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From an accountant: Pharmacy First and its profitability

As community pharmacy continues to face financial challenges, Atif Butt discusses how you can increase your pharmacy profitability through Pharmacy First.

The NHS operates on a rolling five-year Community Pharmacy Contractual Framework, last agreed in 2019. This fixed funding levels until 2024, while also setting out a clear vision for community pharmacy to be increasingly clinically focused, with less emphasis on dispensing and more on providing services in a community setting.

The five-year plan anticipated the roll out of a range of new nationally determined advanced services, and locally commissioned enhanced services that would supplement dispensing income. However, since then, I have found that many in the community pharmacy sector feel the government has been too slow to put their high-level plans into action.

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This has left pharmacies with not enough potential revenue from providing NHS services. Differences in services commissioned at the local and national level have also meant that there can be huge disparities in the options available for pharmacies wanting to provide more services through the NHS.


Decrease in gross profit from dispensing


With dispensing income being fixed for five years and drug costs and other overheads consistently rising over this period, there has been a distinct trend of gross profit from dispensing activities going down across the sector.

In light of this, increasing service provision is a key option for increasing both your revenue and your gross profit margin. It should also be noted that gross profit margin, as confirmed by our sister company Hutchings Consultants, has a significant influence on your pharmacy’s market value.


Pharmacy First


In November last year, NHS England (NHSE) announced that the Pharmacy First scheme in England will launch on January 31 2024, and will involve providing advice and prescription-only treatments for seven common conditions. 

The new service will allow for self-referral from patients along with referrals from existing service routes such as general practices and NHS 111. So far, the uptake has been high with over 90% of community pharmacies in England already signed up to deliver the service.

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However, a survey of pharmacy workers in England carried out for a recent ITV documentary found that just under half of them do not feel confident they will be able to provide the new services in time. Getting the timing right is important, as Community Pharmacy England (CPE) have announced that the upfront £2,000 payment pharmacies will receive will be recovered from them if they have not successfully delivered at least five clinical pathway consultations by 31 March, 2024.

So, let’s look at the main challenges you need to consider to be well-prepared.


Training and staffing levels


One of the main barriers to providing more services reported by pharmacies is the additional training required. When asked in parliament about what steps had been taken to get pharmacists and pharmacy staff ready to implement the new scheme, the pharmacy minister Andrea Leadsom said: “Community pharmacies are private businesses... and it is up to them to provide their staff with the necessary training”.

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A series of seven free online courses has been developed for the seven common conditions included in the Pharmacy First service and is being offered through the National Institute for Health and Care Excellence (NICE) on its iLearn platform.

CPE is also offering a series of webinars to help contractors and their teams prepare for the new services, with more information on the CPE website, including a checklist of the steps you can take to prepare.


IT systems and equipment


You’ll also need to consider if you will need more equipment or resources, so that you can access and update GP records – which will be a core requirement for providing some of the services. Pharmacy IT suppliers have been working hard to get the necessary systems available in time for the launch, and NHSE has said that a system will be available in February 2024, the month the service launches.

NHSE is also currently working with IT suppliers Cegedim, PharmOutcomes, Positive Solutions and Sonar Informatics, and all pharmacies providing the Pharmacy First service must have an agreement in place to use one of the NHS assured Pharmacy First IT systems.

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It may seem daunting when you look at the extra skills, training and resources needed to provide the new services, but you could also consider working with a service partner to help with all of this. There are some companies operating within the sector that provide training, equipment, marketing and logistical support to pharmacies that are rolling out new services.

The obvious advantage of partnering with an external company is that you get to benefit from their expertise and should be able to access all the resources and support you need in one place. However, this is likely to reduce your profit from the service due to the extra costs involved.


‘Guarantee a rewarding long-term future’


The advent of the new services brings many challenges to implement them successfully, but also significant opportunities to improve the sector’s fortunes. It should mean that patients can access help without having to deal with GP waiting times for appointments and get clinical advice and treatment at pharmacies in the first instance.

The development of digital and online technology has the potential to transform the landscape of pharmacy services as more people can opt for online consultations. There is no doubt that the sector is changing, and pharmacies will need to keep pace and adapt in order to guarantee a rewarding long-term future.


Atif Butt (FCCA) is senior accountant at Hutchings Accountants Ltd

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