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Pharmacy losing £10k a month had ‘no choice but to close’

Contractor Graham Phillips says underfunding prevented investment in service development
Contractor Graham Phillips says underfunding prevented investment in service development

A pharmacy was forced to close after the funding cuts made it impossible to continue, reflecting the uncertain future of its group

The freeze on pharmacy funding is taking its toll on the profit margins of pharmacies. In some cases, this has been fatal. Summerhill Pharmacy in Ramsgate, Kent closed its doors to patients at the start of February.

Despite its proximity to the next-door GP surgery, and dispensing around 8,000 items monthly, the pharmacy had been losing approximately £10,000 a month.

Graham Phillips, director of the Manor Pharmacy group, says that the store had been “on the point of bankruptcy”, giving him no choice but to close.

Summerhill Pharmacy had been in an area of "high need", serving a population of 12,000 and was not part of a "cluster", the government term for pharmacies closely situated to one another – a situation it wants to prevent. The GP practice was also struggling to attract GPs, but the pharmacy had been helping it to save money, says Mr Phillips.

The Manor Pharmacy Group is now down to three pharmacies, two of which are also in Ramsgate. But Mr Phillips says he is “utterly depressed” about the future of his other branches.

"They are all losing money so are completely unsustainable, even though they are busy, award-winning and highly thought of by our customers," he tells C+D. Nevertheless, he is proud that the Summerhill Pharmacy staff have been relocated to the group’s nearby branches for the time being.

Underfunded service push

Although Summerhill Pharmacy was brought to its knees by funding issues that started in 2016, Mr Phillips supports parts of the five-year pharmacy funding deal announced last year. “I’ve been arguing for 20 years that community pharmacy should have a massive clinical role”, he says.

The deal shifted the focus from dispensing to clinical services. However, Summerhill Pharmacy was unable to put these plans into action. “A lack of funding meant we couldn’t invest in service development,” Mr Phillips explains.

“We would have loved to have done a whole raft of advanced and enhanced services. We did a lot of smoking cessation, which will go.”

The effect of the government funding will be to keep the pharmacies that are cheapest to run open, he says.

“I feel betrayed. I gave the best 35 years of my life to the NHS and I love pharmacy and my customers, but I hate how we’ve been treated. The large corporates survive but businesses like mine are being lost. Once you destroy a network, it never comes back. I’m living the nightmare.”

34 Comments
Question: 
Is your pharmacy losing money each month?

Sher Khan, Locum pharmacist

 

This is very sad for the owner and the team! At 8k items a month the maths do not add up to the losses. It mentions 3 pharmacies of his in that area so I am assuming it is a case of spreading out his sites to capture more of the local patients. It was a 100 hour contract after all! 
 

My personal feeling is for a number of years independents have opened Phamacies based on the number of items they can capture ONLY! Once funding was slashed and these individuals had to then apply some business acumen to keep their Phamacy going. Unfortunately it hasn't worked out for a number of reasons. Not all locations of Phamrcies are viable and I'm assuming this is one of them. 
 

I work in an area densily populated with independent contractors who for a number of years have scrambled for items promising patients deliveries over deliveries. I took a fresh approach and limited reduced deliveries as it was not viable. Those that chose to use other pharmacies to deliver chose another Phamarcy. Those that didn't well they came into Pharmacy and what do you know my OTC sales, MUR/NMS engagement, customer satisfaction all went through the roof!!! 

 

 

 

Richard Rutter, Non Pharmacist Branch Manager

I'm sure funding cuts have made providing the service almost impossible but there may be a clue if you look online. It seems that Summerhill was a 100 hour pharmacy and so maybe 8000 items isn't enough to cover all the fixed costs and staff salaries

Matthew Edwards, Community pharmacist

At the end of the day the cold hard fact is move with the times.   Locum rates of more than £25/hr are unsustainable in the current climate.  If we are not being  remunerated properly for dispensing and the other services that are sent our way then contractors will lose money.  Minimum wage is the killer for all businesses.   

