Feeling the pinch: How funding cuts are leaving contractors out of pocket
From "unsustainable" funding streams to an unfair drug reimbursement system, community pharmacy contractors reveal the extent of their money worries in the Salary Survey 2022
Most contractors will be all too familiar with headlines emphasising the severity of community pharmacy's financial crisis.
Stories about pharmacy funding – or the lack thereof – have made a near-daily appearance on C+D's news pages this year, having already been a regular occurrence since the government slashed English community pharmacy funding by 6% in 2016.
But pleas for the government to pour more investment into the sector have so far fallen on deaf ears, even as inflation and other costs continue to pile on the pressure.
Pharmacy bodies have been warning for months that the future of England's community pharmacy network hangs in the balance, with mass closures a real possibility unless the government decides to take action. And now the problem is reaching a wider audience as national newspapers start to lobby the government to increase the amount of cash it invests in community pharmacies.
But pharmacy owners cannot run their businesses on public outrage alone.
Results from the C+D Salary Survey 2022 reveal that concerns about their finances are weighing heavily on contractors – and many are questioning the viability of their businesses.
Funding situation “unsustainable”
According to results from the survey, which ran between October 25 and January 20, contractors see cuts to pharmacy funding in England as their biggest problem. More than two-fifths (42%) of 36 respondents cite cuts as the biggest threat to their business.
While Pharmaceutical Services Negotiating Committee (PSNC) chief executive Janet Morrison brands this statistic "a depressing one", she says it "reinforces what we are being told by contractors on a daily basis".
"While it is extremely concerning to hear just how bad the current funding situation is for contractors, it is also unsurprising given the significant increase in their costs," she continues. "As we have been warning ministers and officials for many months now, the government simply has not put enough money into the contract and the sector urgently needs investment to prevent its catastrophic collapse."
There are concerns that the situation is reaching breaking point.
One Salary Survey respondent blasts the funding situation as “unsustainable”, adding that they have started “reducing reinvestment in the pharmacy” and are using “personal income to top up the underfunding”.
And another respondent remarks that "inflation" is not helping the situation.
The "number one" threat facing Jaffer Alibhai's business is the lack of funding, he tells C+D. As the owner of Medicare Pharmacy in Coventry, he believes that pharmacy teams' hard work needs to be paid for in something far more tangible than warm words.
"It was all very well saying, 'Oh, during [the COVID-19 pandemic] you did an amazing job.” [But] I think it’s just lip service,” he says.
Biggest challenge is “lack of funding”
There is no doubt in Leyla Hannbeck's mind that the “biggest challenge" facing contractors is the lack of investment in community pharmacies. The Association of Independent Multiple pharmacies (AIMp) CEO tells C+D she feels the sector has been “starved” of cash since the government's funding cuts kicked in during 2016.
And a multi-year funding deal agreed in 2019 did not take account of the “rising cost of living” and “inflation”, she warns.
A combination of these factors has left many contractors barely able to keep their “heads above the water”, and she worries that if nothing is done soon, many will go under.
Stark figures released by the Company Chemists' Association (CCA) in February only serve to highlight Dr Hannbeck’s fears. According to the data, more than 700 pharmacies have permanently closed in England since 2015.
However, the Department of Health and Social Care (DH) tells C+D that the government "backs" pharmacies with £2.6bn a year.
A spokesperson points to an "additional" £100 million “to support pharmacies with increased services". The DH is “continuing to discuss" how it can "best support" the sector with PSNC, they add.
And for Olivier Picard, contractor and owner of Newdays Pharmacy, Lloydspharmacy's revelation that it has chosen to withdraw pharmacy services from Sainsbury's supermarkets this year is an ominous sign of things to come.
"The fact that a company thinks that it can make more money selling pharmacies than running them tells you all you need to know," he warns.
"Impossible" to make money
Some contractors, like Rifat Asghar-Hussain, superintendent pharmacist and director at Evergreen Pharmacy (Midlands) Ltd, can’t see any glimmers of hope on the horizon.
"NHS funding is not enough for any pharmacy to survive by itself," she tells C+D. She believes that only private or advanced services are keeping pharmacies going.
"If any pharmacist says they’re making money from just the NHS, it’s a lie. [It’s] literally, literally impossible," she says.
Amish Patel, contractor and pharmacist at Lindsay Chemist, Kingston upon Thames, says that the pressures contractors are facing has only worsened over time.
He feels the situation has only become worse in recent years and cautions that pharmacy's "ridiculous" payment structure means that people will be dissuaded from taking a job in the sector.
Community pharmacy contractors are caught in the middle of this funding tussle and as many respondents to the C+D Salary Survey 2022 highlight, the squeeze is taking its toll.
Dispensing at a loss
While underfunding is being felt acutely, contractor respondents to the Salary Survey name Category M clawbacks as another key issue facing their businesses.
Out of 36 respondents, 11% say they consider these clawbacks to be their biggest threat.
Category M clawback present a key problem to Mr Alibhai's business, he says. "When we buy smart, we should really, fairly, be able to keep the profits that we make,” he remarks.
But clawbacks leave him feeling like he is being pinched from all sides. He also cites "the lack of clarity in pricing" as another "big problem".
"We don’t get concessions [until] the very last few days of the month. So the whole month we [are] dispensing hoping we’ll get reimbursed fairly," he explains.
Other contractors have also felt the pinch thanks to an outdated medicines reimbursement system.
It is a matter of principle for Mr Picard that contractors should not lose money simply by dispensing medication.
He believes that dispensing is the bread and butter of any pharmacy business and making a profit should not be a taboo. Dispensing at a loss “should not be tolerated", he asserts.
Meanwhile, Avtar Singh Virdi, pharmacist at Crystal Pharmacy in Hounslow in west London, says the sector is forced to “struggle on” because the government is not taking the situation seriously.
The lack of funding and drug tariff prices are impacting his business, he explains. Currently, his pharmacy is having to pay more for medicines than they are being reimbursed, marking a key area of concern.
Omokayode Badumasi, pharmacist and contractor at KC Pharmacy, Teddington, says rising costs are threatening his business and “it’s got a lot worse in recent months” because of inflation and unpredictable prices.
He adds that sometimes the prices go up but the concessions are not updated to reflect this.
This means the pharmacy has “drugs that are available” but they can’t be dispensed because the amount the pharmacy is reimbursed for the medicines is lower than the price they were bought for.
PSNC is currently lobbying the government for a fairer reimbursement system, but it is impossible to tell whether this will be yet another request that ministers choose to overlook.
Despite the bleak outlook, there may still be light at the end of the tunnel. While it seems unlikely that the government will U-turn on its decision to keep pharmacy funding at a flat £2.592bn per year for the last two years of the multi-year contract, PSNC has predicted that a cash injection via a Pharmacy First minor ailments service may be on its way.
But even if this does come to pass, it seems unlikely that any money won through the service will make enough of a dent to truly alleviate contractors' financial worries.
Unless a radical funding overhaul is forthcoming in the near future, many pharmacy owners will not be able to see past the red ink on their balance sheets in the here and now.
The C+D Salary Survey 2022 ran between October 25 2022 and January 20 2023 and was completed by a total of 1,480 pharmacists and pharmacy staff.