Open the Big Book of Business and you’ll find that retail strategies based on losing money on sales are ruled out early. So why does this peculiar situation exist in community pharmacy?
It dates back to the creation of the NHS in 1948, but 78 years later, having grown steadily heavier over the years, “ongoing market volatility, rising acquisition costs, and delays in reimbursement” have built to such an extent that the situation is untenable. The threat of collective action is now on the IPA table (after the NPA retreated in April 2025).
Perhaps one reason that radical reform remains elusive is that it makes financial sense for the NHS (at least) to maintain it. The fear of dispensing at a loss forces a pharmacy to try and dispense at a profit. That keeps them lean and mean, hitting the phones, shopping around for meds, desperately trying to maintain vanishing margins.
Read more: Pharmacy retained margin funding £120m less than decade ago
It also secures the best possible price for the NHS in the process. As a result, community pharmacists are de facto NHS medicine buyers, a crack squad of hungry procurement grads with gleaming eyes chasing insane targets - and hitting them.
This situation should be win-win. Who doesn’t want to show off their parsimonious procurements and reap the benefits? Well, community pharmacists don’t really get much enjoyment from spending hours finding the medicine the NHS requires them to dispense and lose money doing it.
Gross
Still, they do it, and do it extremely well. But their reward for success is not delightful things like thousands of pounds in bonuses, black Lamborghinis, or swift trips to Paris. If they get too nifty, the government claws it back.
Read more: NPA calls for ‘emergency’ £52m payment for pharmacies
How nifty is too nifty? Currently, the retained margin figure – the amount of profit the community pharmacy sector is collectively allowed to make from dispensing - stands at £800m. Anything above that gets clawed back by grasping government fingers.
Roughly, when divided between a little over ten thousand pharmacies, that’s around £70-80k per year – and that’s just gross margin. That’s before the basic cost of doing business does its own version of a clawback via necessary things like rent, business rates, ever-increasing utility bills, staff costs, the national living wage, national insurance, indemnity insurance, membership fees...
Read more: Govt rejects clawback suspension
This is a non-exhaustive list but it’s easy to understand why community pharmacy is crumpling, trying to swallow sizeable real-terms cuts across the board while battling dizzying increases wherever it looks. This sad example of the macro in micro speaks volumes. And as CPE recently reported, negative increases are not just financial, either.
Cowboys
Community pharmacy is not Clinton Cards, or Blockbuster Video. When these high street household names go down, we go to the Card Factory or stream a movie on Netflix. But community pharmacy is not a consumable, or one of many options.
It’s a fundamental fixture in the health of the nation, but its NHS paymasters show no sign of taking the relationship to the next level. Funding contract negotiations, once again, are delayed – and few out there are optimistic that what does emerge will resemble what pharmacists believe is required.
Read more: Over half of pharmacies could ‘limit services’ over funding
I don’t know how many more pharmacists need to make pleading appearances on breakfast TV, or how many more pharmacy trade bodies need to float the idea of collective action (again) for the Department of Health to wake up, but then again, can anyone halt this sector-wide high street brick and mortar slide?
DSPs - to some - represent a cavalry of sorts, and they certainly suit some patients but they don’t suit all, and the patients DSPs won’t suit at all will typically be the most vulnerable ones in need of advice and support.
You could make a solid case for DSPs being a service makeweight, but they aren’t ever going to be a like-for-like replacement. And it only makes it worse for conscientious community pharmacists that too many DSPs – or the cowboys peddling their way around WhatsApp and Telegram at least – appear to be concerning themselves with making profits by carelessly prescribing weight loss jabs. That’s anathema to a conscientious community pharmacist.
Unsteady
You don’t know what you’ve got until it’s gone. Does the DH understand how lucky it is to have community pharmacy? Dispensing at a loss is a nasty straight jab to the face of community pharmacy every single time it happens, but clawbacks swing like haymakers. As the punishment continues, community pharmacy is starting to look very wobbly. It makes no sense that it’s taking a beating.
Read more: The reality of rising costs, and the need for clarity on funding
The government doesn’t have to find cash, it could pull levers. It could make fresh concessions on business rates, it could look to ape its arrangements with GPs. They were also contracted to the NHS in 1948, but costs relating to rent, staff and more were cushioned, if not covered.
What a difference that would make.
I am sure the last thing the DH needs right now is more wrangling, let alone more demands for money, it’s also caught up in a structural reform of its own. But I sense the concluding view is to keep propping up community pharmacy for a while longer, however punch-drunk it looks.
I’m also sure the DH asks itself whether the pain of reforming existing arrangements with community pharmacies will be more problematic than the patient pain caused by a collapse in the sector. Of course the answer is no. And yet…
