Independents could face £2,400 profit loss in wake of Brexit
The double impact of the falling value of pound sterling on the cost of drugs, and a potential rise in importing fees could cost pharmacies around £2,400 a year, Sigma Pharmaceuticals has warned.
Over-the-counter (OTC) medicines manufacturers have already raised their prices since the UK voted to leave the European Union (EU) in June, said Sigma sales and marketing director Rajiv Shah, who predicted manufacturers of generics and other medicines will follow suit.
Food manufacturer Unilever made headlines this month after it increased the wholesale costs of its products – including Marmite – in the wake of the pound’s steep decline in value.
Mr Shah said the situation for pharmacy “is probably not going to be that different”.
Speaking at the Avicenna conference at the Celtic Manor resort in Wales earlier this month (October 15-16), Mr Shah said Sigma is “quite confident” that the impact of the Brexit vote would lead to worsening drug shortages “over the next year or so”, partly because of the “crazy near-20% decline in the pound against the euro”.
“At Sigma recently, we’ve already had OTC manufacturers come to us and impose price rises [and] we’ve had to absorb that,” he told delegates.
“Looking at the increasing cost of manufacturing outside the UK – and that impact on generic drugs manufacturers and OTC suppliers – when you have raw material prices going up, but you have already tended a price to the UK, sometimes it then becomes unviable to make a product – which is why we get a shortage.”
Impact on imports
While Britain is in the EU and the single market, free movement of goods means drugs can be imported “fairly quickly”, Mr Shah said. But it’s not yet clear if drugs arriving in the UK once it exits the EU would be subject to import levies or quarantines – as currently applies to medicines imported from outside Europe.
This could result in a “lengthier process to bring stock in from the EU”, Mr Shah warned. “If so, this will mean fewer imports of goods, which also contributes to shortages and an increase in prices.”
Sigma estimates that Brexit’s impact on imports could cost independent pharmacies in the UK an average of £2,400 in profit a year (see below). “That’s going to affect a lot of our customers,” Mr Shah told delegates.
However, he added: “Independents are fairly insular, but tend to ride the tough times better than big multinational corporations.”
Read more from the Avicenna conference, including discussions on the cuts and the "radical thinking" required by the sector, here.
Crunching the numbers: how leaving the EU could affect your pharmacy
Drug shortages could affect contractors by reducing the number of parallel import drugs that are profitable to procure or dispense by around 40%, according to Rajiv Shah, sales and marketing director at Sigma Pharmaceuticals.
Mr Shah said the British Association of European Pharmaceutical Distributors estimates the UK medicines market is worth around £462 million. He calculates that this drop in imports would reduce the market’s worth to around £280m.
Divided across the more than 14,000 community pharmacies in the UK, this would mean a drop in annual profit of around £2,400 a year, he estimated.
How much do you expect Brexit to cost your pharmacy?