I know my locum friends will debate this comment. However £25/hr over 40 hrs a week equals £48k a year. That's before tax so with a good accountant  it's an income of £44k take home  (Trust me I have done it before owning my own business).  So if you convert that to an employed status using the HMRC calculator it's an equivalent  of £80k salary.  Therefore the standard rate for locums should be £25 per hour.  This will be an unpopular post. Look at the thumbs down emojis 

J RP, Community pharmacist

80k salary means pension and 55k take home. 4k tax paid? HMRC will come knocking. Dont forget accountant fees to get that service and I have no clue what expenses you are claiming. 25/h all week as well? Highly dependent on the stores you are working as 25 will get gobbled up easily today unless stores are hellholes. I havent the faintest idea how this contractor is losing so much. 8k items should give 800k turnover alone. 30% margins and he is managing his overheads very badly or buying very poorly to make a loss.

Brian Plainer, Locum pharmacist

Desperately saddened to hear of your pharmacy having to close Graham, especially because you've done so much personally to benefit this profession. As an ex-proprietor, now locum pharmacist, I can only say that the writing was on the wall some 20-30 years ago, and then in 2005 when the New Pharmacy Contract was brought in, it became an economic disaster for independent retail pharmacies. Successive governments of all colours have kicked the profession to death for around 30 years.

Essentially the UK has become a country based around certain favoured protected professional and commercial groups - banking, accountancy, law, economics and large corporate businesses while everyone else can go to to s**t! Ridiculous that now, during coronavirus, all these arrogant protected groups are mainly stuck at home with very varying degrees of work or none, thanking their lucky stars they don't have to face a virus-stricken public, many comfortably sat on their partnership multi £100K salaries and savings while we so-called "essential workers" risk our lives, totally underfunded to keep them going ???

CAPT FX, Locum pharmacist

The maths still do not add up and did I see right that the Pharmacy is a converted container? What I see as a norm here is for contractors to mourn about funding at every turn. Yet they have a fully constituted negotiating body that should be aggressively making their case clearly and combatively. 

The negotiations for the GP contract were protracted and on several occassions they refused to accept the tabled contract. The Department of Health had to reconsider and when the GP negotiators were happy , the contract was adopted. The problem with Community Pharmacy is that you have a spectrum of owners or Contractors with different opinions and different levels of financial muscle. 

Whilst this chap is closing a high grossing dispensary, Boots is championing a whole bunch of Pilot services which Duncan Rudkin will rubber stamp blindly as always. So you ask, where are Boots getting the money to prospect uncharted territory when this guy is losing £10K a month. 

It boggles the mind. 

James Hesp, Pharmacy owner/ Proprietor

This does not add up. I own pharmacies and cannot work out these maths.... 10K a month net loss? 

Oliver Staunton, Information Technology

It must be frustrating for a pharmacy owner to have to consider, but if the alternative is going bankrupt, then the first things you would want to try are stopping all MDS dispensing and deliveries, since you don't get paid any extra for doing so. That would mean you'd lose some patients and staff, and it would be very sad, but unfortunately the dispensing margin isn't there anymore to support doing all the nice free things that we do for patients.

Tom Jerry, Community pharmacist

Pharmacy is likely to be come difficult in the coming future and I think we are all aware of that. With large operators looking at reducing their opening hours to just core hours and contractors discontinuing Local services due to insufficient reimbursements eventually gabs in Pharmacetical Service will allow new entrants even an overhaul of the contract application for new Pharmacices allowing a free for all like in the 1970s....the circle is about to repeat itself.

N O, Pharmaceutical Adviser

Lets asume your are right (which you are not) a contract with NHS is a contract, whether free or funded. Once you open a Pharmacy you need to keep it open for a minimum number of hours, which means you need to employ a PHARMACIST for those hours. Then you need to pay bills to keep the premises open. How on earth will you pay for all these basics if you don't get enough funding from the NHS or DHSC?? And how will you make profits for you to justify the business? Services?? HAHAHA you must be dreaming in a coockooland if you think the services payments will make up for all the fees lost in dispensing. All the best though, if you are wishing for such a system.

Tom Jerry, Community pharmacist

Unfortunately we have become no more than a community asset...a charity!!!

Philip Wilkinson, Community pharmacist

Why did you help the surgery for nothing ? They are still practising and have let your pharmacy go bankrupt. Did they not see the benefit of having a pharmacy on site ? Services were only part of the problem.

