The head of the third largest multiple has told C+D that pharmacy needs an extra £300 million – almost £29,000 per contractor – in its core funding.

John Nuttall, MD of Co-operative Pharmacy, said the cash will eliminate capricious profit cycles that have plagued business since category M struck in late 2007.

Speaking exclusively to C+D, Mr Nuttall said: “Pharmacy is underfunded and our profit on purchasing is cross-subsidising core funding.

“Category M is a perfect model for the Department of Health and they have benefited very significantly from putting in place a mechanism which forces pharmacy to competitively procure product.”

But he said the model had become unsustainable, with generics manufacturers calling time on some products, leading to risk of monopolies and stock shortages.

“It’s been a win-win for the Department of Health and I would say if you’re going to have a mechanism that forces the price down then some of that prize needs to be shared with the pharmacist.”

The sector must demonstrate these savings to the cost of service inquiry, he urged.

The inquiry, launched last month, aims to establish fairer pharmacy funding and is due to report next April.

The sector had “done its bit” on belt tightening and should be paid what it is owed, Mr Nuttall added. He went on to blame part of the recent shortfall in funding on a glut of 100-hour pharmacies.

“Allowing 100-hour pharmacies to open, while it might appear to tick the competition box, in this market has had a negative impact because it’s resulted in a dilution of the global sum.”

Latest NHS figures show nearly one in 20 premises is now trading under 100-hour contracts.