Layer 1

‘My pharmacies could be unviable if I have to repay advance funding’

"We’ve had to order PPE at great expense wherever we can"

Thousands of pharmacies will be forced to close if they have to repay advance funding to the government, including his own, says one contractor.

The advance funding of £300 million from the government to alleviate cash flow issues caused by COVID-19 will need to be repaid at a later date.

But Olivier Picard, owner of three-strong Newdays Pharmacy group in Berkshire, says his business is among thousands who will be unable to afford to stay open when this money is clawed back.

The tens of thousands of pounds he is paying to keep his business afloat during the pandemic are already “crippling”, says Mr Picard, who is a National Pharmacy Association board member.

Listen to the podcast to hear more about:

  • Sourcing personal protective equipment (PPE) at any expense after NHS England supplies ran out
  • Worsening medicines pricing problems, culminating in one wholesaler asking for almost double the concessionary price of sertraline
  • How pharmacy has demonstrated the value of every store during the pandemic

You can listen to the podcast below. Alternatively, subscribe to C+D's podcasts on iTunes or by searching “Chemist+Druggist podcast” on your preferred Android podcast app.

Please note, the sound quality of this podcast may be affected as it has been recorded remotely during the COVID-19 outbreak

To keep up with the latest updates for community pharmacy visit our COVID-19 hub.

19 Comments
Question: 
Can your pharmacy afford to repay the funding?

Meera Sharma, Pharmacy owner/ Proprietor

Perhaps you should stop moaning and as a board member of a national body start doing something about it!

R A, Community pharmacist

I want to get this off my chest because I am really tired of hearing the adverse situation of contractors and multiples alike i.e. we are going to go bust.  

Anyone whose done a basic 101 business course could tell you that the community pharmacy business model was not sustainble when they introduced the new contract in 2006 i.e. it was doomed to extinction.

On a yearly basis work load went up along with running costs (minus staff bill) but the NHS dropped fees every year. Under such situation most business people would sell up or avoid entering such sector. However if you fail to heed to your accounts what do you expect now?

In a modern day example look at Microsoft it tried its hand at launching a mobile phone to compete with Google Android and Apple iOS but it failed terribly. As a result it quit. Somehow I get the impression that many contractors think the glory days will come back or those unfortunate enough to buy a pharmacy after the new contract they will become rich like previous generation of owners. To me it seems irresponsible for not facing up to the reality. The most sensible thing you can do is to sell up or avoid buying a pharmacy. 

If selling up isn't an option then develop a plan to break even and please get out of this sector. I was interested in buying a pharmacy but when I looked at the numbers and having worked in a pharmacy I can see it was a very difficult business to operate in so I passed the option. Especially because I wanted to operate a pharmacy with good staffing level, pay a reasonable wage and make enough profit on a long term basis. 

In community pharmacy its impossible to operate like that. On a short term basis a contractor can work to run the whole pharmacy but chances are they will end up 6ft under if they do it to long. 

 

N O, Pharmaceutical Adviser

"" is to sell up or avoid buying a pharmacy. ""

Sell but don't buy ?? If they take your advice, then if they want to Sell who will buy? So basically you are suggesting all pharmacies should close? Is it?

R A, Community pharmacist

I should have clarified this but my advice to avoid buying pharmacy is towards a first time buyer. For the record for some bizzare reason first time buyers still continue to buy pharmacies despite the poor business fundamentals of the sector, which have been in existence since 2012.

However if you have been unfortunate enough to buy a pharmacy and are owner operator then consider selling it to a long established independent groups which can afford to buy a pharmacy purely because they have huge reserves and due to the scale they enjoy they can operate these pharmacies at a lower cost then a individual operator can. 

"So basically you are suggesting all pharmacies should close? Is it?"

By the way did you read the full comment because I also said if neither of those options exist then do your best to breakeven. It might help if you read the full comment before highlighting specific sentences like a tabloid newspaper. 

J RP, Community pharmacist

A lot of the pharmacies owner operators buy cannot be made viable by independent chains. Owner operators will work hard enough to require less staff, less locum costs and have more drive to actually grow the business. The main issues are rent, rates and staff costs. If an owner operator can get a few hard working full time members of staff and a shop with reasonable rent and rates, the model works well to make a living.

R A, Community pharmacist

In my opinion the most practical thing to do for those who are stuck with their pharmacy is to seek out other local owner-operators struggling and form a LLP partnership. This would enable these individuals to utilise the hub spoke model for repeat dispensing and bring down cost via better stock control and scale of economy.  

Individual owners can then focus on dispensing acute prescriptions, OTC sales (again scaling up will allow them to bargin for better discount) and potentially private walk in service as people can't really see their own GP.  

This will be very hard to do but in my opinion its a more palatable option then losing the money you have invested in a pharmacy. 

Also you are right about the rents and rates again given the current economic climate I think landlord may prefer to reduce their rents then lose that income stream. Individuals should consider contacting their landlord with their accounts to explain that if things dont change for the short term they will be forced to close up. 

I wouldn't wish this current situation on anyone but from my own observation most pharmacists failed to grasp that past community pharmacy profit was due to social largesse and the benign control of entry regulation. Therefore I'm not sure most individuals would have the commonsense to follow through what I am proposing if they couldnt see the flaw in buying a pharmacy in the first place.  