Clive Hodgson, Community pharmacist

Providing services, clinical or otherwise, that are financial loss makers may also be an issue in this case. The mantra of providing services today (that contribute nothing positive to the bottom line) in the hope that they are acknowledged and that properly funded clinical services will follow on is by now surely discredited.

Paul Dishman, Pharmaceutical Adviser

I hope that has been totally discredited, but it was PSNC policy for decades.

Paul Guest, Manager

According to my rough calculations, the funding cuts have cost the average pharmacy bottom line in England around £25000 a year before taking rising costs into account. 

This could increase to £50000 a year for pharmacies previously carrying out the full quota of MURs and meeting the establishment payment threshold but who do not receive many CPCS referrals and can't recoup the money through any new services.

The situation is very precarious for a number of pharmacies, and could potentially force a business previously turning a respectable profit into bankruptcy. 

On the other hand those who are able to recoup the lost funding from MURs and the establishment payment, or can withstand it due to a low overhead base, will survive and be proven as viable businesses. 

 

Sam Patel, Community pharmacist

Can’t understand how a pharmacy dispensing 8000 items and still losing 10k a month. Something is not right. I do Locums in pharmacies dispensing around 4000 items and they are surviving 

 

Richard MacLeavy, Non Pharmacist Branch Manager

Items alone doesn't tell the full story though. Rent is often huge in a pharmacy located within a surgery, this will then increase the number of items needed to break even. Similarly the items mix and retail opportunites are key factors to take into account. If your in a surgery, no doubt you will get a lot of antibiotic rx's, boosting your items numbers but of course they are all low value items. Similarly a highstreet pharmacy will often have larger retail revenue meaning they can survive on much lower items. To look at an extreme case, most of Boots most profitable branches have very low items as they are located in retail parks, malls and busy highstreets. They arn't making money on the pharmacy, its the retail operation driving the profitability. 

J RP, Community pharmacist

There are 4k item shops with average counter turnover surviving. It boggles the mind that 8k items leads to 10k loss. Even with 80k rent I cant see him making a loss that severe.

Reeyah H, Community pharmacist

I think it took some contractors far longer to realise the consequences of the new contract. It was dire from the very start. It is impossible to start new services with enthusiasm when there's nothing in the bank! However, I still feel the ones that manage to remain standing, will prosper at some point. Maybe. 

Keith McElrea, Pharmaceutical Adviser

The clinical services route is the future of community phsrmacy, if contractors don't adopt it, within a few year Amazon are going to be eating your lunch.  And it does pay, if the negotiator and the government can come up with a pregressive, properly funded plan.  Look at Scotland's new model. 

Alexander The Great, Community pharmacist

He is clearly deluded and has no idea. If you cannot make enough money from dispensing prescriptions, then the model is already wrong. We need to be properly funded to carry out BASIC tasks. Once that has been achieved, additional funding for services should be provided. At the moment, we do not have enough money to fund staff, pensions, overheads. How do you think we will get the time and money to do anything else???????

P M, Community pharmacist

you muppet.. all the money is going into rx items fees and fees relating to how may rx you do.. not services

Reeyah H, Community pharmacist

Scotland has never hit rock bottom like here in the UK. They have more sense than to let a huge commodity like community pharmacy fail. 

Mark Ashmore, Superintendent Pharmacist

England is not the UK anymore, than Scotland on its own is.
 

C A, Community pharmacist

How on earth is an 8000 item a month pharmacy losing £10,000 a month?

geoffrey gardener, Community pharmacist

Must be serious problems with the overheads, 8000 items a month and losing £10k a month, just doesnt stack up in my book.

Benie I, Locum pharmacist

I wonder what their rent is ?

Reeyah H, Community pharmacist

Easily. Rates, rent, staffing, pensions, loan. 

C A, Community pharmacist

It looks like they are working out of a shipping container... if their rent and rates are that high something else is wrong too!

A B, Community pharmacist

Odd that according to pharmdata they only did 9 MURs and no NMS in the last 12 months to Nov.2019. I know this wouldn't have saved them but if they were struggling that much you'd think they would be making use of every income opportunity available. Maybe they didn't have time to do them?

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