The NHS 10-Year Health Plan rightly places community pharmacy at the heart of community-based care. However, ambition alone will not deliver sustainability if the underlying economics of the sector continue to strip value from the system rather than support it.
Pharmacy margin in England is effectively capped at £900m. No matter how efficiently pharmacies procure medicines, that margin is always pegged back to an agreed level through adjustments to the Drug Tariff. The effect is that efficiency gains made by pharmacies are not retained, but are ultimately removed through system adjustments.
Compare that to the situation in Scotland where the risks and benefits of the medicines supply chain are shared between the community pharmacy network and the Scottish Government.
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This has led to investment in the sector and the implementation of a NHS prescribing service being delivered through the community pharmacy network. It’s good for pharmacy owners, it’s good for the government, and it’s good for patients.
What is often overlooked is the broader impact this framework has across the entire medicines supply chain.
Pharmacies, incentivised to chase the cheapest prices to protect tight margins, often buy from multiple wholesalers to capture marginal savings.
While understandable, this purchasing strategy is a false economy. It drives wholesale prices down to unsustainable levels, erodes profitability for wholesalers and manufacturers, and ultimately contributes little to overall sector income. It also means that the highly trained workforce is conducting manual administration tasks rather than providing patient care.
High-volume generics are now being supplied at record level low costs, forcing suppliers to cut costs or even exit the UK market. This erosion of value across the supply chain increases volatility and uncertainty, making it harder for pharmacies and suppliers to maintain a consistent and reliable supply of medicines.
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At the same time, pharmacies are incurring growing process costs simply to operate. Managing multiple deliveries, responding to frequent price changes, reconciling costs, and navigating availability issues all add operational burden that is not explicitly recognised in the current funding model.
These costs are structural, not optional, and they continue to rise. The very efficiency gains pharmacies strive for, comparing prices, sourcing marginally cheaper stock, and juggling multiple wholesalers, often provide no lasting benefit, creating a cycle of effort that yields little financial reward.
While the 2024/25 funding uplift was welcome, it comes against a backdrop of rising inflation, increasing workload, and persistent pressure from generic drug pricing.
With margins effectively capped in England and Wales the push to chase the cheapest medicines is understandable but counterproductive.
It creates a race to the bottom that ultimately benefits no one, while undermining the stability of the medicines supply chain.
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If community pharmacy is to deliver on the ambitions of the NHS 10-Year Plan, policymakers must take a longer-term view.
Funding and reimbursement mechanisms need to reflect the full reality of running pharmacies, including hidden operational costs and the consequences of short-term price-chasing behaviour.
Only then can the system support pharmacies in providing consistent, high-quality care, while safeguarding a sustainable, dependable supply of medicines for patients.
Maybe it is time for England to look North for a solution?
Harry McQuillan is chairman of Numark