Do online pharmacies face a profitable future?
Judging by the explosion of eCommerce during and since the COVID-19 pandemic, it might be assumed that online pharmacies face the same bright future. However, new figures go some distance to disprove this expectation, with profitability at the heart of the issue.
Online pharmacies offer patients a one stop hub of necessity and convenience, with just one click of a button, they can order or buy prescriptions as well as a range of healthcare products. It is that very necessity and convenience that gave rise to online pharmacies during the COVID-19 lockdowns, but do online pharmacies have a future in a post-pandemic world?
Recent data from the General Pharmaceutical Council (GPhC) shows a very slow increase in the number of pharmacies with online services over the last five years, see table below. From 2018, the number of pharmacies with online services was 519 and in 2023 they are 699, which is an increase of only 180 over the last five years. Could a lack of profit from online pharmacies be causing this slow growth?
|Snapshot date||No of pharmacies with online services|
“The GPHC has been paying significant attention to online pharmacies and how they operate given the higher risk of non face-to-face care,” Romil Patel, CEO of the online pharmacy supply platform PharmaPlace Ltd tells C+D. “This has led to a barrier to entry as the systems needed are complicated and expensive to develop. Coupled with the fact that it is difficult to make money as an online NHS pharmacy, these businesses tend to not be viable. It is therefore unsurprising that there have been few new online NHS pharmacies over the past five years.”
A 2019 YouGov survey for the GPhC showed that 25% of people in the UK are likely to use an online pharmacy. Demand is present in the market, exacerbated by the new ways of shopping and accessing healthcare post COVID-19, but with a limited remit of services available online, the structure of the online businesses needs to be very different from that of a traditional chemist.
“Online NHS pharmacies either need a very low-cost structure or extremely large volumes to operate. These factors mean that few online NHS pharmacies will ultimately survive. The high street pharmacies can rely on additional revenue streams such as consultations, travel vaccines and independent prescribing, which allows them to have a more diverse income than an online pharmacy.” Mr Patel explains.
In April, the GPhC’s former chair Nigel Clarke, shared his concerns with C+D about whether an online pharmacy model is financially sustainable, suggesting it is “difficult” to make money. He told C+D that the push to introduce more pharmacy services rather than “just purely dispensing medicines” – and any resulting changes to the contract – are “going to be much more difficult to do online for obvious reasons”. He added that a post-COVID-19 increase in people presenting in pharmacies as a first port of call “much more than they used to”, alongside moves to encourage the public to do so, is also “a challenge for online pharmacies”.
In June, the online pharmacy, Signature Pharmacy received a £650,000 investment from HSBC UK to enable the pharmacy to expand its warehouse and floor space, including a “state-of-the-art” dispensary and in-house technology department. This investment shows that if the profit model is clear, banks believe that online pharmacies can be a business worth investing in.
Reece Samani CEO and superintendent pharmacist at Signature Pharmacy says that he does not disagree that it is hard to make money from an online pharmacy, yet the same could be said about any business. “Online pharmacies are well positioned to be able to deliver innovation and convenience to patients, and in a world where things around us are about convenience they are well placed to capitalise on this,” he told C+D.
“Even if you look at a sole NHS-run online pharmacy, the model can be made profitable because the expenses associated with the cost of dispensing can be reduced and the remuneration with the average repeat prescription will cover the associated expenses,” he explains. “Overheads associated with owner operated models are also relatively low and with twice daily supplier deliveries, there isn’t a need to stock large quantities of expensive medication (especially at earlier stages).”
Alessandro Grenci, Medino’s superintendent pharmacist recently discussed the issue of growing an online business with C+D, highlighting the steady growth in revenue the company has created in recent years, despite the impact of the COVID-19 pandemic and the financial crisis. “Obviously, we expect these figures to go a bit down this year,” he concedes. “But we are still a profitable business”.
Grenci also discussed the matter of safety, saying he was “not concerned” by the GPhC’s stringent approach for increased regulation for online pharmacies. A spokesperson from the Pharmacists’ Defence Association said that “all decisions about pharmacy should start with the patient and prioritise safe and effective practice.”
A spokesperson from the GPhC told C+D that while there “can be significant benefits for patients using online services to get medicines and treatment” there are also “significant risks that need to be managed to protect patient safety.”
“The future of pharmacy”
“I don’t think online pharmacies are the future of pharmacy alone, but they will form a core part of the overall primary care pharmacy model,” says Signature’s Samani. Data from SignatureRx, its private e-prescription tool that works with online telemedicine companies and private clinics nationwide, shows that over 75% of patients prefer the collection option at local community pharmacies.
“I truly believe community pharmacy will always have a prominent space on our high streets. It’s clear from what we’re working on, that both online pharmacy and community pharmacy can complement each other well in the best interests of patient care,” says Samani.
Overall, technology is advancing, but the recent data shows that over the last five years there has been a slow increase in the number of pharmacies with online services. This could mean that the future may be digital, but it is also in bricks and mortar pharmacies serving communities and high streets.
“Pharmacies are part of the community, at the heart of communities, and you can’t substitute those benefits with the click of a button,” says RPS President Claire Anderson. “Online pharmacies are convenient for some but far from the whole picture, and it’s not necessarily a choice between one or the other – many people may use online for some aspects of medicines supply and visit a physical pharmacy for other needs.
“There’s a real role for traditional, bricks and mortar pharmacies too, and no substitute for the trust they build within their community as an expert source of advice and support. The value of having a space for in-person communication about medicines and health is enormous, especially for harder to reach groups and those facing digital as well as health inequalities,” she told C+D.