Health Secretary Matt Hancock describes community pharmacy as a critical part of the NHS family. He has also said that, if the Government asks pharmacies to offer more services, they need to be paid properly for those services.

“Those words urgently need to be backed by further investment to underpin viability, change and improvement in our sector.”

Chair of the All-Party Pharmacy Group, Jackie Doyle-Price MP, said, “Pharmacies are at a crossroads – and must be given the funding they need to look after the nation’s health”.

“The pandemic has highlighted what a pivotal role they played and continue to play in delivering frontline care when many doctor surgeries were closed.

“Going forward if the NHS is to deliver a truly 24-hour seven day a week service, then pharmacies must be at the forefront of that.”

Read the full report here.

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1 Comment

  1. Michael Khoo

    Perhaps they should consider ownership and location rules?

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