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'Merge and close arrangements don't give the certainty pharmacy craves, as a recent Rowlands case shows'

Community pharmacy has needed certainty over market entry since the regulations were changed in 2016  but a recent rejected Rowlands merger shows this is still lacking, says David Reissner

Some people find it surprising that market entry regulations restricting the opening of NHS pharmacies were introduced at the height of Thatcherism in 1987. However, when the European Court was asked to rule on the anti-competitive nature of Spanish market entry, it decided that restrictions could be justified if the objective was to ensure that the provision of medicinal products to the public is reliable and of good quality. The court held that restrictions could also be justified if the objective was to fill gaps or avoid duplication in services.

Market entry regulations in England have seldom been far from controversy. In 2016, alongside the severe funding cuts imposed at the same time, the Department of Health and Social Care (DH) amended the NHS market entry regulations to enable pharmacy owners to apply to merge two pharmacies onto a single site (closing one of them), but an application must be refused if granting it would create a gap in pharmaceutical services provision.

For the DH and NHS England and NHS Improvement (NHSE&I), allowing pharmacies to merge and close could reduce what they perceived as pharmacy “clusters”. Pharmacy owners who merged and closed pharmacies had an opportunity to cut costs, especially if it meant closing a pharmacy that was not profitable. The amended regulations gave protection to the surviving pharmacy because a competitor would not be permitted to argue that a new contract should be granted because an earlier closure had created a gap in services. This protection would last until the local Pharmaceutical Needs Assessment was updated.

Although some pharmacy owners have made use of the merge and close arrangements, anecdotal evidence suggests that others have not done so because they fear that the next pharmaceutical needs assessment (PNA) will come too soon and that someone will claim that there is a gap, leading to a new contract application.

Of course, as Rowlands recently learned, even if an owner wants to use the merge and close provisions, NHSE&I may not grant the application. When the DH amended the market entry regulations in 2016, it recognised that if an application to merge and close was refused, the owner might go ahead and close a pharmacy anyway; but in doing so, they face a risk that NHSE&I may view favourably an application by a competitor to fill a perceived gap.

One of the most important things community pharmacy has needed since 2016 is certainty, and the recent Rowlands case highlights that the merge and close arrangements do not always provide it.

David Reissner is a solicitor and chair of the Pharmacy Law & Ethics Association


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