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‘Change is inevitable, but how pharmacy reacts to it will determine the sector’s success’

Funding cuts, an overhauled contract and then a global pandemic: pharmacy’s reaction to these pressures will determine the sector’s future, says Scott Hayton

For community pharmacy, COVID-19 has been the latest in a long line of challenges, and despite unprecedented efforts from the government and the NHS, it seems we’re not out of the woods yet.

Over the past 15 years, community pharmacies in England have seen a seemingly constant stream of pressures: a significant category M clawback and continued remuneration cuts; along with an overhaul of the contractual framework; phasing out medicine use reviews and establishment payments; and moving the focus of remuneration from dispensing to clinical services provision – in principle at least. The introduction of new services so far has been slow and bureaucratic in nature, with relatively thin margins by comparison after accounting for time and administrative costs.

Boots’ announcement at the beginning of November that it would halt pharmacy services in 22 of its stores while those stores remain open for retail sales should be no real surprise, then. After all, the decision follows a well-reported programme of “store optimisation” that resulted in close to 200 loss-making branches being sold or closed to date since the initiative was announced in 2019. These decisions by Boots, I’m sure, would have followed many months of discussion and been extremely difficult to arrive at.

 

“Still willingness to invest”

 

Change, however, is a fundamental driving force for all businesses and I've no doubt that this was ultimately deemed a necessary course of action to ensure that we see another 170+ years of the Boots brand.

Similar decisions have been seen across the sector, with many other multiples and group owners making long, hard assessments of their business models and portfolios and setting out revised strategies to safeguard the future of their businesses.

This process is ongoing today evident with McKesson’s sale of Lloydspharmacy to the investment group Aurelius. Personally, I think that the Lloydspharmacy sale and the overall success of these sector-wide portfolio divestments in recent years demonstrates that there are those out there with the necessary vision and determination to embrace the future of community pharmacy.

The pandemic overall has been a beacon for the sector and the vaccinations and subsequent booster drive has shown just how beneficial our pharmacy network can be in terms of health interventions – if only it would be utilised to its full extent and capabilities. Confidence levels in the sector have grown with this, and the number of people actively seeking to acquire pharmacy business has increased exponentially in the past two years.

In 2020, we at Hutchings saw almost a 100% increase in registrations compared to 2019. The overwhelming majority of pharmacists we speak to still see great opportunities within community pharmacy to run a successful and profitable operation, while providing incredibly valuable services to our communities.

The closures and Boots’ decision to cease pharmaceutical service provision in some stores are only one side of this story. Boots did note within its announcement that it had opened a similar number of pharmacies through 2020 and 2021 and has been investing in other areas of the business.

It has also reported piloting a number of new private services including urinary tract infection treatment and independent prescribing, so are clearly looking at alternative incomes while reducing its cost base and waiting for new NHS services to be commissioned. On that front, the hypertension case finding service was olny introduced in October and smoking cessation follows in January next year, so perhaps we are starting to see some progress being made.

It is, of course, possible that more closures will follow in the sector. A recent NHS Business Services Authority report showed that through 2021, 11,636 community pharmacies were active, the lowest level since 2015/16. Moving in this direction naturally means that the global funding sum for the sector is divided between a smaller number of pharmacies.

More recently, it was reported that Boots' parent company may be reviewing its options and exploring opportunities out there for a wider sale of its UK business. Whether or not this develops into anything of substance, we’ll have to wait and see.

No doubt there will continue to be financial pressures and other challenges in coming years and it’s important that the sector continues to adapt and be proactive rather than reactive.

Innovation in service provision, engaging with patients to garner their support, continued pressure at government level and increased dialogue and involvement from pharmacy bodies in designing new services for commission will be key factors that determine the success of community pharmacy going forwards.

Scott Hayton is director of pharmacy brokers Hutchings Consultants

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