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Average hub-and-spoke set-up cost £4,000 per pharmacy, DH estimates

Adopting the hub-and-spoke dispensing model would cost an average £4,000 in set-up fees per pharmacy, according to estimates by the Department of Health and Social Care (DH).

The estimate takes into consideration “investment in IT systems, training, and process redesign”, the DH wrote in a document assessing the potential impact of two different proposed community pharmacy hub-and-spoke models (see below) published yesterday (March 16).

“This equates to approximately 70 hours of work for 4.8 full time equivalents”, the DH calculated, using average hourly wage rates for pharmacists, pharmacy technicians and dispensing assistants from the Annual Survey of Hours and Earnings – which it then increased by 30% to account for pensions and national insurance contributions.

However, the set-up costs at the spoke, its cost savings, and the cost of operating a hub are all points taken into account in its cost-saving estimate – suggesting that the models will save the NHS a total of £27.3 million over a ten-year period, the DH argued.

 

The two proposed hub-and-spoke dispensing models

First model: Patient presents prescription to the spoke pharmacy. The pharmacy sends it to the hub, which prepares and assembles the medicines. These are sent back to the spoke, which supplies them to the patient.

Second model: Same as above but the hub sends the medicines directly to the patient’s home rather than to the retail pharmacy.”

 

Yesterday, the DH launched a consultation on whether the law should be changed to allow all community pharmacies to operate under the hub-and-spoke system.

 

Could hub and spoke save pharmacies money?

 

The DH maintains that the models will bring net reductions in operating costs for pharmacies.

Pharmacies could make gross savings “in the region of a 40% to 50% time saving compared to in-store dispensing”, according to information the DH was fed by stakeholders.

It takes on average between two and three minutes to dispense a prescription, which for independent pharmacies could represent a cost of £1.20 per item, the DH added.

Meanwhile, “automated hub operating costs is 40p per item”, according to the information shared by the stakeholders.

Taking these elements into consideration, the DH applied a 40% time-saving reduction to the £1.20 dispensing cost, which “would suggest a reduction of operating costs of 48p per item, which we then compare against the 40p per item cost of hub dispensing”.

This would mean a “net reduction in operating costs of 8p per item, or just under 7% saving”, which the DH later lowered to 2p per item in “sensitivity testing” – which it said it has “reasonable confidence that pharmacies would achieve”.

 

4,122 spokes could benefit

 

A “maximum” of 4,122 spoke pharmacies could benefit from the legislative changes the DH is consulting on “if there was 100% uptake”, it said.

Meanwhile, it calculated that some 771 pharmacies that dispense less than 60,000 items a year would not benefit from the model, while companies dispensing over 12 million items per year could already be using a hub-and-spoke model and would therefore be “unaffected by the policy proposal”.

However, pharmacies would not be required to implement a hub-and-spoke model, meaning that not all 4,122 suitable businesses will necessarily choose to do so, the DH warned.

The DH based its projections on this assumption and on private market research – the results of which it wrote should be treated “cautiously” – suggesting that around 12% of independent pharmacies would want to implement one of the proposed models, while 40% are considering it.

“If we assume that all pharmacies who indicated that they were definitely interested in hub and spoke were to adopt it within the next five years, and that half of those who were considering it would adopt within the next 10 years”, 907 pharmacies would be using the hub in year 5, growing to 1,319 by year 10, the DH said.

Pharmacists have until June 8 to respond to the DH’s consultation on the hub-and-spoke dispensing models.

Could a hub-and-spoke model ever truly work for independent pharmacies? Catch up with C+D's fourth Big Debate on the C+D Community.

 

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