Infact the most common reason for buying pharmacy the last deacade was due to the misplaced notion that the goverment will commision more healthcare services and we will have opportunities to replace lost income stream from dispensing. This was back in 2010 despite the fact that the contract was introduced in 2005/2006.

J RP, Community pharmacist

I'm going to disagree here again. the entire LLP partnership is unnecessary, if you buy smart (when generics are low priced, you snap as many outers as you can store), you have to think long term the way community pharmacy is these days. If you simply do that step, then more often than not when shortages occur and concession prices go up, you'll be quids in on simple generics. You as the owner can control stock levels better. Yes it will be more work and more hours to do this but if you dont want that for the profit, why own a business in the first place? Second thing needs to be treating and staffing shops correctly, if you have a 5k item shop you can make that work with just half a counter staff and 2 full time dispensers with ease. The training and motivation from staff needs to be there. Rents are actually coming down as landlords are realising how hard high street footfall is being hit like you've said. I strongly believe the floor is here for dispensing income as well. Any lower and massive closures would begin, as most current shops are not well placed to face such an issue with the 3 problems I mentioned above (rent rates and staff).

Let me tell you the calculations on this. A 5k item shop turning over 600k with 30% profit margin. If you can run this shop such that every overhead amounts to 100k (low locum costs, low rent, low rates and its doable), you will have 100k left. Now take out the interest you owe the bank for the purchase and you still will make an incredible ROI for a business you can grow and resell in the future for a profit. Unless you offer a very bad service it is hard to see this income vanish or reduce drastically. Of course you want to avoid shops doing lots of 7 day trays or methadones as those can vanish fast. I understand I've outlined a magical shop here, but if first time buyers can actually acquire one like this, then its not a bad choice at all.

R A, Community pharmacist

You don't have to agree with me at all I'm not trying to convince anyone otherwise. 

However most rationale people would not have invested in a pharmacy in the first place or pay way over the odds for the goodwill value. The biggest problem for most owners is that they paid way too much for the pharmacy and its eating away at their profit margin. This is important to remember because if you lack the skill to value a business according to its future outlook I doubt you will have the business skills to operate in the manner in which you are proposing.   

The other problem I have is that sweating out every ounce of your asset is fine from a business perspective but its not really sustainable for the long term. Not for your own health and sanity. I know that most pharmacists work exceptionally hard performing their duties as a pharmacist and I think its not really sensible to run a pharmacy like this.  

I'm talking from personal experience when I was in a position to buy a pharmacy I passed the opportunity because I felt the goodwill values didnt make any sense and I would have to operate the pharmacy like the way you are suggesting. Unfortunately I value my health and sanity more than making money to subject myself to such adversity.   

Although goodluck to anyone who wants to make a dig at it. 

J RP, Community pharmacist

That's perfectly fair and reasonable, if you're not motivated to do such work and dont see potential its fair to shelve the investment. My only question is where else do you put the money to work? As a pharmacist you have a great opportunity to grow your own business. Something else will require expertise within a field. Property barely gives a return worth the investment and effort anymore and stocks are set for a bumpy ride. Appetite for purchasing pharmacies is high partly because alternatives are not great right now, but also because the floor is somewhat here for funding.

R A, Community pharmacist

I think until this whole situation blows over its difficult to really say where a good investment opportunity exists. 

However cash is cash and I would say its reckless to invest in a business which struggles to generate a decent cash flow on a monthly basis. Therefore anyone who has that much money to invest in a business would be better off to look for a different opportunity. 

I think any pharmacist interested in buying a business should consider doing a business studies course to at least understand what they are letting themselves in for.  That is one of my concerns the community pharmacy sector is brutal and you really need to have skills and grit to make this work. 

Benie I, Locum pharmacist

Where else you say? A newsagent, Off licence, Small grocery store ?

O J, Community pharmacist

Is Christie's still operating?

Axed Locum, Locum pharmacist

Another sob story, We await mass closures!!, before that happens, pigs will fly!!

Axed Locum, Locum pharmacist

Holy Crap: message to DOH, thanks for being soft in the head, and paying out £1,500.00 per pharmacy for easter opening, for just being a contractor, plus a further whopper sum for the May Bank Holidays!! circa £1,000.00 per day for three hours to pay locums £22 ph inc travelling exp!!

Ronald Trump, Pharmaceutical Adviser

You might have to sell the villa in France :(

Axed Locum, Locum pharmacist

Also the 5 bed detached house, with the 4*4's 

Leon The Apothecary, Student

It's a plaster to keep pharmacies open now trading the closures for later, in my opinion. I don't think it takes a huge leap in logic to state how bad the government would look if suddenly a load of Pharmacies closed down during the pandemic because aforementioned government was not financially supporting them, right?

C A, Community pharmacist

Plus Covid has driven more patients to Online pharmacies, so it will be a double whammy when Covid resolves, your cash flow could be properly ruined if you are supporting repayments with less patients

Gamdur Amar, Community pharmacist

We are being crippled beyond our control and very few will be able to pay back without having to use their own personal savings..and most of will not be able to have that as a fall back option 

Job of the week

Pre-registration Pharmacist
Sheffield, South Yorkshire
Up to £25,000