Christie & Co’s head of pharmacy, Tony Evans, and head of medical valuation, Christopher Vowles Frics, noted that the pharmacy market had seen “little impairment or distress” over the COVID-19 pandemic in the firm’s latest pharmacy market review of the sector, published today (October 13).
Many contractors are “keen to expand their businesses” and pharmacy prices are continuing to recover from their “almost static level” in 2020, according to the report, which looked at the market in 2021 and the first half of 2022.
“However, the [community pharmacy] sector, like many, faces several headwinds that may create a more challenging trading,” the report said.
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Constricted funding under England’s five-year funding contract has “had an inevitable consequence for the sector”, Christie & Co wrote.
Meanwhile, the recruitment of pharmacists into PCNs and GP surgeries has resulted in a “significant drain of resources away from community pharmacy”, which “has undoubtedly placed a huge strain” on the sector, the report said.
Pharmacy contractors are also facing a “rapid escalation of energy costs” and an “unsustainable” medicine concessionary pricing system, which “is likely to impact” their gross profit and wage margins, the firm added.
Rising locum rates another pressure
Christie & Co noted rising locum rates as an added pressure to pharmacy contractors, citing data collected by booking platform Locate a Locum.
C+D reported last month (September 9) that there were significant regional differences among hourly locum pharmacist rates, with Inverness-based locums receiving a regional high of average of £54.11 per hour, according to an analysis carried out by Locate a Locum.
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Locate a Locum’s founder and CEO, Jonathan Clarke, said in the report that high locum rates are down to pharmacists moving to PCN and GP roles, as well as “many pharmacists [taking] long-overdue holidays or sickness absences”.
“In addition to the ongoing COVID-19 vaccination rollout, these factors will continue to exert pressure on the sector for the foreseeable future,” he noted.
Decrease in corporate and supermarket-owned pharmacies
The composition of the pharmacy sector “remained broadly the same as previous years”, with corporate and supermarket operators owning about 40% of pharmacies in the UK, Christie & Co wrote.
Boots UK topped the list with 2,173 pharmacies across the UK, while Lloydspharmacy came second with 1,349 and Well came third with 747, according to Christie & Co’s estimates.
However, supermarket operators saw a 2% decrease in the pharmacy contracts they owned and operated in 2021 and the first half of 2022.
“The larger corporate operators [saw] the most notable declines as they continued divestment and/or closure programmes to protect their retained estates,” Christie & Co wrote.
First-time buyers and independent operators were quick to scoop up divested properties, “seeking to re-invigorate the pharmacies by offering more localised and adaptable services to meet patient needs”, it noted.
As of March 31, there were 14,370 registered pharmacy premises in the UK, with 11,816 in England, 1,298 in Scotland, 730 in Wales and 526 in Northern Ireland, according to Christie & Co.
C+D reported today (October 13) that England saw a net loss of 110 pharmacies in 2021/22 – resulting in the lowest number of community pharmacies in seven years – according to data released by the NHS Business Services Authority.
Who is buying pharmacies?
About 80% of the applicants wishing to join Christie & Co’s database in 2021 and the first half of 2022 were first-time buyers, the brokerage firm said.
Independent contractors looking to expand made up another 10% of applications, and a mix of small, medium, and national multiple operators accounted for the remaining 10%.
“Applicant numbers across our UK database increased by…6%” in that time, it noted.
First-time buyers were involved in 40% of Christie & Co’s sales in 2021.
The last six months, however, saw a 30% decrease in sales completed by first-time buyers, “as vendors sought security in selling to more experienced and well-funded existing operators”, Christie & Co said.
“Interestingly, we saw an increase in the number of sales completed to multiple operators in the first half of 2022,” it noted. This accounted for “38% of all sales undertaken, a rise of 9% on the prior year”.